Prepared by: CA Neetu Sukhwani &
Sharad Bang
 

Case study

Introduction:- M/s Sahil Tex Prints, hereinafter referred to as the appellant are engaged in the processing of man-made fabrics classifiable under chapter heading no. 55.11 and 55.12 of the First schedule to the Central Excise Tariff Act, 1985. The officers of the Headquarters Anti-Evasion of Central Excise Commissionerate, Jaipur-II paid a surprise visit on 09.09.2001 to the factory premises of M/s Shree Rohit Syn Fab (P) Ltd. wherein certain delivery challans were found containing the details relating to dispatch of processed (heat set and stentered) man-made fabrics clandestinely to various parties. Among them, some of the delivery challans also pertained in the name of M/s Sahil Tex Prints, the appellant. In order to conduct further inquiry in this matter, surprise visit was also paid to the factory of the appellant on 07.04.2002 and statement of Shri Kishore Singh, munim of M/s Sahil Tex Prints, was taken under section 14 of the Central Excise Act, 1944. Although the statement was retracted by Shri Kishore Singh the very next day, a Show Cause Notice was issued to the assessee on the basis of the retracted statement and the same was later adjudicated and order for recovery of Central Excise Duty amounting to Rs.197260/- along with interest was passed. However, neither show cause notice or hearing letter was served nor the order in original was sent to them. The factory of the appellant was closed and so the order in original was pasted on the factory premises and the appellant came to know of the passing of order in original after recovery proceedings were initiated against them.  

M/s Sahil Tex Prints[OIA No. 371 (SLM)CE/JPR/2015 Dated 04.06.2015]

Brief facts:-M/s SAHIL TEX PRINTS (hereinafter referred to as appellant) are engaged in the processing of man-made fabrics classifiable under chapter heading no. 55.11 and 55.12 of the First schedule to the Central Excise Tariff Act, 1985.
The officers of the Headquarters Anti-Evasion of Central Excise Commissionerate, Jaipur-II paid a surprise visit on 09.09.2001 to the factory premises of M/s Shree Rohit Syn Fab (P) Ltd. wherein certain delivery challans were found containing the details relating to dispatch of processed (heat set and stentered) man-made fabrics clandestinely to various parties among them, some of the delivery challans also pertained in the name of M/s Sahil Tex Prints, the appellant. In order to conduct further inquiry in this matter, surprise visit was also paid to the factory of the appellant on 07.04.2002, wherein statement of Shri Kishore Singh, son of Shri Babu Singh Gehlot, was taken under section 14 of the Central Excise Act, 1944 wherein the fact that they had sent 923.50 thans of processed man-made fabrics from their factory to M/s Shree Rohit Syn Fab (P) Ltd.  for stentering/finishing was accepted. However, the very next day, on 08.04.2002, the said statement was retracted by Shri Kishore Singh, wherein he stated that on account of threat, coercion and pressure from the departmental officers, he was forced to accept the fact that they had sent 923.50 thans of processed man-made fabrics to M/s Shree Rohit Syn Fab (P) Ltd. In the retracted statement, it was also mentioned that in the statement taken on 07.04.2002, Synthetic fabrics were written whereas they are not at all engaged in the processing of synthetic/spun fabrics and rather they are engaged only in the processing of cotton fabrics. Accordingly, Shri Kishore Singh requested to invalidate the statement given on 06.04.2002.
Subsequently, the appellant was informed vide the letter having reference as IV (6) 187/AE/JP-II/2001/Pt.-I/1302 dated 17.06.2002 that the representation regarding the retraction was examined in detail and the statements and the allegations made by them were after thought and without any basis and hence were not tenable.
Thereafter, a show cause notice was issued to M/s Shree Rohit Syn Fab Pvt. Ltd. having no. as V (55) 15/Off/Adj.II/120/2003/3018-23 dated 23.10.2003, for the recovery of the central excise duty along with interest and penalty, wherein all the parties from whom the processed fabrics were procured by M/s Shree Rohit Syn Fab Pvt. Ltd were also made party and penalty was proposed under Rule 26 on all the co-accused, including the appellant. However, since the factory of the appellant that was taken on rented premises had been closed from the year 2005, they were unaware of the show cause notice dated 09.07.2005.
