1. The appellants challenged the order of the Commissioner (Appeals) made on 17.8.04, upholding the order-in-original except as regards seizure of the tempo. Under the order-in-original made on 17.12.99, the Joint Commissioner confiscated 2374 moulded chairs and 3047.900 Kg of suction pipes, totally valued at Rs. 7,06,916/- found unaccounted for, under Rule 173Q of the Central Excise Rules, 1944, with an option to the appellant to redeem the goods on payment of fine of Rupees one lakh and also confiscating the seized goods valued at Rs. 32,902/-, removed without payment of duty of Rs. 5,809/- in a tempo, with an option to redeem the goods on payment of fine of Rupees five thousands only, as well as confirmed the demand for duty of excise for Rs. 1,00,639/- (including Rs. 5,809/-) in respect of goods cleared without payment of excise duty, and, further demands of Rs. 2,790/- for inputs found short and Rs. 3,69,997/- in respect of 8165 chairs clandestinely removed without payment of duty, imposing penalty of like amount.
2. According to the revenue, the appellant was engaged in the manufacture of plastic moulded furniture falling under Chapter Heading No. 9401 of the schedule to the Central Excise Tariff Act. On 21.8.1997, the Anti-Evasion Officers intercepted a tempo carrying moulded furniture cleared from the appellant's factory. Two invoices No. 357 and 358 dated 21.8.97, indicating particulars of debit entries showing payment of duty were produced. On verification, from the records in the factory of the appellant, it transpired that the amount of duty shown in these invoices had not actually been debited and goods had been cleared without payment of duty. On further verification, the officers found that invoice No. 169 was issued twice, on 8.7.97 and 9.7.97, to different parties; and there were three blank invoices No.289, 290 and 291 recovered from the factory. It also transpired that the appellant had actually not debited the duty amounting to Rs. 1,00,639/- in respect of invoices No. 332 to 358 for the period 14.8.97 to 21.8.97, although, particulars regarding duty debited were mentioned in those invoices. On physical verification of stock, chairs and suction pipes valued at Rs. 5,69,760/- and Rs. 1,37,156/- respectively, were found in excess of the balance of finished goods recorded in RG I register. The excess stock of the finished goods was collectively valued at Rs. 7,39,818/-. On the basis of weighment of chairs, it was found that big chair known as 'Antique' was found to be of 3.300 Kg.
and small chair known as 'Cozy Armer' was found to be of 2.800 Kg. The details of chairs manufactured from 1995 till 1997 were obtained from the appellant and on the data supplied by them on 2.2.98, it was found that the appellant had manufactured 1,16,199 big chairs and 12,931 small chairs during the said period. On this basis, the total quantity of inputs used in the manufacture of these chairs worked out to 4,19,663 kg. As on 21.8.97, there was a balance of 9,207/- kgs. of inputs found in the factory. The total quantity of inputs purchased by the appellant during the said period was reported to be 4,55,815 Kg.
Thus, quantity of 26,945MT of inputs was unaccounted for. Keeping in view the weight of each chair, it was found that the 8165 big chairs collectively valued at Rs. 20,55,539/-, involving excise duty of Rs. 3,69,997/-, were manufactured and clandestinely removed.
3. The learned Counsel appearing for the appellant contended that the principles of natural justice had been grossly violated in the present case because, the statement of witnesses and the test report were not given to the appellant despite repeated requests. It was, further, contended that the authorities below did not take into account the wastage involved in manufacture of moulded chairs and had given no finding on the contentions raised by the appellant in that regard. It was also contended that the authorities had relied upon the extraneous aspects such as its observations on the process of manufacture, without disclosing the particulars of such information to the appellant.
4. The learned authorised representative for the department, on the other hand, supported the reasoning adopted by the authorities below and submitted that since the appellant had availed of the personal hearing given on 7.8.99, it cannot complain of not being given an opportunity of being heard or for violation of principles of natural justice, when it had attended such hearing. It was, further, submitted that the test memo was a noting regarding the weight of the sample chairs which were drawn from the factory of the appellant and provisionally released on 28^th October, 1997. It appears from the record that the appellant was not supplied with the relevant document despite repeated demands. It has been stated in Para 4 of the appeal memorandum that "except for panchnama, copy of no other document was given to the appellant" and, that the appellant was not given the copy of investigation report.
5. In this context, even the learned Commissioner (Appeals), in Para 5 of his order, had observed that: "There is no doubt about the fact that prior to 27.8.99, the appellant had entered into correspondence with the original authority for supply of relied upon documents but no such plea was raised by the appellant at the time of filing reply to the show cause notice filed before the original authority." He, further, observed that: "this showed that the appellant was satisfied with the documents supplied to them, otherwise that issue could have been raised while filing the reply to the show cause notice." This reason is clearly falacious because the appellant had never gave up his demand for copies of the relevant statements, test report and other documents which were relied upon. When the appellant had made repeated demands of copies of such documents, it was not appropriate on the part of the appellate authority to have inferred that the appellant was satisfied with the documents supplied by the Revenue, because in reply to the show cause notice, the appellant did not oppose on the said ground.
6. It appears from the record that statements of Mrs. Manju Yadav, Computer operator and driver Shri Kharak Bahadur, were not supplied to the appellant, though asked for. Moreover, the test report dated 28.10.97, against which the samples of chairs were obtained and in which weight of each type of chair was recorded, as stated in the show cause notice, was also not supplied. It is not clear from the record as to what were the contents of that test report and in which documents, the appellants had admitted that the weight of big chair was 3.3 Kg. It was incumbent upon the concerned authority to supply the relevant documents and information to the appellant, which had a direct bearing on the outcome of the proceedings to enable it to defend itself and to avoid the clear violation of principles of natural justice.
7. It also appears that Commissioner (Appeals) has not taken into consideration the contention raised by the appellant that the process of manufacture involved some wastage. It will be seen from reply to the show cause notice that the appellant had clearly contended that the department had failed to observe that the raw material, which was of plastic, would go waste during the manufacturing process. It was stated that material would burn into ashes, unfit for re-use, and, further that the said material was lying in the factory premises which was not taken into account by the visiting officer.
7.1 In this context, the adjudicating authority has noted in the order-in-original that: "It was observed from their process of manufacture that there was no wastage of raw material /input during the manufacturing process." The learned authorised representative for the department was unable to point out from the record as to on what basis such observation was made on the process of manufacture. It appears that the learned Commissioner (Appeals) has overlooked consideration of the contention on wastage which will have a bearing on deciding whether 26.945 MT of inputs were not accounted for. In this context the authorities below could have verified from form RT 5, prescribed under Rule 55, by which the periodic /yearly information of material used for goods manufactured was to be supplied. The information would have indicated the material wasted or destroyed as was required to be mentioned therein in column 13 and 14 and also from the remarks column, the reason for waste and destruction which was required to be mentioned by virtue of Note 2 of that form.
8. For the foregoing reasons, the matter requires to be reconsidered by the learned Commissioner (Appeals) and the impugned order cannot be sustained. The impugned order is, therefore, set aside with the direction to the Commissioner (Appeals) to consider the matter afresh and take a decision in accordance with the law and in the light of the observations made in this judgment, after hearing both the sides.