Chandra Industries Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. m/s. chandra industries, g.t. road, jalandhar have filed an appeal being aggrieved from order-in-original no. 3/ce/86 dated 24.3.1986 passed by the collector of central excise, chandigarh.2. briefly the facts of the case are that m/s. chandra industries are manufacturers of refrigeration and air-conditioning machinery falling under tariff item no. 29a of the first schedule to the central excises and salt act, 1944. on. 30.4.1981, on an information, a contingent of the divisional preventive staff attached to the central excise division, jalandhar conducted patrolling on the g.t. road, and kept surveillance over m/s. chandra industries, jalandhar. nothing untoward was noticed during the course of patrolling but it was learnt from the people sitting in a tea stall near the party's.....

Judgment:
1. M/s. Chandra Industries, G.T. Road, Jalandhar have filed an appeal being aggrieved from order-in-original No. 3/CE/86 dated 24.3.1986 passed by the Collector of Central Excise, Chandigarh.

2. Briefly the facts of the case are that M/s. Chandra Industries are manufacturers of Refrigeration and Air-Conditioning Machinery falling under Tariff Item No. 29A of the First Schedule to the Central Excises and Salt Act, 1944. On. 30.4.1981, on an information, a contingent of the Divisional Preventive Staff attached to the Central Excise Division, Jalandhar conducted patrolling on the G.T. Road, and kept surveillance over M/s. Chandra Industries, Jalandhar. Nothing untoward was noticed during the course of patrolling but it was learnt from the people sitting in a tea stall near the party's factory premises that the appellants had removed a couple of refrigeration machines from the factory in a truck at about 22.00 hrs. Since the unit was reported to be working for one shift and was supposed to clear the goods from their factory premises from 9.00 a.m. to 9.00 p.m. as permitted under Collector's Trade Notice No. 19-CE/77 (15 Misc.) dated 1.4.1977, a doubt arose with regard to the bona fides of the clearance made by the appellants and accordingly the unit was visited by the Preventive Staff which was found to be locked. The Chowkidar of the unit verbally confirmed that a truck loaded with refrigeration machines had left the factory at about 22.00 hrs. Since the factory was closed and no responsible person was available in the factory, further probe in the matter could not be made during the night. The unit was again visited by the Divisional Office Preventive Staff on 1.5.1981 at about 0930 hrs. in the morning. A copy of the current gate pass book was taken over from the concerned clerk and it was found to be containing detatched copies of the original gate passes No. 14 and 15 which were still lying in the same-both dated 30.4.1981 although the clearances under these gate passes had already been made at 17.20 hrs. on 30.4.1981 as per entries in the gate passes. These gate passes related to the clearances of 4 Beverage Coolers of 9.5 Cft. capacity with S.Nos. 7264 to 7267 and 10 combination coolers of 200 to 260 Us. with S.Nos. 7282 to 7291 and the destination of the goods was shown as the duty paid godown of M/s. Chandra Industries, Jalandhar at 293, Lajpat Nagar, Jalandhar. The accounts maintained by the party in the Form RG-I were found to have been written up to 30.4.1981. M/s. Chandra Industries were called upon to show cause by the Assistant Collector vide Show Cause Notice No. P-13/36/81/9800 dated 5.10.1981 read with corrigendum C. No. V-29A(15)1-CE/81/5459 dated 14.5.1982 as to why (1) seized 20 machines valued at Rs. 47,100.00 should not be confiscated under Rule 173Q of the CE Rules 1944, (2) the duty amounting to Rs. 22,848.00 BED and Rs. 1142.40 SED on the stock of 7 beverage coolers of 95 CET found short in stock be not recovered, (3) duty of Rs. 1,54,133.75 BED and Rs. 7706.62 SED on component parts found short on check/verification be also not recovered, (4) duty of Rs. 65,650 BED and Rs. 3182.50 SED leviable on 101 compressors manufactured and cleared by them be also not recovered and (5) duty of Rs. 1,25,66,665.65 evaded by the party as detailed in Annexure 'A' to the said show cause notice, be not recovered from them under Rule 9(2)/56A of the CE Rules, 1944. The appellants were also required to state why the prices worked out as per Annexure 'C be not taken as the true and correct assessable value determined under Section 4 of the Central Excises and Salt Act, 1944, and why duty short-paid amounting to Rs. 44,58,176.25 as per Annexure 'B' on goods cleared under gale passes be also not recovered. They were also called upon to explain why the land, building, plant, machinery, materials, conveyance or any other thing used in connection with the manufacture, production, storage, removal or disposal of goods referred to in the said show cause notice or any other excisable goods produced on such land or in such building be produced or manufactured with such plant be not confiscated under Rule 173Q and why penalty should also not be imposed on them under Rule 173Q for the violation of Rules 9(1), 52A, 53, 56A, 173B, 173C, 173F, 173G and 226 of the Central Excise Rules, 1944. It was imputed in the show cause notice that the appellants contravened the provisions of Section 9 of the Central Excises and Salt Act, 1944 read with Rules 9(1), 52A, 53, 56A, 173B, 173C, 173F, 173FF, 173G and 226 of Central Excise Rules, 1944 in as much as they made clandestine removals of excisable goods without issue of proper gate passes and without their accountal in the statutory records thereby evading Central Excise duty leviable thereon, used duplicate numbers on the refrigeration machinery manufactured by them instead of a running serial number, cleared component parts from the factory without payment of excise duty and without following the procedure prescribed for the same for which they had already availed of the proforma credit, manufactured and cleared excisable goods of the capacities other than those got approved in the Classification List filed by them from time to time and without filing a price list for the same; undervalued the goods manufactured by them by mis-declaring the actual prices being charged by them thereby getting the assessable value approved at much lower rates than the prices being actually charged by them from their buyers; removed the excisable goods from the licensed premises at hours other than those approved by the Collector; did not give an intimation to the Department regarding maintenance of a duty paid godown w.e.f. 1.4.1981 and did not maintain accounts for the stock stored, kept and cleared from the duty-paid godown maintained by them; did not maintain a true and correct account of the excisable goods manufactured and cleared by them as enjoined upon them under the Central Excise Law and deliberately failed to follow the instructions issued to them from time to time for correct accountal of the goods.

The appellants acknowledged the receipt of the Show Cause Notice vide their letter No. CI/81-82/2612 dated 5.11.1981 and requested for supply of copies of G.R.S resumed from different transport companies and also requested for supply of S. No. of the machines alleged to have been removed by them as per Annexure 'A', they also requested for inspection of records recovered from them. The party however denied the charges set out in the show cause notice and requested for granting them a personal hearing before the case was decided. The request of the party for supply of relied upon documents as well as for inspecting the records seized from them on 1.5.1981, was acceded to and the Assistant Collector C.E. Jalandhar was directed to do the needful, vide letter dated 16.11.1981. The appellants were also informed vide letter dated 11.11.1981. The appellants were further reminded vide letter C. No. 166 dated 8.1.1982 to complete the inspection of the documents and send reply to the show cause notice by the end of January, 1982 failing which the case would be decided on the basis of evidence on record. The appellants acknowledged the receipt of that letter dated 8.1.1982 and intimated vide their letter No. C1/81-82/2934 dated 19.1.1982 that in order to complete the inspection of the records they had deputed another person for the job. The appellants did not complete the inspection of the records and accordingly the Asstt. Collector, Central Excise, Jalandhar vide letter dated 20.4.1982 requested them to complete the inspection within a fortnight by deputing more persons for the purpose. The case was fixed for hearing on 28.8.1982 at 11.00 and the appellants were informed by telegram dated 11.8.1982. They were also informed that they should file reply to the show cause notice along with all the evidence which they wanted to produce failing which the case would be decided ex parte. The appellants vide their letter No. Cl/81-82 dated 23.8.1982 in reply to the department's telegram dated 11.8.1982 submitted that: (i) That they were still inspecting the relied upon documents in the office of the Asstt. Collector Central Excise, Jalandhar and had not yet completed the same. After inspection of the records, which were voluminous, they would be able to deal with the show cause notice and submit a detailed reply thereto. In the absence of inspection of the records, they were not in a position to effectively deal with the show cause notice.

(ii) It was however submitted that proper opportunity for examination/inspection of the records was not being afforded to the representative deputed for the purpose. The job of getting the documents inspected was allotted to only one person who could not possibly afford to sit the whole day for the purpose besides looking after his own work. It was stated that the then A. C. took away the keys of the almirah containing the records when she proceeded on long leave. During this period they could not inspect the records.

This fact was brought on record vide their letter No. CI/81-82-2872 dated 5.2.1982 addressed to the Asstt. Collector, Central Excise to inspect the records, they have deputed a whole time senior official for the purpose who had been attending the office of the Asstt.

Collector regularly for the purpose. They, therefore, requested to allow them to complete the inspection, in order to submit proper reply to the show cause notice and to put up the case with full defence. The hearing fixed for 28th August, 1982 would, therefore, be futile in the absence of details from the records. It was also argued that the information asked for vide their letter No. CI/81/82/2612 dated 5.11.1981 had also not been supplied to them so far. The copies of the RT-12 returns for the period from 1977-78 to 1981-82 were still awaited from the Deptt. despite the facts that they had deposited a Sum of Rs. 1012/- in the bank vide bank transfer dated 29.12.1981, as per directions of the Asstt.

Collector, Jalandhar. The serial number of the machines alleged to have been clandestinely cleared by them had also not been supplied as requested for vide their above letter. These documents/information was of vital importance and was absolutely essential for their defence. Appellants requested for the supply of the information at the earliest and requested the Asstt. Collector Central Excise at Jalandhar to supply copies of the RT. 12 returns for the aforesaid period for which they had already paid the necessary charges.

(iii) They however, brought to the notice of Collector's office that the examination of the records so far made by them revealed that the serial numbers of machines had been given in some cases in Annexure-A appended to the show cause notice whereas in other cases, the number of the machines were not there. They requested for intimating the serial number of the remaining machines or categorically informing them whether the machines alleged to have been clandestinely cleared were without serial numbers. The information would help in the correlation at their end as none of the machines was cleared by them without payment of duty.

(iv) That it was note-worthy that the principal raw material for the manufacture of refrigeration cabinets was compressor, thermostat and electric motors which were manufactured by reputed manufacturers and bore specific serial number allotted by the manufacturers.

Appellants requested to intimate whether some enquiry had been made from these manufacturers regarding procurement of the raw material by them with or without bill or the Deptt. had just gone by the invoices only or whether the Deptt. had verified the serial number of the principal raw materials used in the said cabinets duly verified with the manufacturer's account. The result of such an enquiry was conducive to proper defence and might be supplied to them.

(v) That in computing the amount of demand, the value already approved by the Deptt. had been revised without any authority of law. In arriving at the value, the proforma credit availed by them under Rule 56A of the Central Excise Rules, 1944 had also been added in the cost structure which was contrary to Board's instructions F. No. 315/12/76/CX. I dated 24.9.1976. Further as the normal selling price was ascertainable under Section 4(i)(a) of the Central Excises and Salt Act, 1944, the Deptt. had no authority or jurisdiction to resort to the residuary provisions pertaining to the determination of value under Rule 7 of the Central Excise Valuation Rules, 1975.

At best, the Deptt. could have relied upon the value of such goods got approved by other manufacturers in Punjab and Delhi e.g. Messrs.

Hindustan Refrigeration Stores, New Delhi, Commercial Refrigeration, New Delhi and M/s. New Commercial Refrigeration, New Delhi. It was, therefore, requested that the Central Excise office having custody of the price lists of such goods got approved by the manufacturers at Delhi be summoned for cross-examination along with the approved price lists.

(vi) They also reserved the right and wished to cross-examine all the parties who had deposed against them and might be summoned for cross-examinations along with their books of account on the next date of hearing.

In between there had been exchange of correspondence between the appellants and the respondents, and the matter was listed for personal hearing on 16.3.1984. The appellant's advocate had submitted a written memorandum enclosing a list of 864 parties, whose statements were alleged to have been relied upon in this case for cross-examination. In the memorandum he also requested for supply of Sr. No. of machines mentioned in Annexure 'A' to show cause notice, one month's time for inspection of the remaining records lying in the Divisional office, Jalandhar and supply of copies of some documents. The appellant had all along taken stand that there had been no clandestine removal of goods manufactured by them without payment of excise duty and that the transactions recorded in Annexures 'A' and 'B' to the Show Cause Notice were not different transactions and were identical the identity of which could be fully established by the appellant if the serial numbers of the various machines mentioned in Annexure 'A' were supplied by the Department to the appellants. It is further alleged that there was an agreement between the respondent and the appellant that the appellant will cross-examine ten parties and Shri K.L. Bajaj, Asstt. Collector Customs, Amritsar [then Supdt. (Prev.)], who headed the raiding party and recorded the statement at the time of seizure. The appellant had also requested for the cross-examination of the departmental officers who were in charge of the factory and were conducting P.B.C. checks.

The revenue did not accept this request. There had been detailed hearings. After going through the detailed hearings, the learned Collector of Central Excise had passed the following orders: (1) The 20 machines valued at Rs. 47,100.00 seized on 1.5.1981 were not accounted for in the statutory records deliberately, with a view to remove them after completion, without payment of duty and these are liable to confiscation under Rule 173Q of the Central Excise Rules, 1944.

(2) Seven Beverage coolers of 95 Lts, capacity found short at the time of visit of the Central Excise staff on 1.5.1981 were removed clandestinely without payment of duty and without accountal in the statutory records in violation of Rule 9(1) of the Central Excise Rules, 1944 and therefore duty of Rs. 22,848/-as BED and Rs. 1142.40 as SED is recoverable under Rule 9(2) ibid.

(3) The components for refrigeration and air-conditioning machinery in respect of which proforma credit of duty was availed by the party, but were found unaccounted for on 1.5.1981 had been removed by them without payment of duty and therefore the duly on these components which comes to Rs. 1,54,133.75 BED and Rs. 7706.62 SED, is recoverable under Rule 56A(3)(iii) of the Central Excise Rules.

1944.

(4) Parly has also manufactured 101 compressors and cleared them without payment of duty in contravention of Rules 9(1), 52A, 53, 173C, 173G and 226 of the Central Excise Rules, 1944, and therefore, the duty of Rs. 65,650 as BED and 3182.50 SED leviable thereupon is recoverable under Section 11A of the Central Excises and Salt Act, 1944.

(5) Duty amounting to Rs. 1,25,66,665.65 leviable on goods manufactured and cleared clandestinely without payment of duty and without accountal in the statutory record as per details in Annexure 'A' to the show cause notice is also recoverable under Rule 9(2) of the Central Excise Rules, 1944.

(6) Demand of duty of Rs. 44,58,176.25 representing the differential duty on the alleged sale value and the value actually got approved demanded as per Annexure B to the show cause notice is not sustainable.

(7) Party is liable to penal action under Rules 9(2), 226, 56A and 173Q of the Central Excise Rules, 1944 for the violation of Rules 9(1), 52A, 53, 173B, 173C,173G and 226 ibid.