Consequently, the subsequent hearing letters were also not served to the assessee as the factory that was taken on rented premises was closed since 2005. Consequently, the said show cause notice was adjudicated without providing the appellant with the opportunity of being heard. Moreover, as their factory was closed, they did not even come to know of the impugned order in original that was passed against them confirming the duty demand along with interest and penalty.
Thereafter, the appellant came to know of the passing of the said order in original when the recovery proceedings were initiated against them in the year 2011 through mediators or persons that were known to them and resided near the closed factory address. Thereafter, as the appellant got the knowledge of the demand confirmed against them along with interest and penalty, they made correspondences with the department for providing them with the copy of the order in original. The correspondences were made via letter dated 01.12.2011 and reminder letter dated 03.12.2011 was also sent. Thereafter, the appellant again received recovery letter having reference as CE-04 (2) Sahil/PALI-I/2005/722 dated 05.12.2011 to which they replied vide letter dated 12.12.2011 that they have not received copy of order in original and requested to provide them with the copy at the earliest. The appellant also once again sent a reminder letter for providing them with the copy of the order in original vide letter dated 21.01.2012.
As there was no appropriate response from the department regarding providing the appellant with the copy of the order in original even after repeated requests, the proprietor of the appellant, Shri Dilip Kumar filed the application under Right to Information Act, 2005 for providing them with the copy of the said order in original on 31.07.2013.
Thereafter, the copy of the said order in original was provided to the appellant in pursuant to the RTI application filed by them. The copy of the order in original was provided to them on 07.08.2013 and so the appellant strongly opposes the said order which has been passed in gross violation of the principles of natural justice.
Appellant’s contention:-The appellant made following submissions before the Commissioner Appeals:-
The appellant submitted that the impugned Order in Original issued by the Adjudicating Officer is wholly and totally erroneous and is liable to be set aside.
The appellant submitted that the impugned order in original passed by the adjudicating authority was not sustainable primarily on the grounds of natural justice itself as the order has been passed ex-parte, without giving opportunity to the appellant to defend their case and explain their stand. Moreover, on perusal of the statement of facts narrated above, it was very much clear that the impugned order in original had been passed without even serving the show cause notice and providing the opportunity of personal hearing to the appellant to make submissions and furthermore, the fact of the order in original confirming the duty demand along with interest and penalty came to the knowledge of the appellant only when the departmental officers initiated recovery proceedings of the said duty and penalty in the year 2011. It was worth mentioning that no effective communications were made by the department for serving the show cause notice or personal hearing letters and the impugned order in original but when it came to recovery of the dues confirmed vide the impugned order in original, all possible steps and measures were taken to serve the same. The appellant submitted that as they operated their factory in rented premises, they were unaware of the impugned show cause notice and the order in original that was passed and pasted on the main gate of their factory premises. The appellant submitted that the recovery letters were also addressed to their factory address that was closed since 2005. However, the recovery letter first came to their knowledge through mediators and persons know to them who resided near the closed factory premises. Thereafter, the appellant also communicated the revenue department for providing with the copy of the order in original but did not receive adequate response and could get the copy of the order in original in pursuant to the RTI Application on 07.08.2013.  As such, the whole gambit of proceedings on the part of revenue solely indicated the fact that the principles of natural justice had been violated. Therefore, the impugned order in original was void-ab-initio and was liable to be quashed and the appeal should be allowed.
 
Aligning with above, it was submitted that no document pertaining to the issue were received by prior to year 2011 when the recovery proceedings were initiated. Department tried its level best to communicate the recovery letters to the appellant via mediators or persons that were known to them and resided near the closed factory address. However, no genuine effort was made to communicate the show cause notice or the hearing letter or the order in original. Had such effort been made to communicate these notices/ order, there would have been no such harassment of the appellant where they had received the recovery letters without having any knowledge of any confirmed demand. However, on pursuing these letters, it was clear that these recovery letters were not sent by Registered A/D as prescribed in law and had been sent via speed post. It was reasonable to place reliance on the recent decision given by the Hon’ble Delhi Tribunal in the case of Gates India (P) Ltd. Vs Commissioner of C.Ex., Delhi-I [2013 (290) E.L.T. 698 (Tri.-Del)] wherein it was held that service by speed post was not sufficient. Similar decision has been given in the case of Opal Leathers Pvt Ltd Vs CC [2013-TIOL-1432-CESTAT-MUM] wherein it had been decided as follows:-
 
Cus – S. 153 of Customs Act, 1962 – Service of Order-in-Original through Speed Post was not a proper service– therefore, it has to be presumed that the order was not served on the appellants – when the appellant got a recovery notice they came to know about the o-in-o, applied for the same and filed an appeal within 60 days of getting a copy and hence appeal was to be considered as filed within time – o-in-a set aside - moreover, since adjudication order was an ex-parte order, matter remanded for decision on merits – appeal allowed by way of remand: CESTAT [para 4] - Matter remanded :MUMBAI CESTAT
An analysis of this decision also makes it clear that the service by speed post was not a proper manner. In this case, it was decided that the notice served through speed post cannot be termed as proper service and it was presumed by the Hon’ble Tribunal that no notice was served to the assessee. Applying the ratio of these two decisions in their case, since the recovery letters were sent via speed post, it was very clear that the earlier documents were also sent via speed post only which cannot be considered as a valid service. Therefore, benefit of these judgments was extendable in their case, and the impugned order should be treated as an ex-parte order which was not tenable and was liable to be set aside. 
