Full Judgment
2. The facts of the case in brief are that the appellants are engaged in the manufacture of coated cotton fabrics and coated man-made fabrics. Grey fabrics were being procured by them from the market and that the fabrics were subjected to coating with PVC compound.
Investigation in the affairs of the company were undertaken by the department. These investigations revealed that during the period 23-6-84 to 11-2-85 the appellants had received a total quantity of 274432 metres of cotton fabrics, but they were not entered in in Form IV register. It was alleged by issue of show cause notice that these cotton fabrics were coated and removed without payment of duty. The Commissioner decided the issue as indicated above. When the matter came earlier before the Tribunal, this Tribunal by its Final Order Mo.
92/1989-D remanded the matter to the Commissioner for examining various contentions that were not looked into earlier.
3. Learned Counsel for the appellants Shri B.L. Narsimhan submits that the ld. Commissioner in its order in the last para on page 43 of the paper book held, "Though there is no direct evidence with the department in respect of the purchase of PVC compound, but the party's conduct in the purchase of grey fabric, as discussed above, reasonably leads me to believe that they resorted to the similar modus operandi, for purchase of PVC compound without any bill or invoice, and made payment by cash". Learned Advocate submits that though it was submitted that the unit remained closed from 11-1-84 to 19-11-84 which was the-material period for holding that grey fabrics were coated PVC, the learned Commissioner did not pass any order on that.
4. The learned Advocate submits that this Tribunal in the case of Punjab Fibres Ltd. v. Commissioner of Central Excise, Delhi reported in 2002 (141) E.L.T. 819 in para 15 held as under :- "15. Moreover, there is no cogent, convincing and tangible evidence to prove the actual manufacture of the blended yarn with the help of cut fibre/waste after mixing with the alleged saved polyester fibre and thereafter removal of the same from the factory premises in the guise of cotton yarn. It is well settled that initial burden always rests on the Revenue to prove the clandestine manufacture and thereafter removal of the goods by the assessee. This burden cannot be discharged only by raising assumptions and presumptions from the stray pieces of evidence collected by the excise department. This burden has to be discharged by adducing some cogent and tangible evidence. The co-relation of the alleged raw material received with the actual manufacture and removal of the goods in a clandestine manner, has to be established by the Revenue. But, in our view, in the present case the Revenue has failed to do so. There is no reliable evidence on the record to prove that polyester blended yarn had been cleared by the appellants in the guise of cotton yarn during the years 1994 to 1997. From the mere receipt of the alleged cut polyester fibre/waste, no presumption could be drawn that during those years, the appellants must have mixed that waste with polyester fibre and manufactured polyester blended yarn. Similarly, no presumption that the appellants cleared that yarn in the guise of cotton yarn and thereby paidless duty during all those years, could be drawn by the adjudicating authority." 5. The learned Advocate submits that in their case also it was the finding of the learned Commissioner that there was no direct evidence.
He submits that having regard to this finding of the Commissioner their case was fully covered in favour of the assessee.
6. Learned Advocate submits that the appellants were receiving grey fabrics and were recording it as grey fabric in their accounts. He submits that since the coating unit was closed, grey fabrics were returned to supplier. He submits that for proving clandestine removal, no evidence has been placed on record to show that the appellants had clandestinely coated grey fabrics with PVC and sold it without payment of duty. He submits that simply because some grey fabrics were received during the period when Coating Section of the factory was closed, does not prove the case of the department at all. He submitted that no evidence has been adduced by the department to prove that there was clandestine manufacture of coated fabric or there was clandestine removal of coated fabrics. The learned Advocate submits that for proving clandestine removal, the department has not brought any evidence on record to prove this allegation. It was therefore, prayed that the appeal may be allowed.
7. Shri Mewa Singh, ld. SDR submits that the admitted position was that grey fabric was received in the factory of the appellant and no accounts of their sale etc. was produced by the appellant in form IV register. He, therefore, submits that once the fabrics were recorded in the records of the appellant their despatch or return should have been also indicated. He submits that in the absence of this documentary evidence the authorities below have rightly held that there was clandestine manufacture and clandestine removal.
8. We have considered the rival submissions. On careful consideration of the submissions made and the evidence on record and the case law cited, we note that grey fabrics were received for coating in the factory during the period January, 1984 to November, 1984. We further note that the contention of the department was that these fabrics have been clandestinely converted into coated fabrics and removed without payment of duty. However, during this period the appellants pleaded that the coating section of the factory was closed since the appellants have taken this issue, this has not been considered by the learned Commissioner in spite of the matter being remanded for re-consideration.
9. We further note that the second contention was that since the cotton fabrics were received their disposal has not been indicated. The contention of the appellants was since coated section of the factory was closed the grey fabrics were returned to the supplier without coating. On the records we do not find any evidence to prove that other raw material required for coating the grey fabrics were procured.
Further, there was no evidence to prove that the grey fabric after coating were clandestinely removed without payment of duty.
10. We also note that the Commissioner has himself found that there was no direct evidence of clandestine removal. If there was no direct evidence, we do not see any indirect evidence placed on record to prove clandestine removal.
11. We also note that similar issue came up before the Tribunal in the case of Punjab Fibres Ltd. and the findings of the Tribunal in para 15 cited above are relevant.
12. Looking to the above facts, we find that the case has not been established by the department. In these circumstances, the appeal is allowed. Consequential relief, if any, shall be admissible to the appellants in accordance with law.