(8) The land, building, plant and machinery used in connection with the manufacture, production, storage, removal and disposal of the offending goods are also liable to confiscation under Rule 173Q(2) of the Central Excise Rules, 1944.

1. I confiscate 20 refrigeration machines, under seizure, valued at Rs. 47,100/-under Rule 173Q of the Central Excise Rules, 1944 for the contravention of provision of law quoted above. I however allow the party to redeem the goods on payment of fine of Rs. 25000/- (Rs. twenty five thousand only) in lieu of confiscation. This option is excrcisable within 30 days of the date of this order or within such extended period as the undersigned may allow.

2. I demand, under Rule 9(2) of the Central Excise Rules, 1944 from the party, duty of Rs. 22,848/- as BED and Rs. 1142.40 as SED, leviable on 7 beverage coolers of 95 Ltrs. capacity found short in the stock.

3. I also demand under Rule 56A(3)(iii) of Central Excise Rules, 1944 duty of Rs. 1,54,133.75 BED and Rs. 7706.62 P. SED leviable on components of refrigeration machinery found short in the books of account of the party.

4. I also demand under Section 11A of the Central Excises and Salt Act, 1944 duty of Rs. 65,650.00 BED and Rs. 3182.50 SED leviable on 101 compressors manufactured and removed by the party clandestinely.

5. I also demand under Rule 9(2) of the Central Excise Rules, 1944 duty of Rs. 1,25,66,665.65, leviable on the goods removed clandestinely as shown in Annexure 'A' to the show cause notice.

6. I however drop proceedings regarding demand duty of Rs. 44,58,176.25 representing the difference between the prices approved for goods shown in Annexurc 'B' to the show cause notice and the price alleged to have been sold at for want of conclusive evidence.

7. I impose a penalty of Rs. one crore only on M/s. Chandra Industries, G. T. Road, Jalandhar under Rules 173Q, 226 and 56A of the Central Excise Rules 1944, for the violation of Rules 9(1), 52A, 53, 173B, 173C, 226 and 56A of the Central Excise Rules, 1944.

8. I also confiscate under Rule 173Q(2) of the Central Excise Rules, 1944 land, building, plant and machinery used in connection with the manufacture, production, storage, removal and disposal of the offending goods involved in this case by M/s. Chandra Industries, G. T. Road, Jalandhar. I however allow the party to redeem the land, building, plant and machinery on payment of fine of Rs. one lakh only in lieu of confiscation. This option may be exercised within 30 days of the date of issue of this order or within such extended period as the undersigned may allow.

3. Being aggrieved from the aforesaid order the appellants have come in appeal before the Tribunal. Shri M. Chandrashckaran, the learned Advocate has appeared on behalf of the appellants and Shri A.K. Jain, the learned representative of the department has appeared on behalf of the respondent. At the outset of the hearing Shri A.K. Jain raised a preliminary objection that documents at page Nos. 127, 175, 183, 185,255,263,176,277,278,486, 504, 505, 511 to 525 are in the nature of additional evidence and are not admissible. And in case the appellants want to rely on these then they have to file an application for granting the necessary permission for the production of additional evidence. Shri Chandrashckaran, the learned advocate who has appeared on behalf of the appellants stated that in order to facilitate the proceedings he will not rely on the documents mentioned by the S.D.R and shall proceed on the basis of the other material already on record.

Shri Chandrashekaran has read the order-in-original and has laid special emphasis on some of the paragraphs of the order. He has referred to page 28 para 51 of the memo of appeal. He states that on 26.7.1984 minutes of the personal hearing were recorded by the Collector. On a request made by the appellant the same were supplied on 8.8.1985. As per said letter the following were the Minutes of the hearing held on that date: The counsels stated that if the department can verify and supply to them serial numbers of the machines and that all the components i.e.

motors, thermostat and compressors fitted in the machines which are mentioned in Annexure-A to the show cause notice in respect of which serial number has not been mentioned therein, they would waive the right to cross-examine any more witnesses including those officers who will conduct the inquiries in this regard. They would submit the final reply within one month from the date of receipt of final supply of information.

He has also referred to pages 28 to 31 of the order-in-original which is in fact the summary of the reply given by the appellants. He has also referred to bottom of pages 31 and 32 of the order-in-original. He has referred to paras 25.14 and 25.15 of the order-in-original and pages 33, 34, 37 & 38. He has referred to page Nos. 39 to 55 of the ordcr-in-original and has laid special emphasis on para 43.22 which appears on page 55 of the order-in-original where the Collector had observed that the onus is on the party to prove that clearance made from their factory were against proper Gate passes and on payment of duty, as per the provisions of SRP Scheme. Shri Chandrashekaran states that there is complete denial of the principles of natural justice as the statement of the witnesses have been recorded at the back of the appellants and no opportunity of cross-examination was granted to them.

He states that as per the minutes of the hearing on 26th July, 1984 the respondent did not comply with the terms of the agreement and as such the waiver agreement entered into by the appellant with respondent was void in the eyes of Law. He states that keeping in view the gravity and the amount involved in the matter an opportunity should have been granted to the appellants to make all the witnesses available for cross-examination. The appellants have waived the right of cross-examination in respect of other witnesses except ten persons.

Shri Chandrashekaran, the learned advocate stated that the Collector of Central Excise has proceeded on the basis of the agreement arrived between the appellants and the respondent on 26.7.1984. He states that no doubt the appellants had waived the right of cross-examination of some of the witnesses but it was a conditional waiver. Before the waiver could have acted upon, the respondent should have complied with the conditions as laid down in the waiver agreement dated 26lh July, 1984. The minutes of the personal hearing held on 26th July, 1984 appear on page 120 of the paper book. He states that he has already referred to these minutes of the hearing and the same have been reproduced in para number 51 of the memo of appeal. He states that since the respondent viz. the revenue authorities did not comply with the terms of the agreement, the agreement had come to an end and there was complete denial of the principles of natural justice and in support of his arguments he has referred to a judgment of the Hon'ble Supreme Court in the case of State of Kerala v. K.T. Shaduli Grocery Dealer etc. where the Hon'ble Supreme Court had held that Tax authorities entrusted with the power to make assessment of tax discharge quasi-judicial functions and they are bound to observe principles of natural justice in reaching their conclusions. A taxing officer is not fettered by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a court of Law, but that does not absolve him from the obligation to comply with the principles of natural justice. The Hon'ble Supreme Court had further held that one of the rules which constitutes a part of the principles of natural justice is the rule of audi alterant partem which requires that no man should be condemned unheard. It was further held when the assessee applied to the Sales Tax Officer for affording him an opportunity to cross-examine the wholesale dealer in regard to the correctness of his accounts, but this opportunity was denied to him and the Sales Tax Officer proceeded to make a best judgment assessment under Section 17(3). It was held that the act of the Sales Tax Officer in refusing to summon the wholesale dealer for cross-examination by the assessee clearly constituted infraction of the right conferred on the assessee by the second part of the proviso and that vitiated the orders of assessment made against the assessee. Shri Chandrashckaran states that the Tax authorities are bound to follow the principles of natural justice. He has argued that in the matter before the Tribunal there was complete denial of principles of natural justice. He has also relied on the following cases on the issue of principles of natural justice.

1983 ELT 1258 Khandelwal Enterprises, Jaipur v. Collector of Customs and Central Excise, New Delhi.

Natural justice violated, if right of cross-examination not allowed-Since the right to cross-examine any witnesses whose evidence forms the basis for a finding of the alleged contravention is inherent, it is not necessary that he should explain as to why he wants to cross-examine them or how he may proceed to in the cross-examination. Therefore, if the evidence of the witnesses of the Panchnama or the opinion of the Jewellery Appraiser were not offered for cross-examination, the evidence was not worth any reliance.

Natural justice-Merely because facts are admitted it does not follow that natural justice need not be observed-Independent proof of prejudice is not necessary.

Natural Justice-merely because facts are admitted it does not follow that natural justice need not be observed.

Shri Chandrashckaran has argued that an opportunity to cross-examine the witnesses whose statements were recorded at the back of the appellants should have been granted to the appellants. Shri Chandrashckaran further states that the appellant had got manufactured 800 machines on contract basis arid the appellants are not manufacturers of the same and the learned Collector has not given any finding as to their manufacture. In support of his arguments he has cited a judgment of the Supreme Court in the case of Empire Industries Ltd. v. Union of India and Ors. where the That taxable event for Central Excise is the manufacture of excisable goods and the moment there is a transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes "manufacture" takes place and liability to duty is attracted.

Shri Chandrashekaran states that in the instant case before the Tribunal the appellant did not manufacture 800 machines and affidavits of the manufacturers were duly filed before the learned Collector of Central Excise and the revenue has not rebutted the same. The mere fact that the appellant is the owner of these 800 machines cannot lead to the inference that these were manufactured by the appellants and that the appellants1 case is fully covered by the Hon'ble Supreme Court's judgment in the case of Mis. Empire Industries Ltd. v. Union of India and Ors. 1985 ECR 1169 SC. He has referred to page 59 of the order-in-original where even the Collector has mentioned that these 800 machines were manufactured on job charges. He states that Annexures 'A' and 'B' of the Show Cause Notice are duplicate of each other. He has also challenged the validity of the order passed by the learned Collector of Central Excise under Section 11 A. Shri Chandrashekaran states that Section 11A was amended by the Central Excise Amendment Act No. 79 of 1985 which came into force from 27th Dec, 1985 and has referred to Section 8 of the said amending act, in terms of which Every proceeding under the proviso to Sub-section (1) of Section 11A of the principal Act, which is pending immediately before the commencement of this Act before an Assistant Collector of Central Excise and any matter arising out of, or connected with, such proceeding and which so pending shall stand transferred on such commencement to the Collector of Central Excise who may proceed with such proceedings or matter from the stage at which it was on such commencement or from any earlier stage as he may deem fit: Provided that any party to the proceeding or matter may demand that before proceeding further with the proceeding or matter, he may be reheard.

Shri Chandrashekaran states that in the present matter before the Tribunal there was no question of transferring the proceedings to the Collector of Central Excise as the proceedings were already pending before him since 1982. He has referred to para No. 41.3.4 on internal page 53 of the order-in-original and states that the learned Collector of Central Excise has mentioned in the order that this amendment had vested the right with him to demand duly under Section 11A. He states that there was no clandestine removal and Rule (9)2 of the Central Excise Rules is not applicable. Shri Chandrashekaran states that the Collector of Central Excise would have issued a Show Cause Notice before the issue of demand and in support of his arguments he has referred to a judgment of the Tribunal in the case of Steel Authority of India Ltd., Calcutta v. Collector of Central Excise, Calcutta reported in 1983 ELT 2355 where the Tribunal has held that the Show Cause Notice about the demands was a statutory requirement and the Central Excise authorities cannot straightaway raise the demand without following the said procedure. The contention that the practice of making demands straightaway is continuing since long would not make something legal which is illegal. Shri Chandrashekaran the learned advocate has pleaded for the acceptance of the appeal and alternatively he has pleaded that the matter may be remanded to the adjudicating authority as there is denial of principles of natural justice.

4. Shri A.K. Jain, the learned SDR who has appeared on behalf of the respondents states that the SRP had been introduced and as per SRP manual an assesses has to give all the co-operation to the Excise Officer and the excise officer has visited the appellants' factory on 30th April, 1981 and after this date the appellant's records were lost.

An F.I.R. was filed but till today the appellants records have not been traced. Shri Jain has reiterated the facts. He has pleaded that there had been clandestine removal by the appellants and the basis of the charge of clandestine removal is fully supported by evidence viz.

Proforma Invoices recovered from the asscssce, GRs and RRs. It is not disputed that the Proforma Invoices GRs & RRs recovered from the appellants were not their and credibility of the RRs and GRs not in dispute, and the appellants have not disowned the proforma invoices issued by them. Shri Jain states that the records so seized from the appellants are fully supported by the supplementary proofs i.e. the statement of buyers. He has also argued that the veracity to the persons giving the statements have not been disputed by the appellants and the statements so recorded is only corroborative evidence. The primary evidence is Proforma Invoice. Shri Jain has referred to Para Nos. 11 and 15 of the order-in-original. Shri Jain has stated that Shri D. N. Awasthy, the senior advocate had submitted a written memorandum enclosing a list of 864 parties, whose statements were alleged to have been relied upon in this case for cross-examination. He had also requested in the memorandum for supply of Sr. No. of machines mentioned in Annexure 'A' to show cause notice, one month's time for inspection of the remaining records lying in the Divisional Office, Jalandhar and supply of copies of some documents. He has also referred to Para No. 15 of the order-in-original where it is mentioned that the appellants had requested for cross-examination of all the 864 persons whose statements have been relied upon in the show cause notice but they were informed vide letter dated 25.6.1984 that their request for cross-examination of all the witnesses had been examined but not found reasonable. They were informed that they would be allowed to cross-examine 10 parties as agreed upon and Shri K.L. Bajaj, the then Supdt. I/C of the party who effected the seizure. Shri Jain has referred to Para No. 33.6 of the order-in-original where the Collector has mentioned that it was not the case of the party that the accounts of the parties from whom enquiries were made were wrong and manipulated to suit the interest of these parties nor have the appellants proved that these parties had inimical relationship with them so as to doubt their statement. He has stated that Annexure 'A' to the Show Cause Notice is based on appellants' own records. He has referred to Para Nos. 7 & 8 of the order-in-original and has staled that Annexure 'A' to the Show Cause Notice was prepared on the basis of the documents of the appellants. Shri Jain has further stated that the appellants had wanted the number of motors, thermostat and compressors. He states that these numbers were not given by the appellants. He states that tallying of numbers was not relevant as the S1. Nos. do not change the value or number of the finished machines and most of the goods have not been entered in Form-4. Shri Jain states that there is no reference to job workers in their records and these 800 machines were not made by the said job workers. He has referred to the appellants letter dated 30th Dec, 1977 addressed to the Supdt. of Central Excise, Range-I which appears on page 571 of the Paper Book.

Shri Jain states that the appellants had intimated to the Supdt. as to the manufacture of goods on labour charges. He has also argued that the gate passes were not sent with the goods and the gate passes were generally kept in the pockets of the employees of the appellants. He states that the appellants had waived the right of cross-examination.