The appellant further submitted that an order passed without serving the show cause notice to the assessee was not sustainable and was liable to be quashed. It was submitted that it was a well known principle of law that mere issuance of show cause notice was not sufficient and the same was effective and legal only when it was served on the assessee. However, in the instant case, the appellant did not receive any show cause notice. Therefore, the impugned order had been passed without issuance of show cause notice which was not justified in the light of following judgments:-
·         KANJI SHAVJI PAREKH (CAL) P. LTD. Vs. APPRAISER, CUS., POSTAL APPRAISING DEPT. [2010 (262) E.L.T. 83 (Cal.)]:-
Natural justice - Violation of - Order without SCN - Show cause notice not issued and hearing opportunity not granted - Order passed in breach of principles of natural justice - Impugned order set aside- Respondent at liberty to proceed afresh after issuing SCN and giving opportunity of hearing - Section 122A of Customs Act, 1962. [paras 1, 3, 4]
·         WINSTON TAN Vs. UNION OF INDIA [2009 (245) E.L.T. 97 (KAR)]:-
Confiscation under Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 - Requirement of show cause notice - Principles of natural justice - Violation of - Order of forfeiture of property passed without issuing any SCN and when petitioner had already purchased said property from accused - Even if a person was ultimately required to be hanged or to be crucified, he should be heard - Impugned order passed in violation of principles of natural justice, liable to be quashed - Matter remanded to consider whether petitioners are transferees in good faith for adequate consideration after following principles of natural justice - Sections 2, 6 and 9 ibid - Article 226 of Constitution of India. [paras 12, 13]
·         HINDUJA FOUNDRIES LTD. – DCU Vs COMMR. OF CUS., EX. & S.T., HYDERABAD [2009 (235) E.L.T. 678 (Tri.-Bang)]:-
Demand - Show cause notice, absence of - Demand notice issued without issuance of SCN - Order-in-original passed directing recovery without following procedure of law as laid down under Section 11A of Central Excise Act, 1944 - Demand not sustainable - Commissioner (Appeals) not justified in passing impugned order holding such an appeal against notice of demand as not maintainable - Impugned order set aside however liberty granted to Revenue to proceed as per law by issuance of SCN and holding proceedings in terms of principles of natural justice - Section 11A ibid. [para 5]
In light of the above cited judgments, the demand notice or order passed without issuance of show cause notice was not viable. In the case of appellant also, the impugned order has been passed without effectively serving the show cause notice and without giving an opportunity of personal hearing. Therefore, the impugned order passed without serving the show cause notice deserves to be set aside.
It was worth mentioning here that even the recovery letters were not sent by Registered A/D as prescribed in law and have been sent via speed post. It was reasonable to place reliance on the recent decision given by the Hon’ble Delhi Tribunal in the case of Gates India (P) Ltd. Vs Commissioner of C.Ex., Delhi-I [2013 (290) E.L.T. 698 (Tri.-Del)] wherein it was held that service by speed post was not sufficient and accordingly even the demand notices had not been properly served to the appellant.
