Full Judgment
1. Whether averments made in a plaint filed in a Civil Court by a litigant for damages against a Bank in a matter having no connection with the levy or payment of excise duty could constitute conclusive evidence in adjudication proceedings under the Central Excises and Salt Act, 1944? 2. Whether such averments could at all be evidence even when the issues to the suit are still to be decided by the Civil Court, and the suit is pending? 3. Whether an averment contained in a plaint filed before a Civil Court which is pending could amount to an admission as defined in Section 17 & 20 of the Indian Evidence Act, 1872, and fulfils the requirements of Section 21 thereof, so as to constitute substantive evidence? 4. Whether a presumption that goods far in excess of those shown as manufactured in the records maintained by the applicant, under the relevant provisions, of the Central Excises & Salt Act, 1944 and the Central Excise Rules, 1944, which were never disputed, were clandestinely manufactured by the applicant could be raised merely - (i) On the basis of pleadings filed before a Civil Court by the applicant; or/and (ii) on the basis of stock verification by Bank officials in connection with loans granted by them 5. Whether, in a third member reference where no difference of opinion or any specific issue is referred but only a reference as to which of the orders of the respective Members is correct, the third Member could answer the reference without deciding all the issues on which there was a difference of opinion.
At the first instance 10 questions were mentioned as questions of law to be referred but the same were substituted by filing a miscellaneous application. Miscellaneous application was allowed and, accordingly, the above questions were taken on record.
2. The facts of the case, in brief, relating to this reference petition are that the appellants are the manufacturers of Electric Wires and Cables falling under erstwhile Tariff Item 33B of the Central Excise Tariff. The appellants were charged with for having suppressed with their production of Electricity wires and cables valued at Rs. 86,97,946.80 and evaded central excise duty to the tune of Rs. 10,31,772/-. These charges were concluded based upon the stock declaration given by the appellants to the Bank on 2S-2-1985 and the stock taking report of the Bank officials since these figures were not reflected in RG-1 register maintained by the appellants. The contention of the party is that the figures given to the Bank were inflated stock figures with an intention to get more loan and same cannot be taken as basis for having manufactured that huge quantity. No additional machinery had been added and no extra raw material had been purchased during that period to arrive at the conclusion that they had manufactured more goods than they had been normally. Further the goods shown in the stock statement had been purchased from the market but they could not prove with documentary evidence as the connected records were destroyed in a fire which had taken place in their factory on 31-10-1984 after the, assassination of Prime Minister.
The Collector who adjudicated the proceedings negatived the contentions and confirmed the demand in addition to imposing penalty of Rs. 3,00,000/-.
3. Against the above said order the appeal was filed by the appellants before the Tribunal. During the pendency of appeal proceedings the Tribunal also has taken a note of the fact that subsequent to the adjudication in the original Suit filed by the appellants against the Bank, averments made in the plaint are contrary to the stand taken by the appellant. The Member (Judicial) who has written the order held that burden lies on the Department to prove clandestine manufacture and removal of the goods. Since the burden has not been discharged the material relied upon by the Department is not sufficient to hold clandestine manufacture and removal of the goods. He also observed that subsequent confessional statement of the appellants which was not considered in adjudication proceedings and was given before the other authority in different context for different purpose cannot be taken as conclusive proof in the absence of positive evidence adduced by the Department. Differing with this view the Member (Technical) held that normally the burden lies on the Department to prove the clandestine manufacture and removal of excisable goods. But on the facts and circumstances in the instant case it is for the appellants to substantiate that finished goods were purchased from the open market.
Apart from not submitting documentary evidence of such huge purchases, they have not even disclosed the names of persons from whom the goods have been purchased. Hence the Department was justified in arriving at the conclusion of clandestine manufacture and removal of the goods based upon available material on record. Further the plaint presented by the appellants before Delhi High Court lends a strong assurance to conclusion already reached. On reference to a third Member in view of the difference of opinion between the two Members, the third Member concurred with the view taken by the Member (Technical) and, accordingly, appeal was dismissed upholding the order of the Collector.
Hence, this reference application.
4. When this reference application has come up for hearing before us, Sri M. Chandrasekharan, learned counsel for the appellants submitted that he is not pressing question No. 5. Accordingly, question No. 5 was dropped. To a query from the Bench whether remaining all the four questions are required to be referred as they seem to be one and the same, though they are in different forms, he requested that since the question No. 4 is comprehensive, that may be referred to High Court for its considered opinion.
5. Sri Chandrasekharan said that it is settled law that burden lies on the Department to prove clandestine manufacture and removal of the excisable goods. The order of the Tribunal while dismissing the appeal deviated this settled position of law shifting the burden on the party to prove otherwise. It was for the Department to prove that not only the appellants had capacity to produce that huge quantity but to show that it was actually produced and removed. He said that majority view of the Members was very much influenced with the plaint presented by the appellants before the High Court. But he said with or without that plaint it makes no difference as burden was on the Department to prove clandestine production. Since the question arises out of the order and this being a question of law, he requested to refer the question to the High Court for its considered opinion. He also referred to the decision of the Tribunal in the case of Collector of Central Excise v. Prem Jewellers, reported in 1990 (47) E.L.T. 624 wherein it was held that Tribunal is bound to refer any question of law that arises out of its order even though such a question is purely academic and not calculated to dispose of real issue between the parties. However, the High Court has the discretion to decline the answer to such a question but no such discretion is vested with the Tribunal to decline to refer a question of law arising out of its order.
6. On the other hand, Sri S.K. Sharma, learned JDR, appearing for the respondent, submitted that no point of law is involved in the questions to be referred to the High Court. Since the order was passed on facts and arrived at the conclusion on appreciation of evidence, the reference application is liable to be rejected.
7. We have carefully considered the submissions and perused the order of the Tribunal dated 4-1-1991. On going through the submissions with reference to the order in question and the point/points raised in the reference application, we find that there is some force in the arguments advanced on behalf of the applicant that point of law arises in respect of the question requiring reference to the High Court for its considered opinion. We concur with the argument of the applicant's counsel that since there has been a difference of opinion in arriving at the conclusion and in view of the majority opinion whether would it not amount to a shifting of burden from Department to the party, is a question of law which requires to be referred to the High Court for the opinion. Further whether Tribunal would have come to the same conclusion in the absence of plaint presented by the applicants is also a point to be considered. Therefore, question No. 4 being a question of law arises out of the order of the Tribunal and requires to be referred. Since we feel the question No. 4 is to be reformulated, we refer the following reformulated question to the Hon'ble High Court for its considered opinion :- "Whether the Tribunal is justified in the facts and circumstances of the case in arriving at the conclusion that goods were clandestinely manufactured by the appellants on the basis of stock verification by Bank officials or/and on the basis of pleadings filed before the Court in the Civil proceedings?