Shri Jain has read in detail the findings and observations of the learned Collector of Central Excise. He stoics that the findings of the Collector of Central Excise arc correct in law. Shri Jain further states that the goods were sent and there was not a single parly who has received the goods as per gate passes. He states that there was no denial of principles of natural justice. He states that the appellants have not been able to contradict anything by way of cross-examination and the appellants' request for furnishing of thc details as to the number, S1. No. , etc. of the machines, etc. was to delay and to frustrate the efforts of the revenue authorities. Shri Jain has argued that the proforma invoices recovered from the appellants help the revenue's case and states that the documents so seized from the appellants lead to a presumption in favour of the department and in support of his arguments he has referred to a judgment of the South Regional Bench in the case of Collector of Central Excise, Madras v.Madras Chemicals held that "Section 36A of the Central Excises and Salt Act, 1944 says that where any document is seized from the custody or control of any person, the truth of the contents of such document shall be presumed unless the contrary is proved." Shri Jain has pleaded that the appellants had waived the right of cross-examination of the witnesses and the same cannot be revived now. He has referred to another judgment of the South Regional Bench in the case of Bhimraj Misrimal Jain v.Collector of Central Excise, Belgaum 1986 (6) ECR 507 Cegat where the Tribunal had held that "having waived the right of cross-examination, it cannot be contended that the same could be revived by the appellant at his sweet will and pleasure. Such a course is inconceivable in law and would lead to a very absurd situation in the matter of adjudication." He has referred to another judgment on the issue of principle of burden of proof in the case of Narendra Kumar H. Paten v.Collector of Central Excise and Customs, Jaipur Cegat where the Tribunal had held that "What is admitted as also inferred from direct and circumstantial evidence need not be proved -"circumstantial evidence" means proof of other relevant facts from which the fact in issue may be inferred". He stated that natural justice is not violated if the person giving information is not allowed to be cross-examined. In support of his arguments he has referred to a judgment of the Hon'ble Supreme Court in the case of Kanungo and Co. v. Collector of Customs, Calcutta and Ors. reported in 1983 ELT 1486 : ECR C Cus. 902 SC. Shri Jain states that in the instant case there was no necessity of cross-examination. He has also argued that the appellants have not challenged the credibility of the statements recorded by the revenue. In support of his arguments has referred to a judgment of the Hon'ble Supreme Court in the case of K.L.

Tripathi v. State Bank of India and Ors. reported in 1984 AIR SC 273 and in particular referred to para Nos. 32 and 33 as well as 41 of the said judgment. Shri Jain referred to a judgment of the Hon'ble Supreme Court in the case of Liberty Oil Mills and Ors. v. Union of India and Ors.

made observations on principles of natural justice in para No. 15 on page 1285. He has also referred to Rule 233A(b) of the Central Excise Rules, 1944. He has also argued that rules of natural justice vary.

Shri Jain has also referred to the following judgments: (The question whether the right of cross-examination is a necessary attribute of reasonable opportunity and of natural justice, must depend upon the nature of proceedings involved, the provisions of the statute or the law regulating the same, the quiescence or the instance of the complaining party in demanding the right of cross-examination and other attendant circumstances.)Fedco (P) Ltd, and Anr. v. S.N. Bilgrami and Ors.

(Manindra Nath Chatterjee v. Collector of Central Excise and Ors.) (Right of cross-examination is not part of reasonable opportunity) Shri Jain has argued that in the instant case the demand has been raised in the nature of Show Cause Notice and the demand was confirmed by the Collector. In support of his arguments he has referred to a judgment of the Tribunal in the case of Poyila Rubber and Plastics, Quilon v. Collector of Central Excise, Cochin where the Tribunal had held that the "Demand under Rule 9(2) has been issued in the instant case in the form of Show Cause Notice because the proceedings under Rule 9(2) are quasi-judicial and the appellants have to be afforded an opportunity to show cause why the demand should not be imposed. In the show cause notice, the period of levy and the amount of levy have been specified and the grounds of claim set out. Therefore, there is no force in the contention that the order-in-original alone amounts to demand." He has also referred to a judgment of the Hon'ble Supreme Court in the case of TV. B. Sanjana, Assistant Collector of Central Excise, Bombay and Ors. v. The Elphinstone Spinning and Weaving Mills Co. Ltd. reported in 1978 ELT (J. 399) : ECR C 308 SC where the Hon'ble Supreme Court had held that "To attract Sub-rule (2) of Rule 9, the goods should have been removed in contravention of Sub-rule (1) i.e. clandestinely and without assessment. If the goods have been removed with prior permission of the excise authorities, Rule 9(2) will not apply.". Shri Jain further argued that it is admitted that the goods were manufactured on behalf of the appellants. The raw materials were supplied by the appellants, the goods were tested in the factory and were manufactured by them. The names of the job workers were not introduced by the appellants during the adjudication proceedings and no declaration was given to the department. He has referred to the affidavits of S/s Malu Ram, Hari Parkash and Satnam Singh appearing on pages 565, 567 and 569 of the paper book. He has stated that these persons do not have any central excise licence. He has also referred to the following judgments:(Bajrang Gopilal Gajabi v. M.N. Balkundri and Ors.) (v) 1978 ELT 68 : 1978 Ccn-Cus 1D Gujarat Cibatul Ltd., P.O. Atul v. Union of India and Ors.) (vi) 1983 ELT 1994 : 1984 ECR 1837 Cegat (G.D. Industrial Engineers, Faridabad v. Collector of Customs and Central Excise, Chandigarh) Shri Tain has also stated that the appellant's statement was recorded at the time of seizure and he has referred to pages 2 and 12 of the Paper Book and in the statement recorded by the appellant the appellant did not mention as to RT-5 returns, Form 4 and there was also no mention of despatch of raw material to the job workers. There was no declaration in this regard and the job workers did not have any excise licence. No permission was taken under Rule 51A and there is no evidence that the raw materials had gone out of the factory. He has also referred to the provisions of Rule 56B of the Central Excise Rules which lays down special procedure for removal or bond of finished excisable goods or semi-finished goods for certain purposes. Shri Jain also states that there is also no mention of job workers in the classification list and price list and there is also no reference to the machinery manufactured by job workers till today. Shri Jain also argued that the order passed by the learned Collector on the quantum of duty is correct in law and for the levy of penalty Shri Jain has raised the following issues: (i) Classification list and price lists during the period in dispute do not refer to proforma invoices, (ii) Permission under Rules 51A and 56B of the Central Excise Rules was not taken.

(iv) There was no difference in the value of the machines of 90 to 125 Ltrs., 200 to 265 Ltrs., 340 to 453 Ltrs. as per the value computed by the department in Annexurc 'C, the sizes were only for the purpose of trade nomenclature and had nothing to do with the value of the goods.

(vi) The appellants did not pay any excise duty but has charged the same in proforma invoice.

(viii) Job workers did not pay any excise duty-labour charges were not paid.

(x) They did not explain to the department by whom the records were stolen- FIR was lodged six days after seizure.

(xi) In the statement of the appellant there is no mention of manufacture of machines by job workers.

(xii) Residential and business premises were searched and the letter dated 30th Dec. 1977 was not there which appears on page 571 of the paper book.

(xvii) Under Rule 56A some goods were cleared for replacement.

(Internal page 30 of the order-in-original).

(xviii) No price lists or classification list in respect of proforma invoice was filed.

Shri Jain has referred to Section 11(A) and states that this Section has to be read with Section 12A(1). Shri Jain further states that Rules are parts of Law. Shri Jain has also argued that in the Income Tax and Sales Tax returns the appellants have not mentioned about the three persons from whom they had got manufactured the 800 machines on job charges. He also pleaded that a senior officer can always exercise the powers of a junior officer. He has pleaded for the dismissal of the appeal.

5. Shri M. Chandrashckaran, the learned advocate has pleaded that the impugned order passed by the adjudicating authorities is not correct in law. In support of his arguments he has referred to a judgment of the Hon'ble Bombay High Court in the case of Dunlop Rubber Co. (India) Ltd. v. M.V. Raghavan Iyer and Ors. reported in 1983 ELT 2289 (Bom.) where the Hon"ble Bombay High Court had held that "It is well settled law that the validity of an impugned order must be judged by the reasons given in the order itself and cannot be complemented or supplemented by fresh reasons in the shape of an affidavit or otherwise". Shri Chandrashekaran stated that in the present matter there is denial of principles of natural justice and the agreement arrived at between the appellant and the respondent as to the waiver of cross-examination of the witnesses is a nullity in the eyes of law. The appellants had given up the right on the condition of supply of information by the department and had agreed to cross-examine only 10 persons. The department has not acted upon the agreement. The appellants have to be given an opportunity to cross-examine all the 864 witnesses. He has also referred to another judgment of the Hon'blc Supreme Court iri the case of Mohinder Singh Gill and Anr. v. The Chief Election Commissioner, New Delhi and Ors.

the Hon'ble Supreme Court had held that "When a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise." He states that the arguments of Shri Jain do not help him. He has also referred to another judgment of the Hon'blc Gujarat High Court in the case of Cibatul Limited., P.O.Atul v. Union of India and Ors. reported in 1979 ELT (J. 407) : 1979 Cen-Cus 404D Gujarat where the Hon'ble Gujarat High Court had held that: "The proceedings before the Central Excise authorities are quasi-judicial in character, therefore, if any order passed in pursuance of these proceedings is challenged, it can be supported only on the material stated in the impugned order and not on any other grounds". Shri Chandrashekaran has referred to page 59 Para 45.3.2 of the order-in-original where the Collector has duly mentioned about the manufacture of 800 machines. Shri Chandrashekaran has argued that the learned Collector has not made any mention of the appellant's Income Tax or Sales Tax return and as such the same cannot be taken in consideration at this stage. Shri Chandrashekaran has argued that in spite of the repeated requests by the appellants for the supply of information as to the S1. No. of motor, thermostats, etc. no information has been given to the appellants. He has referred to page No. 40 of the order-in-original. Shri Chandrashekaran has again pleaded that there is complete denial of the principles of natural justice and again referred to the minutes of the personal hearing held on 26th July, 1984 which appears on page 120 of the paper book. He states that the appellants should have been afforded an opportunity to cross-examine 864 persons whose statements were recorded by the revenue authorities at the back of the appellants. He states that the cross-examination has got a definite purpose. Shri Chandrashekaran states that the record of personal hearing appears on page 88 of the paper book. Shri Chandrashekaran states that the right of cross-examination is a basic rights of the appellant and the same has to be utilised by the appellants for discharging the onus. The appellants have not been given an opportunity to discharge this onus and, therefore, the order passed is bad in the eyes of law. He further states that the revenue's; case is based on proforma invoices and that the issue of a proforma invoice does not show that the goods have been sold. He states that there can be a situation that a Proforma Invoice may be issued and the goods are not supplied at all to the person in whose favour the Proforma Invoice was issued. Shri M. Chandrashekaran the learned advocate states that the judgment of Hon'ble Supreme Court in the case of S.L. Kapoor v. Jagmohan and Ors. reported in 1981 AIR Supreme Court 136 cited by the learned S.D.R does not help him as the Hon'ble Supreme Court had held that merely because facts are admitted it docs not follow that natural justice need not be observed. Shri Chandrashekaran states that in the present matter the facts are all disputed ones. He has also referred to another judgment of the Hon'ble Supreme Court in the case of Kishinchand Chellaram v. The Commr. of Income-Tax reported in 1980 SC 2117 where the Hon'ble Supreme Court had held that where "Letter not disclosed to assessee-Statement in letter also not proved to have been based on personal knowledge of Manager-Tribunal held ought not to have accepted unsupported statement of Manager, based on hearsay, that the amount was remitted by assessee and ought not to have come to the conclusion that the said amount represented concealed income of assessee. Shri Chandrashekaran states that in the present matter before the Tribunal the statements of 864 persons were recorded at the back of the appellants and as such no adverse inference should be drawn and the appellants should be given an opportunity to cross-examine the witnesses. Shri Chandrashekaran states that if the revenue authorities had given the Sl. No. etc. of the motors, compressors, etc. the appellants would have co-related and the present problem would not have arisen. Shri Chandrashekaran has again pleaded that the appellant's appeal may be allowed on merits and in case the appellant's plea is not accepted then the matter may be remanded to the adjudicating authority as there was denial of principles of natural justice. Shri Chandrashekaran states that the written demand has to be made within the period specified in Section 11A of the Central Excises and Salt Act by a proper officer. He has referred to a judgment of the Hon'ble Madras High Court in the case of Kwality Dyes and Chemicals v. Collector of Central Excise and Customs, Madurai held that "Seizure invalid, if reasonable belief is formed by the Superintendent of Central Excise who is subordinate to the Collector-Reasonable belief as envisaged by Section 110 of the Customs Act must be formed by the proper Officer who must be the Head of the Department i.e. the Collector-'Reasonable belief formed by the Superintendent will not justify seizure-Section 110 of the Customs Act, 1962 as made applicable to the Central Excises Act and Rule 2(xi) of the Central Excise Rules, 1944 and Notification No. 69/59." He has also referred to the Show Cause Notice issued on 5th October 1981 and also argued that written demand on DD-2 form under Rule 9(2) has to be given within time limit of five years from the date of the adjudication. Shri Chandrashekaran states that the demand is hit by limitation. He has pleaded for the acceptance of the appeal and in the alternative for the remand of the matter to the adjudicating authority for grant of an opportunity of cross-examining the other 864 witnesses as there was denial of principles of natural justice.

6. We have heard both the sides and have gone through the facts and circumstances of the case. We have also considered the arguments and the case law cited by both the sides on merits of the case as well as on the issue of principles of natural justice. It is an admitted fact that the appellants had requested for the cross-examination of 864 witnesses and they have not been afforded an opportunity to cross-examine them, On the 16th day of March, 1984 there was a hearing before the Collector and after hearing the counsels on 16.3.1984 the following decisions were taken in consultation with the party's counsel and communicated to them and the same has been duly discussed by the learned Collector in para No. 13 of his order. Record of personal hearing on 16.3.1984 appearing on page 88 of the paper book is reproduced below: Shri D.N. Awasthy, Sr. Advocate assisted by S/Shri S.L. Chopra and A.K.S. Bedi, Advocates and Shri Mahesh Anand Prop. of the firm appeared for personal hearing today.

Shri Awasthy submitted a written memorandum, which is placed on record, enclosing a list of hundred parties, whose statements are alleged to have been relied upon in this case, for cross-examination. He also requested in the memorandum for supply of Sr. Nos. of machines mentioned in Annexure 'B' to show cause notice, on month's time for inspection of the remaining records lying in the Divisional Office, Jalandhar and supply of copies of some documents.

After hearing the counsels, the following decisions were taken and communicated to the party: 1. As regards cross-examination of persons who statements have been relied upon in the show cause notice, it was agreed that out of 100 persons whose cross-examination has been sought, 10 persons i.e. 3 persons each having large, medium and small transactions for each year, would be offered for cross-examination and the names of such persons would be selected by the Collector.

2. The party would supply within one week a list of Departmental officers whom they intend to cross-examine with their relevance to the case. The Collector after considering the list would select the Departmental officers to be offered for cross-examination.

3. The party's request to complete inspection of remaining records/documents within one month was granted on party's assurance that they would not ask for further time under any circumstances.

4. The party would be supplied by the Asstt. Collector, Jalandhar copies of documents which have been allowed to be supplied to them and in respect of which they have paid the copying charges.

5. Regarding supply of Sr. Nos. of machines listed in Annexure 'B' to the Show Cause Notice, the party was informed where serial numbers were available they had already been supplied and where Sr.