In continuation to above, it was reiterated that the appellant came to know about the confirmation of demand only after initiation of the recovery proceedings and not before that. None of the documents, neither the show cause notice or hearing letter nor the order in original; were received by them before receipt of the recovery letter. Though the impugned order obtained in pursuant to the RTI application has a mention that the opportunity of personal hearing was provided to them, but no such letter offering the personal hearing was being received by them. When the letter of personal hearing was not communicated to them, it cannot be said that any effective opportunity of personal hearing was granted to them. Thus, the impugned order in original has been passed violating the principles of natural justice as the appellant was not given effective opportunity to defend their case. It has been held by the highest Court of India that the order passed without giving personal hearing was not justified. It has been held in the Supreme Court of India in the case of UMA NATH PANDEY Versus STATE OF U.P. [2009 (237) E.L.T. 241 (S.C.)]that the hearing was the essence of any decision and an order passed without being heard was void ab initio. The verdicts of hon’ble Supreme Court are produced as follows:-
“Natural justice - Violation of - Notice not issued - Revision Order passed by Single Judge without issuing notice to parties - Natural justice was essence of fair adjudication and to be ranked as fundamental - Purpose of following principles of natural justice was to prevent miscarriage of justice - Notice and hearing required as per principles of natural justice - Impugned order set aside - Matter remanded to High Court for considering the matter afresh. [paras 2, 3, 8, 19, 20]
Natural justice - Notice and hearing - First rule was ‘nemo judex in causa sua’ meaning ‘no man shall be a judge in his own cause’ - Second rule of natural justice was ‘audi alteram partem’ meaning no one should be condemned unheard - Notice was first limb of this principle - Notice must be precise and unambiguous - Time given should be adequate so as to enable party to make re-presentation - Order passed wholly vitiated if such notice and reasonable opportunity absent - Essential that party was put on notice before passing adverse order against him. [paras 8, 17]
Order - Violation of natural justice, effect of - Whenever order was struck down as invalid as violative of principles of natural justice, final decision absent and fresh proceedings left open - Order assailed by virtue of inherent defect was vacated but proceedings not terminated. [para 17]
Natural justice and legal justice - Expressions ‘natural justice’ and ‘legal justice’ do not present water-tight classification - Substance of justice to be secured by both - Natural justice called in aid of legal justice when legal justice fails to achieve such solemn purpose - Natural justice relieves legal justice from unnecessary technicality, grammatical pedantry or logical prevarication - Natural justice supplies omissions of formulated law. [para 7]
Natural justice - Objects and intention - Principles of natural justice laid down by Courts for minimum protection of rights of individual against arbitrary procedures that may be adopted by a judicial, quasi-judicial and administrative authority while making order affecting rights - Rules of natural justice intended to prevent such authority from doing injustice. [para 10]
Natural justice - Rules - Rules of natural justice are not rules embodied always expressly in a statute or rules framed thereunder - Rules of natural justice may be implied from nature of duty to be performed under a statute - Every administrative order involving civil consequences must be consistent with rules of natural justice - Civil consequences cover everything that affects a citizen in his civil life. - What particular rule of natural justice should be implied and what its context should be in a given case must depend to a great extent on the fact and circumstances of that case, the framework of the statute under which the enquiry was held. [para 15]
Words and Phrases - Natural justice - Natural justice was another name for commonsense justice - Rules of natural justice are not codified canons but principles ingrained into conscience of man - Natural justice was administration of justice in a commonsense liberal way. [para 6]
As such, order passed without giving personal hearing was void ab initio. Similar decision was given in the following cases:-
 
·         Andhra Agencies vs State of AP [2008-TIOL-228-SC-CT]:-
“Personal Hearing was must: The stand of the assesses before the Tribunal and the High Court was that they were not given personal hearing and only on consideration of their objections, the orders were passed by the authorities. The Tribunal and the High Court held that since objections were considered, there was no need for giving personal hearing. The Supreme Court held that, "Such conclusion was clearly unsustainable.": SUPREME COURT;”
·         M/s Measurement & Controls India Ltd Vs CCE, Pondicherry [2008-TIOL-1538-CESTAT-MAD]:-
“Central Excise - the impugned order was passed without hearing - natural justice was denied to the appellants by the lower appellate authority by choosing to dispose of appeal without personal hearing - matter remanded to pass orders after hearing. :CHENNAI CESTAT;”
The analysis of these decisions makes it clear that an order passed without giving effective opportunity of being heard was not legally sustainable. In the case of appellant also, they had not received even a single hearing letter from the department even when it was a settled principle that at least 3 opportunity of hearing was to be provided to the assessee. Moreover, the impugned order was also not received. Thus, even if the hearing was granted to them by issuing any such letter, the same was not communicated. A letter without being communicated was non-effective. Thus, the impugned order had been passed without giving effective opportunity of being heard and as such it was not tenable. Applying the ratio of above mentioned decisions, the impugned order should be set aside and the appeal should be allowed.
