Full Judgment
The order also inflicts a fine of Rs. 15 lakhs. The order also imposes confiscation of land, building, plant and machinery for violation of the Act of 1957.
2. When the matter came up for hearing, as the question raised in these appeals are falling in narrow compass and based on decided issues of the earlier order of the Tribunal, therefore all the appeals were taken up for hearing waiving pre-deposit with the consent of both parties.
3. The appellant Sadhana Textile Mills is engaged in the manufacture of processing of textile fabrics falling under Chapters 52,54 & 55 of the Schedule to the Central Excise Tariff Act, 1985. The charge against the appellant in the show cause notice is that he has mis-declared the actual composition of fabrics, the actual value of processed fabrics, the actual processes carried out on the fabrics and further allegation of evasion of additional duty of central excise amounting to Rs. 70,61,754.30. The show cause notice also alleges violations of Rules 173B, 173C, 173F, 173G(1) read with Rule 9(1), Rule 173G(2) read with Rule 52A, 53 173G(4), Rule 226, 54 read with 173G(3) of Central Excise Rules with intention to evade payment of central excise duty. The other appellants were also charged with violation of Rule 209A of the Central Excise Rules and penalties have been levied.
4. As far as levy of penalty and fine for violation of the provisions of the Additional Duties of Excise (Goods of Special Importance) Act is concerned, it has been held by the decision of the Delhi High Court in Pioneer Silk Mills v. UOI 1991 (4) Delhi Lawyers 75 : 1998 (79) ECR 553 (Del) that violation of the said Act levy of penalty and fine is unconstitutional. The learned adjudicating authority in the impugned order at a reference to the said Pioneer Silk Mills case had also referred to the decision of the Gujarat High Court in Maheshwari Mills Ltd. v. UOI . The Tribunal in its several decisions including the decision in Krishna Silk Mills v. CCE had held that the power of levying penalty and fine for violation of the Additional Duties of Excise (Goods of Special Importance) Act is not permissible.
The Tribunal has followed only the Delhi High Court judgment. No doubt in the impugned order the learned adjudicating authority had sought to follow the judgment of the Gujarat High Court referred to above. In our view that is wrong. We are of the view that the Delhi High Court decision squarely applies to the facts of the case and therefore levy of penalty and fine is wrong in law, therefore the impugned order insofar as it orders imposition of penalty and inflicting the fine is wrong in law and that is set aside.
5. The appeals of Rahul Corporation appeal No. E/3337/98, Rahul Enterprises appeal No. E/3338/98, Rahul Textiles appeal No. E/3339/98, Jayantilal Kataria appeal No. 3340/98, Sharvari Enterprises appeal No.3382/98, S.V. Choksey appeal No. E/3402/98 and Shyam Sundar Seth appeal No. E/3500-RV/98 are all allowed.
6. As far as appeals No. E/2935-RV/98 and E/2936-RV/98 are concerned, the impugned orders relating to levy of penalty and fine are set aside.
As far as levy duty is concerned in appeal No. E/2936-RV/98, the matter is not free from doubt. The levy of duty has been upheld by the Delhi High Court judgment. However, the impugned order is challenged by Shri A.V. Naik, learned Counsel, on two grounds, firstly the report of chief chemist has not been properly looked into; secondly he states that the adjudicating authority has failed to give the copies of various documents required by them by their letter dated 29.8.1987 and 16.9.1997.
7. As against this, learned DR would submit in his characteristic manner that the impugned order has been passed by the adjudicating authority in a perfectly legal way. He invited our attention to 2nd paragraph in page 34 of the impugned order. In the said paragraph the adjudicating authority observed that the appellants were given opportunity for inspection right from 1996 and 1997. Therefore the learned DR would argue that principles of natural justice has not been failed in this case. As far as the referral to chief chemist's report is concerned, this has been considered by the adjudicating authority in page 33 of the order.
8. We have considered the submissions of both sides in respect of this matter. We are of the view having considered the rival contentions and looking into the facts of the case that there has been failure of natural justice. The documents have been seized in 1991. The inspection was going on for number of days is reflected in the letter of the department dated 27.8.1997. In that letter inspection was allowed from 28th August, 1997 to 5th September, 1997. In reply to that the appellants Sadhana Textile Mills Private Limited wrote a letter on 29.8.1997 (page 282 of the paper book) where they specifically state as follows: We would like to inform you that the statement is factually incorrect. We made all sincere efforts to complete inspection.
However, we were informed that the remaining records were not available as they were at Andheri. The records were also not available at Andheri. We cannot take inspection of documents unless they are made available to us. The department could not make several documents available to us in spite of several requests.
Subsequently on 16th September, 1997 (at page 284 of the paper book) the appellants requested the Assistant Commissioner (Preventive) to give the specified documents as indicated therein including various challan Nos. and job cards etc. From the records available we are unable to find there has been any reply to the said communication made by the appellants. In the context of the said letters we are at a loss to know how the adjudicating authority at page 34 of the order could say that sufficient opportunity of inspection had been given. Had it been so, then the department could have controverted by writing a suitable letter and could have been reflected in the impugned order.
The failure to refer to the same in the impugned order in our view suffers from the illegality and infirmity. We are therefore of the view that there is a failure of natural justice in this case. Further it is also not the case of the department that the documents reflected in the two letters of the assessee are irrelevant in this case. If that were to be so, that would have been reference to that in the order therefore, failure to do so we feel there is a failure of natural justice in this case.
9. Further as far as chief chemist's report is concerned it has not been properly appreciated by the adjudicating authority. We are therefore of the view that the adjudicating authority is required to relook at it and give finding de novo. The impugned order insofar as it relates to levying duty on them is set aside and we remand back to the adjudicating authority for re-adjudication and re-determination. The documents have been seized in 1991, we are now in the year of 1998 December. It is hoped that the adjudicating authority will re-determine within three months from the date of receipt of this order. The matter is remanded the adjudicating authority.