Nos. were not available in the invoice or other records, they could not be supplied as already intimated in the written reply given to the party.

6. As regards valuation of the goods involved in this case, the party would submit written arguments keeping in view the law on valuation laid down by the Supreme Court in the recent judgments.

7. The next date for personal hearing and cross-examination of the witnesses would be fixed immediately after expiry of one month period allowed to the party for inspection of records. The party promised not to seek adjournment of the date of 8. 3 Show Cause Notices issued to the party would be argued separately and 3 separate orders would be issued.

Thereafter on the 26th July, 1984 the appellants and the respondent had reached on an agreement which appears on page 120 of the Paper Book which is also reproduced below: The counsels stated that if the Deptt. can verify and supply to them serial numbers of the machines and that of the component i.e.

motors, thermostat and compressors fitted in the machines which are mentioned in Annexure 'A' to show cause notice in respect of which serial number has not been mentioned there, they would waive the right to cross-examine any more witnesses including those officers who will conduct the enquiries in this regard. They would submit the final reply within one month from the date of receipt of final supply of information.

A simple perusal of the record of personal hearing on 16th March, 1984 and 26th July, 1984 would show that the agreement as to the waiver of the cross-examination of witnesses by the appellants with the revenue authority was conditional. The department was to verify and supply the Sr. Nos. of the machines and that of the components which were mentioned in Annexure 'A' to the show cause notice in respect of Sl.

Nos. have not been mentioned therein. The revenue has not acted upon the terms of the agreement. Since we have held that the revenue had failed to comply with the terms of the agreement the appellant's right to cross-examine 864 witnesses revived. The judgments cited by the learned S. D. that the cross-examination of the witnesses was not essential do not help him. The Hon'ble Supreme Court in the case State of Kerala v. K.T. Shaduli Grocery Dealer had held that Tax authorities entrusted with the power to make assessment of tax discharge quasi-judicial functions and they are bound to observe principles of natural justice in reaching their conclusions.

Para Nos. 2 and 3 from the said judgments are reproduced below: 2. Now, the law is well settled that tax authorities entrusted with the power to make assessment of tax discharge quasi-judicial functions and they are bound to observe principles of natural justice in reaching their conclusions. It is true, as pointed out by this Court in Dhakeswari Cotton Mills Ltd. v. Commr. of I.T., West Bengal that a taxing officer "is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law", but that does not obsolve him from the obligation to comply with the fundamental rules of justice which have come to be known in the jurisprudence of administrative law as principles of natural justice. It is, however, necessary to remember that the rules of natural justice are not constant; they are not absolute and rigid rules have universal application. It was pointed out by this Court in Suresh Koshy George v. The University of Kerala that "the rules of natural justice are not embodied rules" and in the same case this Court approved the following observations from the judgment of Tuker L.J. in Russell v. Duke of Norfolk (1949) 1 All ER 109: There are, in my view, no words which are of universal application to every kind of inquiry and every kind of domestic tribunal. The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject-matter that is being dealt with, and so forth. Accordingly, I do not derive much assistance from the definitions of natural justice which have been from time to time used, but, whatever standard is adopted, one essential is that the person concerned should have a reasonable opportunity of presenting his case.

3. One of the rules which constitutes a part of the principles of natural justice is the rule of audi alterant partem which requires that no man should be condemned unheard. It is indeed a requirement of the duty to act fairly which lies on all quasi-judicial authorities and this duty has been extended also to the authorities holding administrative enquiries involving civil consequences of affecting rights of parties because, as pointed out by this Court in A.K. Kraipak v. Union of India natural justice is to secure justice or to put it negatively to prevent miscarriage of justice" and justice, in a society which has accepted socialism as its article of faith in the Constitution is dispensed not only by judicial or quasi-judicial authorities but also by authorities discharging administrative functions. This rule which requires an opportunity to be heard to be given to a person likely to be affected by a decision is also, like the genus of which it is a species, not an inflexible rule having a fixed connotation.

It has a variable content depending on the nature of the inquiry, the framework of the law under which it is held, the constitution of the authority holding the inquiry, the nature and character of the rights affected and the consequences flowing from the decision. It is, therefore, not possible to say that in every case the rule of audi alterant partem requires that a particular specified procedure to be followed. It may be that in a given case the rule of audi alteram partem may import a requirement that witnesses whose statements are sought to be relied upon by the authority holding the inquiry should be permitted to be cross-examined by the party affected while in some other case it may not. The procedure required to be adopted for giving an opportunity to a person to be heard must necessarily depend on facts and circumstances of each case.

The learned SDR had referred to the Hon'ble Supreme Court's judgment in the case of Kanungo & Co. v. Collector of Customs, Calcutta and Ors.

reported in 1983 ELT 1486 (S.C) : ECR C Cus 902 where the Hon'ble Supreme Court had held that "Principles of natural justice do not require that in every matter, the person who has given information should be examined in the presence of the Appellant or allowed to be cross-examined by the person concerned in respect of the statements made before the Customs authorities. This judgment of the Hon'ble Supreme Court docs not help the respondent because in that case the appellant had requested for the cross-examination of an informer whereas in the present matter before us the 864 persons are not informers. The revenue has based its case on the ground that the appellants had sold the goods manufactured by them. Keeping in view the law laid down by the Hon'ble Supreme Court and the reproductions from the Hon'ble Supreme Court's judgments given above we hold that there is complete denial of the principles of natural justice. The revenue authorities should have offered the appellants an opportunity to cross-examine the 864 witnesses. Accordingly we set aside the impugned order and remand the matter to the Collector of Customs and Central Excise, Chandigarh for de novo examination in accordance with law. It is directed that the learned adjudicating authority will afford an opportunity to the appellants to cross-examine 864 witnesses. The appellants will also be entitled to adduce any fresh evidence before the adjudicating authority, if they so choose. Since we have remanded the matter to the adjudicating authority we are not going into the other merits of the appeal. For statistical purposes the appeal is allowed by way of remand.

7. I have carefully considered the records of the case placed before us and the arguments advanced by the learned advocate and the learned SDR.I have also perused the order written by my learned Brother Shri Harish Chander, Member (Judicial). He has observed that in passing the impugned order, the Collector has violated the principle of natural justice which warrants remand of the matter to the Collector for de novo examination in accordance with law after affording an opportunity to the appellants to cross-examine 864 witnesses and also allowing them to adduce any fresh evidence before the adjudicating authority, if they so choose. He has held that the failure of the Department to furnish the Sri. Nos. of all the machines and their parts, viz., motors, thermostats & compressors, revived the right of the appellants to cross-examine all the 864 persons and the earlier waiver of cross-examination of those persons by the appellants was of no consequence. According to him, since, after the Department had failed to supply Sri. Nos. of all the machines and their parts the appellants wanted to cross-examine all the 864 persons, the Collector should have allowed the cross-examination of those persons by the appellants. As the Collector has not done so, there has been denial of natural justice to them. I could not, however, persuade myself to agree to the findings my learned Brother and I am of the view that in the facts and circumstances of the case and the evidence on record, there has been no violation of the principle of natural justice by the Collector in his refusal to allow cross-examination of all 864 persons. I am, therefore, recording below my separate findings and conclusions, dealing with all the points urged before us during the hearing.

8. The conclusions and decisions of the Collector, as in paragraph 49 of the impugned order, have been reproduced in paragraph 2 of the order recorded by my learned brother Shri Harish Chander. It is, therefore, not necessary for me to reproduce the same.

9. During the hearing before us the learned advocate for the appellants has argued on the following points: (i) The Collector of Central Excise had no power to demand duty under Section 11A of the C.E and Salt Act, 1944. According to that section as it existed prior to 27.12.1985, the Assistant Collector was the proper officer to confirm the demand for duty and the Collector had no power to pass such order.

(ii) Entire proceedings are vitiated by the non-compliance of the principle of natural justice by the Collector.

(iii) 800 machines were got manufactured by the appellants from other persons on job charges. The Collector has not dealt with those machines.

10. Challenging the Collector's authority to pass order under Section 11-A of the Central Excises and Salt Act prior to 27.12.1985 the learned advocate has relied upon this Tribunal's decision in the case of Quality Containers Pvt. Ltd. v. Collector of Central Excise, Bombay , in which it was held that this section conferred jurisdiction on the Assistant Collector to determine the amount of duty in terms of the notice issued by the proper Central Excise Officer. The said power was exercisable by Collector only from 27.12.1985. The contention of the learned advocate is that as these proceedings were pending before the Collector and not before the Assistant Collector on 27.12.1985, the Collector was not competent to pass order under Section 11-A even after 27.12.1985. So far as the Collector's power prior to 27.12.1985 is concerned, the Tribunal's decision, (Cegat) is to be followed. This decision also considered the provision of Rule 6 of the Central Excise Rules according to which the Collector could perform the duties and exercise the power of a subordinate officer. Tribunal has held that this power of the Collector would relate only to powers exercisable by any other officer under the Rules and not under the Act. The position, however, has changed with effect from 27.12.1985 when Section 11-A was amended and Section 12-A of the Central Excises and Salt Act was introduced. According to amended Section 11-A: (i) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Collector of Central Excise may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty of excise has not been levied or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words "Central Excise Officer", the words "Collector of Central Excise", and for the words "six months", the words "five years" were substituted.

"Note" below Section 11-A, introduced with effect from 27.12.1985 vide Central Excises and Salt (Amendment) Act, 1985 (206 of 1985), reads as follows: Every proceeding under the proviso to Sub-section (1) of Section 11-A of the Principal Act, which is pending immediately before the commencement of this Act before an Assistant Collector of Central Excise and any matter arising out of or connected with, such proceeding and which is so pending shall stand transferred on such commencement to the Collector of Central Excise who may proceed with such proceeding or matter from the stage at which it was on such commencement or from any earlier stage as he may deem fit: Provided that any party to the proceeding or matter may demand that before proceeding further with the proceeding or matter, he may be re-heard.

(1) A Central Excise Officer may exercise the powers and discharge the duties conferred or imposed under this Act on any other Central Excise Officer who is subordinate to him.

(2) Notwithstanding anything contained in Sub-section (1), the Collector of Central Excise (Appeals) shall not exercise the powers and discharge the duties conferred or imposed on a Central Excise Officer other than those specified in Section 14 or Chapter VIA.In terms of the amended Section 11-A of the Central Excises and Salt Act, with effect from 27.12.1985, the Collector of Central Excise was empowered to demand Central Excise duty which had not been levied or paid or had been short-levied or short-paid. According to "Note" below Section 11-A, the proceedings under Section 11-A(1) which were pending before the Assistant Collector of Central Excise on 27.12.1985 stood transferred to the Collector of Central Excise on that date and the Collector was empowered to proceed with such proceedings or matters from the stage at which it was pending on that date. These proceedings were pending before the Collector of Central Excise on 27.12.1985. Show cause notice was issued to the appellants on 5.10.1981 and the proceedings continued till 25.3.1986 on which date the Collector of Central Excise, Chandigarh passed the impugned order-in-original. Where the "Note" below Section 11-A empowered the Collector of Central Excise to proceed with the matters or proceedings pending before the Assistant Collector, I do not see any logic behind the contention that the Collector could not proceed with the proceedings which were pending before him on 27.12.1985. The only requirement of law was that the Collector was required to re-hear the party after 27.12.1985 before proceeding further if the party demanded a re-hearing. In the present case, the appellants were heard by the Collector before 27.12.1985.

They did not demand any re-hearing in the proceedings after 27.12.1985.

The Collector of Central Excise was, therefore, competent under the law to proceed further in the proceedings from the stage at which the same were pending before him on 27.12.1985 and pass order under Section 11-A of the Act. The order passed by the Collector of Central Excise in this case under Section 11-A of the Act does not suffer from any legal infirmity warranting interference by the Tribunal. The argument of the learned advocate that the Collector had no power to pass order under Section 11 -A of the Act is not found to be tenable.

11. The learned advocate has argued that the Collector violated the principle of natural justice by not allowing the cross-examination of all the 864 persons whom the appellants wanted to cross-examine. His contention is that the appellants waived the right to cross-examine all the 864 witnesses subject to the condition that the Department should supply to them the serial Nos. of all the machines and their component parts. As the Department could not supply all the serial Nos., their right to cross-examine revived and they insisted on the opportunity of cross-examination of all the 864 witnesses. As the Collector did not agree with their demand, it has been argued, there has been violation of the principle of natural justice. In support of his argument, the learned advocate has relied on a few decisions. The particulars of those decisions and the ratio relied upon are given below:State of Kerala v. K.T. Shaduli Grocery Dealer etc.

(Decided on 15.3.1977) It was held in this case that the tax authorities entrusted with the power to make assessment of tax discharge quasi-judicial functions and they are bound to observe principles of natural justice in reaching their conclusions.Khandelwal Enterprises, Jaipur v. Collector of Customs and Central Excise, New Delhi 1983 ELT 1258 (CEGAT) (Decided on 25.3.1983). In paragraph 6 of this decision, the Customs, Excise and Gold (Control) Appellate Tribunal has held that: The right to cross-examine any witnesses whose evidence forms the basis for a finding of the alleged contravention is inherent and it is not necessary that he should explain as to why he wants to cross-examine them or how he may proceed in the cross-examination.

If they were not offered for cross-examination the evidence of the witnesses to the Panchnama or the opinion of the Jewellery Appraiser is not worth any reliance whatsoever not having been put to test.S.L. Kapoor v. Jagmohan and Ors. (Decided on 9.5.1980) The requirement of natural justice are met only if opportunity to represent is given in view of proposed action. The demands of natural justice are not met even if the very person proceeded against has furnished the information on which the action is based, if it is furnished in a casual way or for some other purpose. The person proceeded against must know that he is being required to meet the allegations which might lead to a certain action being taken against him. If that is made known the requirement are met The principles of natural justice know of no exclusionary rule dependention whether it would have made any difference if natural justice had been observed. The non-observance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary.Kishan Chand Chellaram v. Commissioner of Income Tax.

(Decided It was held that "merely because the facts were admitted it did not follow that natural justice need not be observed.

12. The learned Senior Departmental Representative Shri A.K. Jain has argued that there was no denial of natural justice by the Collector.