In continuation, the appellant relied upon the judgment given in the case of Automotive Tyre Manufacturers Association v/s The Designated Authority & Ors [2011-TIOL-03-SC-CUS] wherein it was held as under:
Principles of Natural Justice: It was well settled that unless a statutory provision, either specifically or by necessary implication excludes the application of principles of natural justice, because in that event the Court would not ignore the legislative mandate, the requirement of giving reasonable opportunity of being heard before an order was made, was generally read into the provisions of a statute, particularly when the order has adverse civil consequences which obviously cover infraction of property, personal rights and materials deprivations for the party affected.
The person who hears must decide: Even written arguments are no substitute for an oral hearing. A personal hearing enables the authority concerned to watch the demeanor of the witnesses etc. and also clear up his doubts during the course of the arguments. Moreover, if one person hears and another decides, then personal hearing becomes an empty formality.
Further, in the case of M/s Prakash Indus Ltd v/s CCE, Raipur [2009-TIOL-2093-CESTAT-DEL] it was held that:
Central Excise – Principles of Natural Justice – Personal Hearing – Adjournments – Section 33-A(2) of Central Excise Act, 1944 provides an embargo upon the power of the adjudicating authority to adjourn the matter indefinitely and for more than three times at the request of a party to a proceedings. However, prolongation of the hearing from one day to another on account of paucity of time or non-completion of recording of testimony of one or more witnesses or for non-conclusion of the arguments, would not amount to an adjournment, it would amount to continuation of the proceedings. Besides, the adjournments, as stated in the proviso, are at the insistence of a party to the proceedings and not on account of any difficulty faced by the authority. The limit of three times adjournment was to be understood in the facts and circumstances of each case and may be extended if the circumstances so demand. Undoubtedly, such adjournment will have to be for the valid and justifiable reasons to be recorded in writing by the authority concerned.
In light of the above cited decision, it was clear that at least three opportunities are to be given to the assessee and the same may also be extended in special circumstances but in the present case, not even a single opportunity of hearing was given to the appellant. As such, the impugned order was totally against the principles of natural justice and deserved to be set aside.
The appellant further submitted that the sole basis of the confirmation of the demand was the statement of Shri Kishore Singh, son of Shri Babu Singh, Munim of the unit M/s Sahil Tex Prints, Pali taken during the course of surprise visit by the Central Excise Officers on 07.04.2002, wherein it was accepted that the appellant had sent 923.50 thans of processed man made fabrics from their factory to M/s Shree Rohit Syn Fab (P) Ltd. for stentering/finishing under the cover of some challans. However, the said statement was retracted the very next day on 08.04.2002 and also intimated to the Central Excise Commissionerate vide their letter dated 10.04.2002. The retracted statement clearly mentioned that the statement tendered on 07.04.2002 was under threat, coercion and pressure from the central excise officers. Moreover, it was also specified that in the statement, processing of synthetic fabrics was written while the appellant was not at all engaged in the processing of such synthetic fabrics and rather they processed only cotton fabrics in their factory. Furthermore, it was also requested that the statement taken on 07.04.2002 was under pressure and fear and so the same should be invalidated. It was submitted that the statements taken under section 14 of the Central Excise Act, 1944 have evidentiary value only if they are voluntary statements and are obtained without any threat or coercive means. However, the statement of Shri Kishore Singh was obtained under threat, coercion and pressure and as such, had no value in the eyes of law. Accordingly, the demand of central excise duty confirmed along with interest and penalty solely by placing reliance on the said statement was totally erroneous and consequently was liable to be set aside.
