Sunil Silks Mills and ors. Vs. Cce - Court Judgment

Excerpt:
1. the main issue in these appeals is whether m/s. sunil silk mills manufactured and clandestinely removed 56.5 lakh metres of cotton and man made fabric. a duty demand of rs. 53 lakhs has been made on the ground that this quantity of fabrics have been clandestinely manufactured and cleared by them. the main evidence relied upon for the allegation was that the central excise authorities had recovered r-forms showing the receipt of export of this quantity by the said processor. learned counsel representing the appellant has submitted that a demand based on r forms alone is not sustainable at all and she seeks setting aside of the demand based on the decision of the supreme court in the case of oudh sugar mills ltd. v. union of india 1978 elt (j 172). regarding the merits of the case, learned counsel submitted that r forms are under the octroi rules and those forms show import into bombay of grey fabric as well as export out of bombay of processed fabrics. she submitted that in the instant case, grey fabrics were received by the processor from bhiwani, processed and cleared on payment of duty. the gray fabrics mentioned in the r forms has actually been taken into account in the raw-material accounts kept by the processor. their processing and duty paid clearance are also entered in the central excise records she submitted that in such a situation.demand cannot be sustained on the ground that the goods were exported.the learned counsel also submitted that, after the hearing of the case before the commissioner on 14.11.91, they had submitted a synopsis of their arguments and alongwith the synopsis, a statement correlating the grey fabrics covered by the r forms had been submitted. this statement indicated r form wise the receipt of the goods in the factory, their processing and clearance on payment of duty. even earlier, the assessees had prepared such a correlation statement between the entries in the r forms and production and payment of duty. however, the commissioner has passed the adjudication order without taking the.explanation and correlation made by the assessee. the order-in-original does not contain any examination of the appellants reply/explanation on this count or any finding as to why the explanation is rejected. we have heard the learned dr also.2. the impugned order states that it was passed on 12.11.91 but issued on 12.12.91. it is clear from this that the synopsis submitted on 14.11.91 by the assessee has not at all been taken into account by the commissioner before passing the order. even though the appellants had filed correlation statements earlier also, they have not been considered while passing the adjudication order. excise is a duty on production. therefore, relevant matter for verification is whether raw materials received by the appellants under the r forms have been correctly accounted, their use in production reflected and their clearnace on payment of duty revealed by the accounts of the assessee.the export of processed fabrics out of bombay is not the concern of central excise. the central excise authorities were, therefore, right in seeking to verify the r form to see whether the grey fabrics received under them had been fully accounted for. however, the order has been passed without taking into account the relevant records kept by the assessee or the correlation rendered by the assessee. in these circumstances, the case is required to go back to the original authority for a fresh decision of the case after considering the explanation and correlation offered by the appellants. the appeals are, accordingly, disposed of by way of remand. the impugned order is set aside and the matter remitted to the jurisdictional commissioner for fresh consideration. since this dispute relates to 1986 onwards, it is essential that this dispute be taken up for fresh decision at the earliest. it is accordingly, directed that the remand proceedings shall be completed within a period of 3 months from the receipt of a copy of this order. the appellant shall render all cooperation in disposing of the matter by appearing for hearing when the case is fixed by the commissioner. all the issues involved in this case shall be considered in the remanded proceedings.

Judgment:
1. The main issue in these appeals is whether M/s. Sunil Silk Mills manufactured and clandestinely removed 56.5 lakh metres of cotton and man made fabric. A duty demand of Rs. 53 lakhs has been made on the ground that this quantity of fabrics have been clandestinely manufactured and cleared by them. The main evidence relied upon for the allegation was that the Central Excise Authorities had recovered R-Forms showing the receipt of export of this quantity by the said processor. Learned Counsel representing the appellant has submitted that a demand based on R Forms alone is not sustainable at all and she seeks setting aside of the demand based on the decision of the Supreme Court in the case of Oudh Sugar Mills Ltd. v. Union of India 1978 ELT (J 172). Regarding the merits of the case, learned Counsel submitted that R Forms are under the octroi rules and those forms show import into Bombay of grey fabric as well as export out of Bombay of processed fabrics. She submitted that in the instant case, grey fabrics were received by the processor from Bhiwani, processed and cleared on payment of duty. The gray fabrics mentioned in the R Forms has actually been taken into account in the raw-material accounts kept by the processor. Their processing and duty paid clearance are also entered in the Central Excise records She submitted that in such a situation.

demand cannot be sustained on the ground that the goods were exported.

The learned Counsel also submitted that, after the hearing of the case before the Commissioner on 14.11.91, they had submitted a synopsis of their arguments and alongwith the synopsis, a statement correlating the grey fabrics covered by the R Forms had been submitted. This statement indicated R Form wise the receipt of the goods in the factory, their processing and clearance on payment of duty. Even earlier, the assessees had prepared such a correlation statement between the entries in the R Forms and production and payment of duty. However, the Commissioner has passed the adjudication order without taking the.

explanation and correlation made by the assessee. The Order-in-Original does not contain any examination of the appellants reply/explanation on this count or any finding as to why the explanation is rejected. We have heard the learned DR also.

2. The impugned order states that it was passed on 12.11.91 but issued on 12.12.91. It is clear from this that the synopsis submitted on 14.11.91 by the assessee has not at all been taken into account by the Commissioner before passing the order. Even though the appellants had filed correlation statements earlier also, they have not been considered while passing the adjudication order. Excise is a duty on production. Therefore, relevant matter for verification is whether raw materials received by the appellants under the R Forms have been correctly accounted, their use in production reflected and their clearnace on payment of duty revealed by the accounts of the assessee.

The export of processed fabrics out of Bombay is not the concern of Central Excise. The Central Excise Authorities were, therefore, right in seeking to verify the R Form to see whether the grey fabrics received under them had been fully accounted for. However, the order has been passed without taking into account the relevant records kept by the assessee or the correlation rendered by the assessee. In these circumstances, the case is required to go back to the original authority for a fresh decision of the case after considering the explanation and correlation offered by the appellants. The appeals are, accordingly, disposed of by way of remand. The impugned order is set aside and the matter remitted to the jurisdictional Commissioner for fresh consideration. Since this dispute relates to 1986 onwards, it is essential that this dispute be taken up for fresh decision at the earliest. It is accordingly, directed that the remand proceedings shall be completed within a period of 3 months from the receipt of a copy of this order. The appellant shall render all cooperation in disposing of the matter by appearing for hearing when the case is fixed by the Commissioner. All the issues involved in this case shall be considered in the remanded proceedings.