The basis of charge of clandestine removal is the proforma invoice recovered and seized from the premises of the appellants, and the GRs and Railway Receipts, etc. The seized documents have not been disowned by the appellants. Annexurc 'A' to the show cause notice was prepared on the basis of the proforma invoices, RRs, GRs and other documents like correspondence etc. Credibility of those documents has not been disputed by the appellants. As the statements of the customers were corroborative evidence and were not the only evidence, it was not necessary to allow cross-examination of 864 persons. The appellants waived the right of cross-examination of those 864 persons. They could not revive their claim for cross-examination after having waived the same. He has also argued that the statutory records like D-3 intimation, Form-IV, R.T.-5, R.G.-1, R.G.-23, G.P.-1 and also the RRs and GRs did not contain the serial Nos. of the motors, thermostats and compressors. The serial Nos. were not furnished by the appellants in any of the statutory records. Tallying the serial Nos. was not relevant. The serial Nos. could not change the description of the goods. Most of the goods have not been shown in the Form-IV. Non-supply of the serial Nos. was an excuse to delay and frustrate the proceedings. In support of his arguments, the learned Senior Departmental Representative has relied on the judgments and . He has distinguished the facts of the present case from the case of Khandelwal Enterprises v.Collector of Customs and Central Excise, Delhi, reported in 1983 ELT 1258 (CEGAT), on the ground that in the present case the basic evidence is the proforma invoices, and the statements of the customers were only corroborative evidence. Further, in the said case, the Tribunal did not consider the judgments of the Supreme Court and the High Courts relied upon by him. He has also distinguished the case of S.L. Kapoor v.Jagmohan and Ors.

Chandrasekharan), stating that in the present case all the documents were furnished to the assessce.

13. Brother Shri Harish Chandcr has discussed a few judgments on the principle of natural justice and he has based his conclusion mainly on the judgment of the Hon"ble Supreme Court in the case of State of Kerala v. K.T. Shaduli Grocery Dealer, which was cited by the learned advocate Shri Chandrasekharan. For proper appreciation of this legal issue, I think it desirable to consider the various judgments relied upon by the learned Senior Departmental Representative. The ratio laid down in those judgments are, therefore, given below: It is true that all action against a party involving penal or adverse consequences must be in accordance with the principles of natural justice, but whether any particular principle of natural justice would be applicable to a particular situation of the question whether there has been denial of natural justice must be judged in the light of facts and circumstances of each particular case. The basic requirement is that there must be fair play in action and the decision must be arrived at in a just and objective manner with regard to the relevance of the materials and reasons.

The rules of natural justice are flexible and cannot be put on any rigid formula. In order to sustain a complaint of violation of principles of natural justice on the ground of absence of opportunity of cross-examination, it has to be established that prejudice has been caused to the party concerned by the procedure followed. Neither cross-examination nor the opportunity to lead evidence by the delinquent is an integral part of all quasi-judicial adjudications.

In assessment proceedings under Section 17(3) of the Kerala General Sales Tax Act, 1963, it could not be said that the assessee has a right to insist on any party or witness, whose statement or record is relied on by the assessing authority and the substance of which has been disclosed, to be tendered or made available for cross-examination. The question whether the right of cross-examination is a necessary attribute of reasonable opportunity and of natural justice, must depend upon the nature of the proceedings involved, the provisions of the statute or the law regulating the same the quiescence of the instance of the complaining party in demanding the right of cross-examination, and other attendant circumstances.State of Kerala v. K.T. Shaduli Yusuff (1977) 39 STC 478 (SC) cannot be understood as recognising a right of cross-examination as an invariable attribute of the requirement of reasonable opportunity under Section 17(3) of the Act. The Supreme Court has stated the rule with sufficient elasticity and amplitude as to make the right depend on the terms of the statute, the nature of the proceeding or of the function exercised, the conduct of the party, and the circumstances of the case.

Held, on the facts of the case, that the assessee was not entitled to demand a right of cross-examination of a particular person as part of the reasonable opportunity under Section 17(3) of the Act or on the rules of natural justice.

9. There can be no invariable standard for 'reasonableness' in such matters except that the court's conscience must be satisfied, that the person against whom an action is proposed has had a fair chance of convincing the authority who proposes to take action against him that the grounds on which the action is proposed are either non-existent or even if they exist they do not justify the proposed action. The decision of this question will necessarily depend upon the peculiar facts and circumstances of each case, including the nature of the action proposed, the grounds on which the action is proposed, the material on which the allegations are based, the attitude of the party against whom the action is proposed is showing cause against such proposed action, the nature of the plea raised by him in reply, the requests for further opportunity that may be made, his admissions by conduct or otherwise of some or all the allegations and all other matters which help the mind in coming to a fair conclusion on the question.

(iii) Bishm Ram Borah and Anr. v. Parag Saikia and Ors.

Held that "Rules of natural justice must necessarily vary with the nature of the right and the attendant circumstances.Chairman, Board of Mining Examination and Anr. v. Ramjee (Decided Natural justice is no unruly horse, no lurking land mine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating.

Courts cannot look at law in the abstract or natural justice as a mere artifact. Nor they can fit into a rigid mould the concept of reasonable opportunity. If the totality of circumstances satisfies the Court that the party visited with adverse order has not suffered from denial of reasonable opportunity the Court will decline to be punctilious or fanatical as if the rules of natural justice were sacred scriptures. In the instant case, the Board cannot be, anathematised as condemning the man without being heard. The respondent has, in the form of an appeal against the report of the Regional Inspector, sent his explanation to the Chairman of the Board. He has thus been heard and compliance with Regulation 26 in the circumstances is complete.

(v) Manindra Nath Chatterjee v. The Collector of Central Excise and Ors. 1977 (Vol. 2) Taxation Law Reports-1754 (Cal.) (Decided on 23.11.1976). It was held that: The right to cross-examination is not necessarily a part of reasonable opportunity. Whether in a particular case a particular party should have the right to cross-examine or not depends upon the facts and circumstances of the case and it very largely depends upon the adjudicating authority who is not guided by the rules of evidence as such. He must, however, afford such opportunity as would ensure to the party concerned proper opportunity to defend himself.

It is well known that in these matters the Revenue or Excise authorities arc entitled to make their independent enquiries and to rely upon such enquiries provided the result of such enquiries arc communicated to the person concerned against whom such enquiry is sought to be relied on and he is given an opportunity to rebut or contradict any evidence adduced by such enquiry.

In the instant case before the Excise Authorities under the Central Excise Rules (1944), Rule 160, it was held that, in the background of the facts and circumstances of the case, the mere fact that the petitioner was not given an opportunity to cross-examine was not violativc of the principles of natural justice.Fedco (P) Ltd. and Anr. v. S. N. Bilgrami and Ors.

(Decided Clause 10 of the Imports (Control) Order, 1955 requires that before cancelling the licence granted under the order on the ground that it was obtained by fraud, the licensee has to be given a reasonable opportunity of being heard. The requirement that a reasonable opportunity of being heard must be given has two elements. The first is that an opportunity to be heard must be given; the second is that this opportunity must be reasonable. Both these matters are justiclable. There can be no invariable standard for reasonableness in such matters, except that the Court's conscience must be satisfied that the person against whom an action is proposed has had a fair chance of convincing the authority who proposes to take action against him that the grounds on which the action is proposed are cither non-existent, or, even if they exist, they do not justify the proposed action. The decision of this question will necessarily depend upon the peculiar facts and circumstances of each case, including the nature of the action proposed, the material on which the allegations are based, the attitude of the party against whom the action is proposed in showing cause against such proposed action, the requests for further opportunity that may be made, his admissions by conduct or otherwise of some or all the allegations and all other matters which help the mind in coming to a fair conclusion on the question.

(vii) Jayantilal Thakordas v. State of Gujarat 1969 (Vol. 23) STC Page 11 (Gujarat) (Decided on 1.7.1968). It was held that: (1) that on the facts and in the circumstances of the case, the Tribunal was justified in holding that the principles of natural justice were not violated by the Sales Tax Officer in not recording the statements of two parties from whose accounts assessee's suppressed sales were detected, and not giving opportunity to the assessee to cross-examine them; (2) that on the facts and in the circumstances of the case the Tribunal was justified in making an estimate of the turnover of sales higher than the detected suppression of sales.

14. From the ratio of the above mentioned judgments it is clear that the quasi-judicial authority should follow the principles of natural justice. Natural justice demands that the accused person should not be punished unheard and he should be given reasonable opportunity of being heard. Whether natural justice has been denied in any particular case, should be judged in the light of the facts and circumstances of each particular case. In the judgment reported in 1977 (Vol. 2) SCR page 904, the Hon'ble Supreme Court has held that "if the totality of circumstances satisfies the court that the party visited with adverse order has not suffered from denial of reasonable opportunity the court will decline to be punctilious or fanatical as if the rules of natural justice were sacred scriptures." It was also held in that judgment that "unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating." Regarding the question of opportunity of cross-examination, the Hon'ble Supreme Court, in the case of K.L.

Tripathi v. Bank of India and Ors.

(decided on 4.10.1983), has held that in order to sustain a complaint of violation of principles of natural justice on the ground of absence of opportunity of cross-examination, it has to be established that prejudice has been caused to the party concerned by the procedure followed. It has also been held that cross-examination is not an integral part of all quasi-judicial adjudication. In view of this judgment of the Supreme Court, the Tribunal's decision reported in 1983 ELT 1258 in Khandelwal Enterprises case (decided on 25.3.1983) which has been relied upon by the learned advocate, is of no effect. In the case of Manindra Nath Chattcrjee v. Collector of Central Excise and Ors. 1977 (Vol. 2) TLR 1754, Hon'ble Calcutta High Court has held that the Revenue or Excise authorities are entitled to make their independent enquiries and to rely upon such enquiries provided the result of such enquiries arc communicated to the person concerned against whom such enquiry is sought to be relied upon and he is given an opportunity to rebut or contradict any evidence adduced by such enquiry. In the said case, it was held that the mere fact that the petitioner was not given an opportunity to cross-examine was not violative of the principles of natural justice. In the judgment reported in 1969 (Vol. 23) STC 11 (Jayantilal Thakordas v. State of Gujarat), Gujarat High Court has held that the principles of natural justice were not violated by the Sales Tax Officer in not recording the statements of two parties from whose accounts assessee's suppressed sales were detected, and not giving opportunity to the assessee to cross-examine them. In the light of these judicial pronouncements it is to be examined whether in the present case, the denial of cross-examination of 864 persons, whose cross-examination was waived by the appellants, has amounted to the violation of the principles of natural justice.

15. Annexure 'A' to the Show Cause Notice in this case has given the detailed information regarding the machines which are alleged to have been clandestinely removed by the appellants without judgment of duty.

This Annexure gives, in tabular form, information regarding name of the party, description of machine, C.I. No. , quantity, rate, value, assessable value, rate of duty, duty payable, differential duty and the evidence. In the column for "Evidence", the particulars of evidence mentioned are P-Invoices No. and date, Bill No. & date, cheque No. and date, GRs. No. and date, entries in warranty expiry list, entries in ledgers and other registers and statements of accounts, correspondence and the statements of the customers, etc. The evidence mentioned in this column are not, however, common against all the items in the Annexure. Some of the records like the invoices, bills, registers, note books, correspondence, etc., as per Panchnama were seized from the premises of the appellants. It has also been stated in the impugned order by the Collector and during the hearing before us by the Senior Departmental Representative that the charge of clandestine removal of the machines as per Annexure 'A' to show cause notice is based on the documents seized from the premises of the appellants and the statements of the buyers were corroborating evidence. Serial Nos. of the machines were not furnished against all the items of Annexure 'A'. It is an admitted fact that at the beginning of the proceedings the appellants requested for the opportunity to cross-examine all the 864 persons.

Subsequently during the personal hearing before the Collector they waived the claim for cross-examination of the 864 persons, but limited the claim to cross-examination of 10 persons to be selected by the Collector, subject to the condition that the Department should verify the serial Nos. of the machines and their component parts (motors, compressors and thermostats) and furnish the same to the appellants.

Collector, therefore, got the serial Nos. verified and furnished the same wherever available along with the verification reports to the appellants. The verification reports have been submitted at pages 121-510 of the Paper Book filed by the appellants. It is stated in para 33.8 of the impugned order that the appellants were duly informed that wherever serial Nos. were available, the same had been supplied to them and where there was no serial number on the machine or were not available those could not be supplied. The verification reports indicate inter alia that the serial No. could not be furnished in some cases due to reasons that (1) some buyers were not traceable because some had discontinued business and in some cases address was incomplete; (2) some buyers sold the machines to other parties and the whereabouts of the latter were not known; (3) machine Nos. and part Nos. were illegible in some cases, not treaceable/not visible or not found in other cases. In these circumstances, in my view, the Department was not supposed to furnish the serial numbers of the machines and their parts in all the cases. In this view of the mailer, it should be held that the Department has fulfilled its commitment to supply the serial Nos. as per minutes of the hearing dated 26.7.1984.

The appellants could not expect the Department to furnish the serial Nos. of the machines whose buyers arc not traceable or the buyers had sold the machines to others or where the serial Nos. were not legible.

The appellants waived their right to cross-examine 864 persons.

According to the ratio of the decision of this Tribunal in the case of Bhimraj Misrimal Jain v. Collector of Central Excise, Belgaum 1986 (6) ECR 507 Cegat their right to cross-examine could not revive. In the said case, the Tribunal held that after having waived the right of cross-examination the same could not be revived.

16. The proforma invoices were seized from the premises of the appellants. The presumption as to the seized documents as per Section 36A of the Central Excises and Salt Act, 1944 is applicable in this case. This Section of the Act says that where any document is seized from the custody or control of any person, the truth of the contents of such documents shall be presumed unless the contrary is proved. In the case of Collector of Central Excise, Madras v. Madras Chemicals Cegat presumption under Section 36A of the Act was in favour of the Department as in the case of Section 139 of the Customs Act, 1962 and Section 72 of the Foreign Exchange Regulation Act, 1973. As regards onus of proof, the Tribunal, in paragraph 8 of the said decision, has observed as follows: So far as the question relating to onus of proof is concerned, it is a settled axiomatic proposition of law that in a situation like the one, the court or a quasi-judicial authority would be merely called upon to make an effort to disengage truth from falsehood and not to come to a conclusion that because of certain discrepancy in certain matters the whole story is untrue. In other words, the court should not attempt the easy course of assembling exaggerations and discrepancies and exonerating the guilty party. I am at pains to highlight this aspect of the case because even assuming that the red pocket diary contains certain figures which may be false or wrong, that would not be a circumstance on the basis of which the entire case of the Department can be discredited. It is well settled that the maxim that falsus in uno falsus in omnibus is neither a sound rule of law or a rule of practice. Hardly one comes across a witness whose evidence does not contain a grain of untruth or at any rate exaggeration, embroideries or embelishments. It is therefore the duty of the court to sift and scrutinise the evidence carefully and in terms of the felicitous metaphor, separate the grain from the chaff. As the Supreme Court has observed Eldorado of absolute proof being unattainable, the law accepts for it, probability as a working substitute in this work-a-day world. In fine, legal proof is not necessarily a perfect proof but only a prudent man's estimate as to the probabilities of the case. The materials recovered during the course of investigation, the statement recorded from the various persons and the surrounding circumstances, coupled with the entries in the red pocket diary clearly point to the conclusion that the charge against the respondents regarding the clandestine removal of excisable goods is clearly made out by the Department.