In continuation to the above, it was worth observing the facts narrated below as regards the investigation proceedings concluded by the anti evasion team with respect to the case under consideration. The statement of almost all the parties were recorded on 06.04.2002 and 07.04.2002 when anti evasion party of Jaipur as well as various other officers visited the factories of all the parties and took the statement of these parties. The large number of departmental officers visited the small district of Pali and took statements of various parties. The following superintendent has taken the statements of various officers:-
 

 
In addition to above, many other officers visited Pali and took statement of other parties whose statement has not been revealed. These all officers have visited on 06.04.2002 and 07.04.2002 which shows that the department has put maximum pressure to prove this case. Many teams visited the small town Pali in one day and pressurised parties concerned to accept the allegations. It was also worth mentioning that out of these parties listed, most of the parties retracted the statements tendered by them the very next day which itself proves that the department was resorted to book a case against the said parties. It was submitted that Shri Ashok Doshi retracted his statement on 07.04.2002, the very next day when the statement was taken by the Central Excise Officers on 06.04.2002. Similarly, statement of Biyani was also retracted on 07.04.2002 and the retraction was duly intimated to the department. As such, if one of the parties retract the statement, it may be possible that it was an afterthought but if three parties retract their statements on the very next day of the investigation, it cannot be said that the parties are defending themselves. There was quite a possibility that the statements of the parties have been obtained under pressure, threat or fear and coercion. As such, confirming the duty demand along with interest solely by placing reliance on the statements that have been retracted the very next day was not proper and legal and the demand should therefore be quashed and the appeal should be allowed.
 
Aligning with the above, it was also submitted that the statement was retracted the very next date, i.e., by availing the first available opportunity and so the same cannot be said to be after thought. It was also submitted that mere confessional statements have no evidentiary value unless and until they are supported by substantive cogent and corroborative evidences. In the present case, the demand has been confirmed solely on the basis of confessional statement of Shri Kishore Singh without any supporting evidences to substantiate the statement. Moreover, the said statement on the basis of which demand has been confirmed and was relied upon was retracted by the concerned person the very next day and the fact of retraction was also intimated to the department. As such, the onus lies on the department to prove that the statement has evidentiary value in the present case. It has been held by various appellate authorities that duty cannot be demanded merely because there were confessional statements; all the other relevant factors should be considered so as to prove the allegations as well as the confessional statements of the parties to investigation. The view that the confessional statements cannot be sole reason to confirm the duty demand has been supported by the following decisions:-
·         Commissioner of C.Ex., Vs Omkar Textile Mills Pvt. Ltd. [2010 (259) E.L.T. 687 (Guj.)]:-
Clandestine removal - Evidence - Shortage of fabrics - Stocks not verified physically while drawing panchanama - Affidavit of Director that stock verification not conducted physically and compared with recorded balance - Evidence to support charge of clandestine removal except statement of Director, concurrently found to be absent by all authorities - Statement of Director subsequently retracted - Findings in adjudication order that no shortage of goods found, confirmed by appellate authorities - Revenue not able to furnish evidence to prove charges - Findings by Tribunal not perverse - Clandestine removal of goods to be made out on facts which find corroboration from material on record - Demand cannot be raised merely based on statement retracted later without any corroborative material- Section 11A of Central Excise Act, 1944. [paras 2, 5, 9]
 
·         Gopalchand Khandelwal Vs DRI [2009-TIOL-535-HC-DEL-CUS]
Customs - admissibility of statement of co-accused; confession does not amount to proof - The court may take the confession into consideration and thereby, no doubt, makes its evidence on which the court may act; but the confession does not amount to proof. Clearly there must be other evidence. The confession was only one element in the consideration of all the facts proved in the case; it can be put into the scale and weighed with the other evidence :DELHI HIGH COURT;
·         ASST. COLLECTOR OF CUSTOMS (PRE.), BOMBAY Versus AHMED ABDULKARIM [2009 (247) E.L.T. 97 (Bom.)]
Evidence - Retracted confession - Confessional statement of co-accused even if voluntary and true, as a rule of prudence, Court was required to seek assurance getting corroboration from other evidence adduced by prosecution - Court was required to find out whether there are other facts and circumstances on record to corroborate what was stated in retracted confession - Retracted statements of co-accused whose trial has been separated cannot be used as a piece of evidence to draw assurance or to corroborate the retracted statement of accused under Section 108 of Customs Act, 1962 - Even if another view can be taken on the basis of evidence, it was no ground to interfere in an appeal against acquittal in as much as the presumption innocence was further strengthened by acquittal of accused. [paras 21, 22]
·         Pioneer Industries Vs Commr of C.Ex., Mumbai-II [2006 (193) E.L.T. 506 (Tri.-Mumbai)]:-
Demand - Clandestine removal based merely on alleged confessional statements without corroboration by any documents - Extra quantity sent out, on cash sale basis, not established - Material in the form of Octroi Check Post returns produced by appellant to prove that quantity not mis-declared - Demand not sustainable - Section 11A of Central Excise Act, 1944 read with Rule 9(2) of erstwhile Central Excise Rules, 1944. -The entire change was based on an alleged confessional statement, recorded that the quantity on the delivery challans and bill book were different in two sets.The invoices issued from the factory were hand written and when issued from factory again typed on other set kept at office at Mumbai. This ipso facto will not prove the case of the Revenue. Investigators have not produced a single invoice showing difference in weight of quantity removed and charged in original/duplicate/triplicate/quadrupled copy. The mere admissions as recorded are not corroborated by any documents. No corroborative material exists to show that extra quantity was sent out on cash sale basis. Therefore, even relying on the statement, which are difficult to rely upon, otherwise for lack of corroborations, the value turnover, the entire financial year cannot be increased on pro rata basis to deny the exemption by alleging small scale exemption threshold level of Rs. 30 lakhs to be crossed, without any evidence of extra cash recovery in actual terms. There was no such material. The denial of benefit of exemption was therefore not upheld. [para 3(a), 3(b)]
 
In the above cases, it was held that the demand cannot be sustained merely because the confessional statements have been given by the director/authorized signatory or any party to the investigation. All the other relevant factors should also be considered to raise the demand on the assessee. In present case also, many of the essential factors directly related to the processing and clearance of the cotton fabrics have not been considered and the impugned demand has been confirmed solely on the basis of statements of the related parties which was not sustainable as even the confessional statements should be supported by the cogent and corroborative evidences. Thus, the impugned order in original was not tenable and was liable to be set aside.
 
It was further submitted that private records or delivery challan books of other party cannot be the basis of confirmation of demand when the authenticity of records maintained by the appellant was not disputed. It was submitted that the key area of the investigation at appellant’s end would have been the comparision of raw material consumption and the production of finished goods, i.e. processed cotton fabrics which has not been done. The appellant submitted that when the production and consumption as reflected in their records was not disputed, then the receipt of semi-processed fabrics for stentering due to discrepancies found at the end of M/s Shree Rohit Syn Fab (P) Ltd. cannot be questioned at the appellant’s end and if the same was questioned, it should be backed by cogent and corroborative evidences at their end also. If it was alleged that there was clearance of 923.50 thans of semi-processed cotton fabrics from appellant’s factory, it should have been verified with the raw material purchases and other purchases of other consumables but that has not been done and simply demand has been confirmed on the basis of the statement of Shri Kishore Singh that was retracted later on. It was submitted that without cogent and corroborative evidences, the allegations cannot sustain as held in the following cases:-
·         M/s Hiren Aluminium Ltd v/s CCE, Valsad [2009-TIOL-433-CESTAT-AHM]–
Central Excise – CENVAT credit – demand of CENVAT Credit on the ground that the inputs were diverted – There was no dispute about the quantum of final product manufactured – Such quantum of final product cannot be manufactured out of the quantity of inputs, as contended by Revenue – The inputs were recorded in RG-23A Part-1, alongwith the claim of credit in RG23A part-II, the same have been shown to have been used in the manufacture of the final product, which was cleared on payment of duty. The fact that the said inputs were actually used in the manufacture of final product cleared on payment of duty stands admitted in the adjudicating authority’s order – no justification to uphold the impugned order of Commissioner denying the CENVAT credit. Appeals allowed.
·         GHODAVAT PAN MASALA PRODUCTS LTD. VERSUS COMMISSIONER OF C. EX., PUNE [2004 (175) E.L.T. 182 (Tri. - Mumbai)] -
“…………Besides, we find that when the department has based his case on the statement of certain parties and when the statements were retracted in writing by them, it was imperative on the department to have brought corroborative evidence to substantiate the allegation of clandestine removal. The department having not done so, has lost their right to raise the demand merely on presumption/assumption. In a case of its kind the department was duty bound to have brought direct, tangible, corroborative and strict evidence to prove the clandestine removal beyond reasonable doubt. We do agree with the contention of the ld. SDR that mathematical accuracy cannot be expected in such a matter. However, it does not mean that the Department was absolved of its responsibility to bring on record the tangible, strict, positive, direct and corroborative evidence to prove clandestine removal beyond reasonable doubt as there was no evidence of actual excess production, removal of such excess production, transport of such excess production, confirmation from buyers and receipt of unaccounted cash towards sale of such unaccounted clearances. We find that the department has not done so………”.