In this connection, the Hon'ble Supreme Court's judgment in the Collector of Customs, Madras and Ors. v. D. Bhoormull reported in 1983 ELT 1546 (S.C.) : 1985 ECR 2284, ECR C Cus 908 S.C. regarding the burden of proof is very much relevant to the present case. In the said case the Hon'ble Supreme Court held that in the proceeding for imposing penalty under Clause (8) of Section 167 of the Sea Customs Act to which Section 178A docs not apply, the burden of proving that the goods were smuggled goods was on the Department. But in order to appreciate the scope and nature of the onus cast by it, due regard must be paid to other kindred principles, no less fundamental, of universal application. One of them is that the prosecution or the Department is not required to prove its case with mathematical precision, but what is required is the establishment of such a degree of probability that a prudent man may on its basis believe in the existence of the facts in issue. In this connection paragraphs 30 and 31 of the aforesaid judgment arc reproduced below: 30. It cannot be disputed that in proceedings for imposing penalties under Clause (8) of Section 167, to which Section 178A does not apply, the burden of proving that the goods are smuggled goods, is on the Department. This is a fundamental rule relating to proof in all criminal or quasi-criminal proceedings, where there is no statutory provision to the contrary. But in appreciating its scope and the nature of the onus cast by it, we must pay due regard to other kindred principles, no less fundamental, of universal application. One of them is that the prosecution or the Department is not required to prove its case with mathematical precision to a demonstrable degree, for, in all human affairs absolute certainty is a myth, and as Prof. Brett felicitously puts it- "all exactness is a fake". El Dorado of absolute Proof being unattainable, the law accepts for it probability as a working substitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus legal proof is not necessarily perfect proof, often it is nothing more than a prudent man's estimate as to the probabilities of the case.

31. The other cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered. To use the words of Lord Mansfield in Blatch v. Archar (1774) 1 Cowp 63 at p. 65- "According to the Proof which it was in the power of one side to prove and in the power of the other to have contradicted. Since it is exceedingly difficult, if not absolutely impossible for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it not obliged to prove them as part of its primary burden.

17. In the present case the charge against the appellants is that the goods as per Annexure 'A' to the show cause notice were cleared by them clandestinely without payment of duty. In support of this change, the department furnished to the appellants the available information including those obtained from the records seized from their premises along with other documents, as indicated in the Annexure 'A', and the statements of the customers were also cited as corroborating evidence.

Copies of the evidence relied upon were supplied to the appellants.

They were working under self-removal procedure. A great trust was reposed on them by the Government in the matter of accounting for the excisable goods manufactured by them and the removal of the same on payment of Central Excise duty after observing the procedure prescribed in the rules. By furnishing details of the charge with supporting evidence the Department discharged its burden of proving clandestine removal of the goods. It was then for the appellants to prove that duty was paid on the goods mentioned in Annexure 'A' before removal of the same from their premises. The description of the goods, quantity, value etc. along with the relevant invoices number and date and bills number and date etc. were furnished to them. If the goods were removed from their premises after payment of duty, there could be no reason why they should not be able to indicate the particulars of the documents under which duty was paid before removal of the goods. I do not appreciate their insistence on the supply of serial numbers of machines and their parts in view of the fact that from paragraph 42.3.3 of the impugned order it is seen that even in the cases where serial numbers were furnished by the Department the appellants could not co-relate the machines with duty paying documents. Paragraph 42.3.3 of the impugned order, which is reproduced below, makes the position very clear: 42.3.3: I observe that the charge of clandestine removal of goods without payment of duty is based on the invoices/records resumed from the party on 1.5.1981 as mentioned in Annexure 'A' to show cause notice and is further supported by statements tendered by different dealers/persons in India to whom, as per these records/invoices, goods were supplied. There is no mention of any duty of central excise having been paid in these invoices/records so as to co-relate with the gate passes and other duly-paying documents. The copies of statements of all those persons were supplied to the party along with Annexure 'A' to the show cause notice but the party had not been able to co-relate these machines with the duty paying documents so far. The charge of clandestine removal is further supported by the fact that the party had not been making entries of receipt/issue of all the components/parts obtained from outside as held earlier and did not maintain Form IV register properly. The party had submitted a 10 page statement showing co-relation of machines mentioned in Annexure 'A' to show cause notice, with gate pass etc. On verification, as already stated, it was found that though serial number of machines were found to be the same, but the description/capacities of the machines differed. In most of the cases even the names of the buyers did not tally. This discrepancy also supports the plea that they have been allotting one serial number to more than one machine with a view to remove them without payment of duty.

During the hearing before us the learned SDR submitted photo copy of a statement showing that the description, capacities and value of the goods as per the invoices and those as per gate passes do not tally.

This statement has not been disputed by the learned advocate. No plausible explanation has been given by the appellants for such discrepancies. The appellants have contended that the value shown in the invoices includes post-manufacturing expenses etc. But this contention does not explain the difference in the description and the capacities of the machines. If the machines as per the invoices and the Gate Passes were the same, there could be no such discrepancies in the descriptions and capacities of the machines. The appellants made an attempt before the Collector to co-relate 476 machines with duty-paying documents, but on verification Collector found that although the serial numbers of machines were the same, the descriptions and capacities of the machines did not tally. The learned SDR has stated that the statement as submitted by him contains machines out of the aforesaid 476 machines. I am, therefore, not inclined to accept the contention of the appellants that 476 machines are co-related out of those mentioned in Annexure 'A' of show cause notice with the duty-paying documents.

18. In ground number 17 of the appeal memorandum, the appellants have stated that verification of the serial numbers was not properly done.

It has also been stated therein that the appellants had brought to the notice of the Collector a few instances and the appellants have also drawn attention to the deposition of Shri Baru Ram, Inspector of Central Excise during cross-examination before the Collector in support of their claim that the serial numbers of the machines and their parts were not properly verified physically. I have observed earlier that the Department discharged the burden of proof by supplying the details of evidence in support of the charge of clandestine removal. The onus of proof shifted to the appellants according to the ratio laid down in the Supreme Court judgment in Kanungo and Coy. v. Collector of Customs, Calcutta and Ors. decided on 7.2.1972 and reported in 1983 ELT 1486 (S.C.) : ECR C Cus 902. It is held in that judgment that when the customs authorities have apprised the appellants of the result of the investigation as also all the evidence on record which militates against the appellant's version, burden of proof shifts on to the appellants from the customs which docs not get discharged if the appellants are not able to meet the inferences arising therefrom. The appellants in the present case should, therefore, have tried to prove with documentary evidence that the duty on the goods mentioned in Annexure 'A' to the show cause notice was actually paid. Instead of doing so, they have insisted on supplying the serial numbers of the machines and their parts by the Department. In paragraph 12 of the appeal memorandum the appellants have stated as follows: The appellant requested for information of the serial number of remaining machines or categorically be informed whether the machines alleged to have been clandestinely cleared were without the serial numbers. The information would help the assessee in co-relation at its end as none of the machines were cleared without payment of duty.

I am of the view that the Department was not duty-bound to furnish the serial numbers of the machines and the parts thereof, particularly when the statutory records did not mention the serial numbers of the parts.

It was for the appellants to rebut the charge of clandestine removal by producing the relevant duty-paying documents. No doubt, the Collector agreed to re-verify the serial numbers and furnish the serial numbers found on re-verification. This is nothing but a good gesture on the part of the Collector, which cannot be used by (he appellants against the Department. The appellants have not explained as to in what manner prejudice has been caused in the absence of the serial numbers of the machines and parts thereof, in spite of the fact that in the show cause notice it was clearly stated that the machines were cleared without assigning serial numbers. The question of prejudice is relevant according to the latest decision of the Supreme Court (decided on 4.10.1983) cited before us, viz. the case of K.L. Tripathi v. Bank of India and Ors. The ground No. 17 of the appeal memorandum indicates that the appellants were not required to be dependent on the Department for getting the serial numbers. The buyers were their customers. If the appellants desired they could very well approach the customers for the serial numbers instead of asking the Department to supply the same.

This, along with the other facts and circumstances of the case, goes to show that their insistence for the serial numbers and failing that cross-examination of all the 864 persons were intended to delay and frustrate the adjudication proceedings. The appellant's argument that the statements of parties on second verification were not supplied does not carry any weight as the second verification was done only to ascertain the serial numbers of machines, which alone were to be communicated to them.

19. It has been argued by the learned Departmental Representative before us that the proforma invoices which were seized from the premises of the appellants and which have been the basis for charge of clandestine removal, have not been challenged and as such these were sufficient to establish the charge. He has further argued that what is admitted need not be proved and in support of his argument he has relied upon this Tribunal's decision in the case of Narender Kumar II.Patel v. Collector of Central Excise and Customs, Jaipur, Cegat. It has been held by the Tribunal in that case that what is admitted and also inferred from direct and circumstantial evidence need not be proved. The representatives of the buyers who were cross-examined before the Collector did not say that the machines were not supplied by the appellants. In paragraph 33.6 of the impugned order the Collector has observed that: It is not the case of the party that accounts of the parties from whom enquiries were made were wrong and manipulated to suit the interest of these parties nor has the party proved that these parties had inimical relationship with them so as to doubt their statement. The party has also not denied the supply of machines to those parties whose statements were relied upon.

This observation of the Collector has also not been controverted by the appellants. The appellants have not also proved by producing necessary documentary evidence that all the Proforma invoices seized from their premises or how many of them were only accommodation bills and not the invoices relating to the goods sold.20. In view of the foregoing discussions, and considering the facts and circumstances of the case and the evidence on record, I hold that after having waived the right of cross-examination of 864 persons the appellants could not claim to revive it later and also that by not allowing the cross-examination of those 864 persons the Collector has not violated the principles of natural justice. The contention of the appellants on this point is, therefore, rejected. The matter does not deserve to be remanded to the Collector on the alleged ground of denial of natural justice as there is no violation of the principles of natural justice by the Collector and such remand will frustrate the purpose of adjudication proceedings.

21. The learned advocate has argued that the appellants got 800 machines manufactured from three persons on job charges basis. He has stated that the Collector has not dealt with these machines. The learned advocate has also argued that as per the ratio of the decisions of the Hon'ble Supreme Court in the case of Empire Industries in the case of Ujagar Prints and Ors. v. Union of India and Ors.

manufacturers of those 800 machines and hence the appellants were not liable to pay central excise duty on those 800 machines. On this point, the arguments of Shri A.K. Jain, learned SDR are that the appellants did not mention about those 800 machines being manufactured from others on job charges basis in the statements of the proprietor of the appellant firm. There was no reference to job work anywhere in the statutory records. There was no account of job work and no account of materials. The names of the job workers were also not disclosed to the Department. Towards the end of the adjudication proceedings, on 20.9.1985, i.e. after 41/2 years, they came with the plea of job work and produced a copy of so-called letter dated 30.12.1977. No copy of this letter was found in the documents seized from the premises of the appellants. This letter was not received by the Sector Officer Shri Darshan Kumar on 30.12.1977. This letter is not on record of the Sector Office. Shri Darshan Kumar, Sector Officer was present during the hearing before us and he disowned the signature of the recipient on the copy of the letter produced by the appellants. The learned advocate Shri Chandrasekharan has said during the hearing before us that the letter was delivered to Shri K. L. Beri, Inspector of Central Excise, Jalandhar. Shri K.L. Beri was not Sector Officer. The Collector has not dealt with this letter. Regarding submission of the letter to another sector officer, the learned SDR has relied upon the decision of Patna High Court reported in 1986 (62) STC 149 (Patna) in the case of Indian Tobacco Company Ltd. v. The Superintendent of Commercial Taxes, Monghyr Circle and Ors. decided on 15.1.1986. In paragraph 12 of this judgment the Hon'ble High Court has held that "An assessee may have to furnish information of various categories on various points to the Sales Tax department from time to time, but the Taxing Officer cannot be fastened with the knowledge of all those informations furnished to the sales tax department at some point of time, when he proceeds to assessment. After relevant information is not supplied in the return and the accompanying statement, it would amount to withholding relevant material". The learned SDR has further argued that Form-IV and RT-5 returns of raw materials do not show despatch of any raw materials to any job worker.

During the hearing before us raw materials account in Form-IV register in respect of electric motors was shown to us as an example and it has been observed that the raw materials account does not show any issue to job workers. Shri Jain has further stated that no D-3 intimation on despatch and receipt Was given to the Department; no permission under Rule 51A was sought for; no permission under Rule 56B was sought for in respect of semi-finished goods; there is no proof that raw materials went out of the factory to the job workers; there was no mention in the classification list and price list about manufacture of machines from outside; no details of the machines manufactured from outside on job charge basis have been furnished to the Department; no labour charges have been shown in the manufacturing account and profit and loss account, copies of which have been filed by the Revenue along with an affidavit dated 11.3.1987. The learned SDR has argued that the affidavits of S/Shri Malu Ram, Hari Prakash and Satnam Singh at pages 565-570 of the Paper Book do not give details of the manufacture, labour charges etc. and these persons never gave any declaration to the Department and did not obtain L-6 licence. Further, he has also argued that even if for arguments sake it is accepted that 800 machines were manufactured on job charges basis as claimed by them, then, as per affidavits of these three persons, the goods were manufactured on behalf of the appellants from their materials including even nuts and bolts, the goods were tested by them and were liable to be rejected by them, the goods were transported, received and cleared by them, the so-called job workers were brought in the picture only for the relevant period of demand for duty. The so-called manufacture on job work started, according to the appellants, from April, 1978 and there was no such manufacture after the date of detection of the case by the Central Excise Officers on 30.4.1981. The goods were manufactured free of charge by the so-called job workers. Shri Jain has, therefore, stated that the appellants were the manufacturer in respect of those 800 machines which are claimed to have been manufactured from outside on job charges basis. In support of this argument, he has relied on the following decisions:G. D. Industrial Engineers, Faridabad v. Collector of Customs and Central Excise, Chandigarh.

22. The learned advocate has relied upon two judgments of Hon'ble Supreme Court in support of his argument that in respect of 800 machines which the appellants claim to have manufactured from outside on job charges basis, the appellants are not the manufacturer and hence not liable to pay central excise duty. In the judgment in the case of Empire Industries Ltd. and Ors. v.Union of India and Ors. it was held by the Hon'ble Supreme Court that the taxable event for central excise duty is the manufacture of excisable goods and the moment there is a transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes, "manufacture" takes place and liability to duty is attracted. The sale or the ownership of the end-product is absolutely irrelevant for the purpose of taxable event under the Central Excise. In in the case of Ujagar Prints and Ors. v. Union of India, it has been held by the Hon'ble Supreme Court that in view of the decision in the case of Empire Industries Ltd. v.Union of India the process of bleaching, mercerising, dyeing, printing, water proofing, etc. carried out by the processors on job work basis amounts to manufacture under the Act as it stood prior to the amendment and also subsequent to amendment. In view of this, Hon'ble Supreme Court had held, the petitioners cannot contend that these processes do not amount to manufacture as envisaged by Section 2(f) of the Central Excises and Salt Act and processed fabrics are not liable to excise duty.

23. The learned SDR has relied on the following decisions in support of the argument that the appellants were the manufacturers even if they could prove by producing the requisite documentary evidence that the goods were actually got manufactured from job workers. In the case of Bajrang Gopilal Gajabi v. M.N. Balkundri and Ors. , the appellants got cloth manufactured in some powcrlooms and purportedly purchased the cloth from the owners of those powcrlooms. The yarn for the manufacture of cloth was supplied to the powerlooms by one Tejpal for and on behalf of the appellants and the cloth in question was manufactured by the powcrloom owners for and on behalf of appellants and the powcrloom owners received only an amount equal to the labour charges. It was held by Bombay High Court that the appellant himself was the manufacturer of the cloth in question and he was rightly assessed to the excise duty in respect of the cloth so got manufactured in the powerlooms. The Hon'ble Supreme Court confirmed the decision of the High Court. In 1983 ELT 1994 (CEGAT) : 1984 ECR 1837 this Tribunal has held that the "manufacturer" includes not only a person who employs hired labour in the production or manufacture of excisable goods, but also a person who engages in the production or manufacture of his own account. Therefore, a manufacturer who brings into existence an article or a product or one who may bring into existence an article or product through the instrumentality of hired labour are both "manufacturers" in terms of inclusive definition of the said word.

24. The arguments of the learned Senior Departmental Representative as in paragraph 21 (supra) have not been controverted by the appellants.

The facts stated therein amply prove that the plea of manufacture of 800 machines on job work basis from outsiders is an after-thought and the appellants themselves manufactured those machines. No credence should be placed on the letter dated 30.12.1977 and the affidavits of S/Shri Maln Ram, Hari Prakash and Satnam Singh, the same not being reliable. In the light of this finding, I do not consider that the judgments cited by both sides, vide paragraphs 22 and 23 (supra), are relevant to the facts of the present case. The plea of the appellants regarding those 800 machines is, therefore, rejected.

25. Shri Chandrasekharan has stated that the arguments of the learned SDR should be limited to the points dealt with in the Collector's order. This argument was advanced by the learned advocate in the context of paragraph 45.3.2 of the impugned order and Shri Jain's arguments that the 800 machines referred to above were also manufactured by the appellants and that the belated plea that those were got manufactured from outsiders on job charges basis, is an after-thought. To establish that the labour charges on account of job work were not also shown in the Trading and Profit and Loss Account of the appellants, the learned SDR submitted copies of the Trading and Profit & Loss Account for the year ending on 31.3.1981 and the Balance Sheet of the appellants as on 31.3.1981, obtained from the Income Tax Officer, District II (I), Jalandhar, and in the application dated 10.3.1987 prayed for admission thereof as evidence. Shri Chandrasekharan, though initially objected to the admission of these additional evidence, but in course of arguments has stated that he has got no objection to the admission of these evidence in case the Revenue Authorities support their application with an affidavit of an officer of the Department containing the details as to how they were able to procure the papers. As undertaken by Shri Jain, an affidavit has been filed in this regard. In course of his arguments for admission of these additional documents, Shri Jain relied on the following decisions:Patnaik and Co. Ltd. v. Commissioner of Income Tax, Orissa.

(ii) 1987 (64) STC 352 (Karnataka) Ferro Concrete Company of India (Steels) Ltd. and Anr. v. State of Karnataka and Anr.

Tribunal is the final fact finding authority and the Court has no jurisdiction to go behind the statements of fact made by the Tribunal in its Appellate Order. In paragraph 7 of the decision , this Tribunal has held that the Tribunal may grant relief on a ground different from that urged before the lower authorities.

26. Regarding the scope of consideration by the appellate authority, the learned advocate has cited three judgments, viz. (i) Dunlop Rubber Co. (India) Ltd. v. N.V. Raghavan Iyer reported in 1983 ELT 2289 (Bombay), (ii) (Mohinder Singh Gill and Anr. v. The Chief Election Commissioner, New Delhi) and (iii) Cibatul Limited, P.O.Atul, v. Union of India and Ors. reported in 1979 ELT (J-407) : 1979 Cen-Cus 404D Gujarat. In Dunlop Rubber Co.'s case the Hon'ble Bombay High Court has observed that the validity of an impugned order must be judged by the reasons given in the order itself and cannot be contemplated or supplemented by fresh reasons in the shape of affidavit or otherwise. In the above decision Bombay High Court followed the judgment of Hon'ble Supreme Court (Mohinder Singh Gill and Anr.). In the case of Cibatul Ltd. 1979 ELT (J-407) : 1979 Cen-Cus 404D Gujarat it has been held that the proceedings before the Central Excise Authorities are quasi-judicial in character, and, therefore, if any order passed in pursuance of these proceedings is challenged, it can be supported only on the materials stated in the impugned order and not on any other ground. In the light of the decisions cited above it is to be seen whether this Tribunal is debarred from going into the question whether the claim of the appellant that 800 machines were got manufactured by job workers on job charges basis is correct or such a claim is an after-thought. Collector has discussed this point in paragraph 45.3.2 of the impugned order, which is reproduced below: 45.3.2. The party has also pleaded that during 1978, they got manufactured about 800 machines from other 3 persons on supply of raw materials and on payment of job charges and those machines were supplied to their dealers by issuing accommodation bills from their factory. This plea has been taken for the proposition that S. Nos.

were to be allotted by the actual manufacturer and not by them and therefore the possibility of these machines having the same serial No. as allotted by them to their own product manufactured in their factory, cannot be ruled out. The person who gets his goods manufactured from another manufacturer by supplying raw material and by paying job charges is also a manufacture within the meaning of Section 2(0 of the Central Excises & Salt Act, 1944 and unless he authorises the actual manufacturer to discharge the duty liability under the Central Excise Law in terms of notification No. 305/77 dt.

5.11.1977 issued under Rule 174A of the Central Excise Rules 1944, he is not absolved from the responsibility of a manufacturer under the law and is liable to pay duty on the goods so got manufactured from others. The support in this regard is had from a judgment of Supreme Court of India in the case of Shri Agencies v. S.K. Bhattacharya and Ors. (Civil Appeal No. 1799 (NCM) of 1966 : 1976 Cen-Cus 94D SC. In view of the above legal position it was the responsibility of the party in this case to see that S. Nos. as required under the law are allotted to each machine even if got manufactured from others and keep proper account of the same in the statutory records when they have admitted to have issued accommodation bills. This plea is also not tenable. The picture that emerges after discussing the above facts is that party had been using all sorts of methods to evade payment of duty on the goods manufactured by them and the allotment of one serial number to two machines is one of those methods.

The above extract shows that the Collector has dealt with the appellants' point that they were not the manufacturers in respect of 800 machines and hence they had no liability to pay Central Excise duty. Collector has held that according to the definition in Section 2(0 of the Central Excises and Salt Act the appellants were manufacturers and were liable to pay duty. The appellants before us have urged the claim that they got 800 machines manufactured from three outside job workers on job charges basis and they were not liable to pay Central Excise duty on those machines. The, learned SDR has strongly contested this claim and has brought out various facts and materials in course of his arguments, vide paragraph 21 (supra), to show that this claim of the appellants is an afterthought and those machines were not at all got manufactured from the job workers outside.

In the circumstances, this Tribunal has to go into the facts and materials and give its findings on the appellants' claim. Accordingly, after considering the facts and circumstances of the case, the evidence on record and the arguments of the learned advocate and the learned Senior Departmental Representative I have held in paragraph 24 (supra) that the claim of the appellants regarding manufacture of 800 machines on job charges basis is an afterthought and the appellants themselves manufactured those machines.

27. The next point argued by the learned advocate is that the entire demand for duty was time-barred. In the show cause notice issued by the Assistant Collector, the appellants were asked to show cause why duty should not be recovered from them under Rule 9(2) of the Central Excise Rules on the goods alleged to have been clandestinely removed.

According to the learned advocate, this show cause notice under Rule 9(2) was not a written demand. The written demand was made by the Collector in the impugned order dated 24.3.1986. Rule 9(2) says that written demand has to be made by the proper officer within the period specified in Section 11-A Of the Central Excises and Salt Act. A written demand has to be made within 5 years. Referring to the term 'proper officer1, he has cited the definition of "Proper Officer" in Rule 2(xi) of the Central Excise Rules, which reads as under: 'Proper Officer' means the officer in whose jurisdiction the land or premises of the producer of any excisable goods, or of any person engaged in any process of production of or trade in, such goods or containers thereof whether as a grower, curer, wholesale dealer, broker or commission agent or manufacturer, or intended grower, curer, wholesale dealer, broker, commission agent or manufacturer, are situated.

The learned advocate has further argued that as per ratio of the Madras High Court decision in the case of Kwality Dyes and Chemicals v.Collector of Central Excise and Customs, Madras, , Head of the Department, i.e. Collector is the proper officer. In the said case the Madras High Court has held that the seizure is invalid if reasonable belief is formed by the Superintendent of Central Excise who is subordinate to Collector; reasonable belief as envisaged by Section 110 of the Customs Act must be formed by the proper officer who must be the Head of the Department, i.e. Collector; reasonable belief formed by the Superintendent will not justify seizure. According to the learned advocate, the demand was time-barred as the Collector made demand on 24.3.1986 by the impugned order. In support of his arguments, the learned advocate has relied on the decisions reported in 1983 ELT 2355 (CEGAT) and . In 1983 ELT 2355 (Steel Authority of India Ltd., Calcutta v. Collector of Central Excise, Calcutta) this Tribunal held that issue of a show cause notice about a demand was a statutory requirement and without following the said procedure, the Central Excise authorities could not straightaway raise the demand. In the present case, however, a show cause notice was issued to the appellants on 5.10.1981 by invoking Rule 9(2) of the Central Excise Rules. Tribunal's decision relied upon by the learned advocate is not, therefore, relevant in this case. The Supreme Court's decision (Union of India v. Raman Iron Foundry) is also not relevant in the present case. In the said case it has been held that on a true interpretation of Clause-18 read as a whole it applies only where the purchaser has a claim for a sum presently due and payable by the Contractor.

28. Rebutting the arguments of Shri Chandrasckharan on the point of limitation, Shri Jain has stated that the demand was raised in the nature of show cause notice and the demand was confirmed by Collector.

There was clandestine removal of goods. In the case of N.B. Sanjana v.The Elphinstone Spinning and Weaving Mills Co. Ltd. 1978 ELT (J-399) : ECR C 308 SC it was held by Hon'ble Supreme Court that Rule 9(2) was applicable to clandestine removal without payment of duty. Shri Jain has also relied on this Tribunal's decision in the case of Poyila Rubber and Plastics, Quilon v. Collector of Central Excise, Cochin, . In paragraph 8 of that decision this 8. Shri Vellapally mainly emphasised that in any event there was no "clandestine removal" and hence the demand could not be sustained.

Even at the outset we must say, that we are not impressed with his contention that the show cause notice issued on 20.9.1974 is not a demand as contemplated under Rule 9(2). In this notice the period for which the non-levy is stated and the amount of levy has been specified. The grounds on which the claim was made have also been set out therein. Rule 9(1) envisages the leviability of excise duty on excisable goods removed from any place where they are produced, cured or manufactured etc. Rule 9(2) contemplates that it any excisable goods are removed in contravention of Sub-rule (1) then the duty is leviable on such goods upon a written demand made within the specified period. The demand under Rule 9(2) had been issued in this case in the form of a show cause notice because the proceedings under Rule 9(2) are quasi-judicial. The appellants should be afforded an opportunity to show cause why the demand should not be imposed. There is no force in the contention of the learned Counsel for the appellants that the order-in-original alone amounts to a demand.

Regarding the term "Proper Officer" Shri Jain has relied upon the definition of this term in Rule 2(xi) of the Central Excise Rules, 1944 and has stated that this term cannot be given a restricted meaning as held by the Division Bench of Hon'ble Karnataka High Court in paragraph 13 of their judgment in the case of Inspector of Central Excise v. S.T.Venkataramanappa . He has argued That Central Excise Rules, 1944 were made under Section 37 of the Central Excises and Salt Act, 1944. The Rules and the Act should be harmonious.

Rule 9 cannot be read in isolation. It should be read with Section 11-A of the Central Excises and Salt Act which has been mentioned in Rule 9(2) of the Central Excise Rules. Further, the confirmation of demand for duty is dependent upon adjudication. According to Section 33 of the Central Excises & Salt Act, Assistant Collector of Central Excise could impose penalty up to Rs. 250/-, whereas Collector of Central Excise could adjudge penalty without limit. Under Rule 173-Q of Central Excise Rules, maximum penalty is 3 times the value of the excisable goods.

Therefore, the Collector is the competent authority to adjudicate this case. Shri Jain has also stated lhat a senior officer can always discharge the functions and exercise the powers of a junior officer.

Amount of duty payable is as determined by the adjudicating authority.

On this point, Shri Jain has relied on the Supreme Court judgment in the case of Union of India v. Raman Iron Foundry . He has argued that in the present case, duty is yet to be paid. Relevant date for the purpose of Section 11-A in this case is the date on which duty is to be paid, vide Section 11-A (3)(ii)(a)(c) of the Central Excises & Salt Act.

29. The contention of the learned advocate that the show cause notice under Rule 9(2) of the Central Excise Rules was not a written demand and that the written demand was made by the Collector in the impugned order dated 24.3.1986 is not correct. This point is fully covered by paragraph 8 of this Tribunal's decision reported in 1986 (23) ELT 545 (Tribunal), an extract of which has been given in paragraph 28 (supra).

In the present case the demand under Rule 9(2) was issued in the form of a show cause notice giving details of the duty payable on the excisable goods clandestinely removed without payment of duty. The demand was confirmed by the Collector who adjudicated the case. I do not find any reason to differ with the ratio of the aforesaid decision.

Respectfully following the said decision, I, therefore, hold that the demand show cause notice dated 5.10.1981 is the written demand for duty as envisaged in Rule 9(2) of the Central Excise Rules. As the demand was made within five years from the relevant period, the demand was not hit by limitation under Section 11-A of the Central Excises & Salt Act.

The contention of the learned advocate to the effect that the demand was time-barred, is therefore, rejected.

30. The argument of Shri Chandrasekharan that the demand under Rule 9(2) was not made by the "Proper Officer" has no force. According to him, Collector was the Proper Officer to demand duty under Rule 9(2).

He has relied on the decision of Madras High Court reported in 1986 (24) ELT 238 (Madras). But this decision was in the context of seizure made under Section 110 of the Customs Act, which is not the case before us. The present case relates to demand for duty made under Rule 9(2) of the Central Excise Rules. The facts of the two cases not being similar, the decision of Madras High Court cannot be applied to the present case.

(2). If any excisable goods are, in contravention of Sub-rule (1), deposited in or removed from, any place specified therein, the producer or manufacturer thereof shall pay the duty leviable on such goods upon written demand within the period specified in Section 11-A of the Act by the proper officer, whether such demand is delivered personally to him, or is left at his dwelling house, and shall also be liable to a penalty which may extend to two thousand rupees, and such goods shall be liable to confiscation.

This sub-rule does not explain who is the Proper Officer for raising demand under Rule 9(2). It, however, says that the demand should be made within the period specified in Section 11-A of the Central Excises & Salt Act. Section 11-A of the Act as it stood in October, 1981, provided that "a Central Excise Officer" could serve notice on the person chargeable with the duty which has not been levied or not paid, etc. In this case, Assistant Collector of Central Excise issued the show cause notice demanding duty and he asked the appellants to show cause to the Collector of Central Excise as to why they should not pay the Central Excise duty specified in the show cause notice and why penalty should not be imposed on them under Rule 173-Q of the Central Excise Rules. Sub-section (2) of Section 11-A lays down that: The Assistant Collector of Central Excise, shall, after considering the representation, if any, made by the person on whom notice is served under Sub-section (1), determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.

After amendment of Section 11-A with effect from 27.12.1985 the Collector of Central Excise could determine the duty under Sub-section (2) of Section 11-A. In the present case, the demand show cause notice was issued by the Assistant Collector of Central Excise and the demand was confirmed by the Collector of Central Excise by the impugned order.

It cannot, therefore, be said that the demand for duty was not made by the proper officer. The contention of the learned advocate is therefore, found to be untenable.

31. In the light of my foregoing discussions, I hold the view that the Collector correctly held the charge of clandestine removal of the goods as per Annexure-A to the show cause notice as established and he correctly asked the appellants to pay the duty thereon. The demand for duty was not barred by limitation and the Collector's order confirming the demand docs not suffer from any infirmity, warranting interference by this Tribunal. I, therefore, confirm the same.

32. In paragraph 49 of the impugned order, the Collector has held the other charges against the appellants as proved. The Collector has held that: (i) The 20 machines valued at Rs. 47,100.00 seized on 1.5.1981 were not accounted for in the statutory records deliberately, with a view to remove them after completion, without payment of duty and these are liable to confiscation under Rule 173-Q of the Central Excise Rules, 1944.

(ii) Seven beverage coolers of 95 Liters capacity found short at the time of visit of the Central Excise staff on 1.5.1981 were removed clandestinely without payment of duty and without accountal in the statutory records in violation of Rule 9(1) of the Central Excise Rules, 1944 and therefore duty of Rs. 22,848/- as basic excise duty and Rs. 1142.40 as special excise duty is recoverable under Rule 9(2) ibid.

(iii) The components for refrigeration and air-conditioning machinery in respect of which proforma credit of duty was availed of by the party, but were found unaccounted for on 1.5.1981 had been removed by them without payment of duty and therefore the duty on these components which comes to Rs. 1,54,133.75 basic excise duty and Rs. 7,706.62 special excise duty, is recoverable under Rule 56-A(3)(iii) of the Central Excise Rules, 1944.

(iv) The party has also manufactured 101 Compressors and cleared them without payment of duty in contravention of duty in contravention of Rules 9(1), 52A, 53, 173B, 173C, 173G and 226 of the Central Excise Rules, 1944 and therefore, duty of Rs. 65,650.00 as basic excise duty and Rs. 3182.50 as special excise duty leviable thereon is recoverable under Section 11A of the Central Excises & Salt Act, 1944.

The Collector has passed orders accordingly. However, in lieu of confiscation of 20 refrigeration machines referred to in (i) above, he has imposed a fine of Rs. 25,000/-. In paragraphs 39.1.1 to 41.3.4 of the impugned order, the Collector has discussed the contentions of the appellants and has given his findings which are based on cogent reasons. I accept his findings as correct.

33. In paragraph 37 of the impugned order, the Collector also held that taking into account the approved assessable value, and the value of goods cleared as shown in the gate passes and R.T. 12 and the value of goods removed clandestinely, the aggregate value of clearances of specified goods was more than Rs. 15 lakhs in all the financial years from 1977-78 to 1981-82 and as such the exemption from duty in terms of notifications No. 71/78-CE dated 1.3.1978 and No. 80/81-CE dated 19.6.1980 was not available to the appellants'. There is no material before us to hold a different view. I, therefore, upheld the Collector's findings. I also uphold the findings of the Collector regarding the appellants' failure to produce the statutory records and maintenance of a duty-paid store room without licence.

34. Collector has imposed on the appellants a penalty of Rupees One Crore under Rules 173Q, 226 and 56A of the Central Excise Rules, 1944 for contravention of Rules 9(1), 52A, 53, 173C, 173G, 226 and 56A of the Central Excise Rules. He has also confiscated the land, building, plant and machinery used in connection with the manufacture, production, storage, removal and disposal of the offending goods under Rule 173Q(2) of the Central Excise Rules with a redemption fine of Rupees One Lakh only. Arguing for the respondent, Shri Jain has stated that the appellants have betrayed the trust reposed on them under Self Removal Procedure. They deserve the maximum penalty under law.

Considering the amount of duty evaded the penalty imposed by the Collector was not excessive. Shri Jain has relied on the decision of this Tribunal in the case of K. M.Ibrahim v. Collector of Customs, Bombay in support of his arguments.

According to Rule 173Q(1) of the Central Excise Rules, the maximum penalty which could be imposed on the appellants for the various offences adjudicated by the Collector was three times the value of the excisable goods in respect of which contraventions have been committed.

The value of the goods involved in the contraventions in this case is more than Rs. 1.5 crores. They evaded duty to the tune of more than Rs. 1.28 crores. The manner in which they have committed various contraventions of law and have evaded duty of such a magnitude clearly show that they have completely betrayed the trust reposed on them under the S.R.P. They, therefore, deserved maximum penalty prescribed under the law and they deserved no leniency. The Collector has imposed a penalty of much less than 100% of the value of the excisable goods involved in the contraventions. I do not, therefore, think this to be a fit case for reducing the penalty imposed by the Collector.

Consequently, I confirm the amount of penalty. The Collector has also correctly confiscated the land, building, plant and machinery under Rule 173Q(2). Redemption fine of Rs. 1 lakh in respect of land, building, plant and machinery is not considered to be excessive.

Accordingly, the same is also confirmed by me.

35. In the result, I uphold the impugned order passed by the Collector and dismiss the appeal.Dated: Sd/- (D. C. Mandal)29.9.1987 Member (Technical) In view of the difference of opinion existing between two Members of the North Regional Bench, Senior Vice-Presidcnt in exercise of his powers vested under Section 35D(1) of the Central Excises and Salt Act, 1944 read with Section 129C(5) of the Customs Act, 1962, by his order dated 8.2.1989 has referred the matter to me for hearing on the points of difference between the Members of the North Regional Bench. The following points of difference were set out by the dissenting Members of North Regional Bench: (1) Whether on the facts and circumstances of the case there was violation of the principles of natural justice.

(2) If so, whether the order of the Judicial Member remanding the case for fresh disposal after complying with the principles of natural justice is in order.

2. Accordingly, a hearing was fixed and the matter was heard on 20.3.1989. Judicial Member Shri Harish Chander has given the following direction in his order dated 8.7.1987 after setting out the case law on the question of compliance of principles of natural justice and the opportunity for allowing cross-examination to the parties in quasi-judicial matters: The revenue authorities should have offered the appellants an opportunity to cross-examine the 864 witnesses. Accordingly, we set aside the impugned order and remand matter to the Collector of Customs and Central Excise, Chandigarh for de novo examination in accordance with law. It is directed that the learned adjudicating authority will afford an opportunity to the appellants to cross-examine 864 witnesses. The appellants will also be entitled to adduce any fresh evidence before the adjudicating authority, if they so choose. Since we have remanded the matter to the adjudicating authority we are not going into the other merits of the appeal. For statistical purposes the appeal is allowed by way of remand.

Learned Technical Member in para 20 of his order has held as follows: so far as the cross-examination of 864 persons on whose statements the department appears to have relied is concerned: In view of the foregoiog discussions, and considering the facts and circumstances of the case and evidence on record, I hold that after having waived the right of cross-examination of 864 persons the appellants could not claim to revive it later and also that by not allowing the cross-examination of those 864 persons the Collector has not violated the principles of natural justice. The contention of the appellants on this point is, therefore, rejected. The matter docs not deserve to be remanded to the Collector on the alleged ground of denial of natural justice as there is no violation of principles of natural justice by the Collector and such remand will frustrate the purpose of adjudication proceedings.

3. Learned advocate for the appellants in supporting the judgment of learned Judicial Member has urged that the waiver of right of cross-examination of 864 persons was subjected to certain conditions which have not been fulfilled by the department. Those conditions are set out in para 6 of the Judicial Member's order: After hearing the counsels, the following decisions were taken and communicated to the party: 1. As regards the cross-examination of persons whose statements have been relied upon in the show cause notice, it was agreed that out of 100 persons whose cross-examination has been sought, 10 persons i.e.

3 persons each having large, medium and small transactions for each year, would be offered for cross-examination and the names of such persons would be selected by the Collector.

2. The party would supply within one week a list of Departmental officers whom they intend to cross-examine with their relevance to the case. The Collector after considering the list would select the Departmental officers to be offered for cross-examination.

3. The party's request to complete inspection of remaining records/documents within one month was granted on party's assurance that they would not ask for further time under any circumstances.

4. The party would be supplied by the Assistant Collector, Jalandhar copies of documents which have been allowed to be supplied to them and in respect of which they have paid the copying charges.

5. Regarding supply of Sr. Nos. of machines listed in Annexure 'B' to the show cause notice, the party was informed where serial numbers were available they had already been supplied and where Sr.

Nos. were not available in the invoice or other records, they could not be supplied as already intimated in the written reply given to the party.

6. As regards valuation of the goods involved in this case, the party would submit written arguments keeping in view the law on valuation laid down by the Supreme Court in the recent judgments.

7. The next date for personal hearing and cross-examination of the witnesses would be fixed immediately after expiry of one month period allowed to the party for inspection of records. The party promised not to seek adjournment of the date of 8. 3 Show Cause Notices issued to the party would be argued separately and 3 separate orders would be issued.

Thereafter on the 26th July, 1984 the appellants and the respondent had reached on an agreement which appears on page 120 of the paper Book which is also reproduced below: The counsels stated that if the Department can verify and supply to them serial numbers of the machines and that of the component i.e.

motors, thermostat and compressors fitted in the machines which arc mentioned in Annexure 'A' to show cause notice in respect of which serial number has not been mentioned there, they would waive the right to cross-examine any more witnesses including those officers who will conduct the enquiries in this regard. They would submit the final reply within one month from the date of receipt of final supply of information.

3.1. Learned advocate has further submitted that breach of the conditions of the agreement for waiving the right of cross-examination of 864 persons should automatically restore to them the right of cross-examination and therefore, a flagrant breach of principles of natural justice has taken place in this case. The learned advocate has relied on the following case law in support of his proposition that principles of natural justice is an essential element in the procedure for arriving at decisions in quasi-judicial matters and that opportunity for allowing cross-examination forms a special ingredient of the principles of natural justice:S. No. Particulars Page Nos. of the paper book conta-1. M.P. Jain v. Collector of Customs 1988 (37) 1-6 577 = 1988 (19) ECR 108 Cegat.Kishan Chand Chellaram v. C.I.T. Bombay.

7-13 .State of Kerala v. K. T. Shaduli4. K.T. Shaduli v. Stale of Kerala STC Vol. XXIX 25-33 page 445. Ram Narain Kishori and Ors. v. University of 34-38 Calcutta . Kehmchand v. UOI Khandelwal Enterprises v. Collector10. Premier Motors v. Commr. of Sales Tax STC 149-156 Vol. XXVI P. 402.Ram Krishna Aggarwal v. Collector of CE 1981 ELT 217 221-225 (Orissa).19. Malkhan Singh Nirpet Singh v. Inspector of CE 235-240 Kalra Ghee Factory v. S. T. Tribunal STC Vol. 66 244-246 page 292.S. L. Kapur v. Jagmohan24. Telec and Ors. v. Bombay Municipal Commissioner 274-298 1988 SC 180.

3.2. In view of the aforesaid judgments, the learned advocate has submitted that no doubt is left that the appellants should be allowed the opportunity of cross-examining the persons whose statements were recorded by the Department behind the back of the appellant and if those statements are sought to be relied upon by the department's support of this case.

4. Learned SDR, on the other hand, has supported the finding of the learned Technical Member with regard to the issue under consideration.

5. I have already considered the pleas advanced on both sides. Detailed facts of the case have been set out in the orders of the learned Members of the North Regional Bench of the Tribunal who originally heard the case. The facts, therefore, need not be repeated here. I find from para 19 of the order of the learned Technical Member that the main reason for not allowing the opportunity for cross-examination is that the department's case is based on the proforma invoices which were seized from the premises of the appellants and which have been the basis for charge of clandestine removal. These invoices have not been challenged and as such these were sufficient to establish the charge.

The learned Member had also considered the argument of the learned SDR to the effect that what is admitted need not be proved. He has also relied upon para 33.6 of the impugned order of the Collector to the following effect: It is not the case of the party that the accounts of the parties from whom enquiries were made were wrong and manipulated to suit the interest of these parlies nor has the party proved that these parties had inimical relationship with them so as to doubt their statement. The party has also not denied the supply of machines to those parties whose statements were relied upon.

6. On a perusal of the Annexurcs to the show cause notice submitted by the appellant on 12th June 1989 in response to the Registry's letter dated 30.5.1989, I find that it is not correct to say that the case of the department is based entirely on proforma invoices seized from the appellant's premises. A perusal of col. 11 of this statement at Annexure 'A' to the show cause notice in a large number of cases indicates reliance upon the statements of the so-called customers of the appellants, apart from the invoices of 'P' series and other documents. It is also seen from the statements of the customers of the appellant who are alleged to have bought air-conditioning/refrigerating machines from the appellant that they have also surrendered copies of their accounts and the bills or invoices under which they are alleged to have received the goods. In these circumstances, it is patently a case where evidence has been collected from various persons all over the country who have deposed against the appellants. This evidence naturally cannot be utilised unless its veracity is tested in cross-examination.

7. It has also been observed by the learned Technical Member that the appellants have not proved by producing necessary documentary evidence that the proforma invoices seized from their premises were only accommodation bills and not the invoices relating to the goods sold. I am afraid that this is placing the burden on the wrong shoulders. It is for the department to prove by other evidence that the proforma invoices seized from the premises of the appellants relate to the goods actually sold by corroborating with the goods receipts or other transport documents.

8. Having gone through the entire evidence on record, I am of the view that a serious prejudice is likely to be caused to the appellants if they are not given the opportunity to cross-examine the statements of persons on whom the department relies. Accordingly, I agree with the learned Judicial Member and consider that the case is fit for remand as ordered by him.Dated: Sd/-P.C. Jain26.6.1989 Technical Member 1. In view of the majority decision, the matter is remanded to the Collector of Customs and Central Excise, Chandigarh for de novo examination.