·         COMMISSIONER OF C. EX., GHAZIABAD VERSUS CENTRAL ELECTRONICS LTD. [2011 (271) E.L.T. 586 (Tri. - Del.)]
Perusal of the records clearly disclose that apart 5. from alleging that the inputs were neither brought into the factory nor any manufacturing activity or processing thereon in the factory premises of the respondents was carried on, no other material placed on record by the department so as to deny the benefit of credit on such inputs to the respondents. It was the specific case of the respondents that the goods were subjected to payment of duty, they were duly received by the respondent, they were utilized in the final product manufactured by the respondents, and the final product was a dutiable product. All these facts were never in dispute in the entire proceedings and being so, we do not find any justification for interference with the concurrent findings arrived at by the authorities below. Hence, the appeal fails and was hereby dismissed.
·         IN RE: FRONTIER ALLOY STEEL LTD. [2010 (250) E.L.T. 461 (Commr. Appl.)]
Cenvat/Modvat - Inputs, receipt of - Proof - Input purchased through broker/trading firm and credit of duty taken on invoice supplied by them - Assessee making payment through cheque, inclusive of excise duty, which showed in their ledger account - Receipt of goods in their factory evidenced by Form 31 of U.P. Trade Tax department, Form 48 of West Bengal Rules and copy of GRs - Consignment recorded by assessee in their statutory records - HELD : Assessee was bona fide purchaser of goods - Department did not prove that (i) inputs were not received in factory, (ii) flow back of money to trading firm, and (iii) use of any alternative source of raw materials by assessee - Department’s contention that assessee availed Cenvat credit without receipt of goods and that there was fraud and collusion, rejected - Rule 9 of Cenvat Credit Rules, 2004. [para 5]
Cenvat/Modvat - Duty paying documents - Verification of input supplier - Assessee not expected to verify their records or duty payment by them or their registration with Central Excise - They have to rely on statements of supplier and their documents - Only reasonable step could be taken to ensure that supplier was trustworthy, receipt of inputs and their documents, appear prima facie bona fide - Inputs regularly received from trader with duly authenticated invoices having all prescribed particulars, which was in accordance with prevalent practice in iron and steel trade - All reasonable precautions taken before taking credit and were entitled to it - Main culprit was Trading Firm who issued bogus invoices and duty forfeited by their fraud could be recovered from them under Section 11D of Central Excise Act, 1944 - Rule 9 of Cenvat Credit Rules, 2004. [para 5]
·         Ruby Chlorates (P) Ltd. v/s CCE, Trichy [2006 (204) ELT 607 (Tri.-Chennai)]
“…..- Department not produced evidence of use of inputs to prove manufacture of unaccounted finished production - No statements obtained to show as to from whom raw materials were purchased - No evidence for use of electricity or receipt of sale consideration by assessee -……”
·         D. Suyaraj v/s Collector of Central Excise, Coimbatore [2001 (135) ELT 202 (Tri.-Chennai)].
“Demand - Clandestine removal - Private records - Mere recovery of a diary with entries by assessee not sufficient when not supported by factors like purchase of raw material or consumption of electricity…”
·         CCE, Bhubaneshwar-I v/s Minakshi Steels[2005 (190) ELT 395 (Tri.-Kolkata)]:-
“Demand - Clandestine removal - Evidence - No evidence that assessee purchased any excess raw materials to manufacture any excess ingots in their factory over and above what has been required in Books of Accounts - Rough Note books found by investigating officers, not reflecting actual production - Department failed to prove as to whether there was sufficient evidence to prove that power consumption per tonne was based on evidence or record seized from appellants or based on any experiment conducted in premises of assessee - No norm of consumption of power or any evidence in form of private records seized or any evidence which was based on any norm fixed by Department under Rule 173E of erstwhile Central Excise Rules, 1944 - Charge of clandestine removal based on assumption hence not sustainable.”
·         Chemco Steels Pvt. Ltd. V/s CCE, Hyderabad-I [2005 (191) ELT 856 (Tri.-Bang.)]:-
“Demand - Clandestine removal - Private registers and packing slips maintained by shift supervisors/operators not to be the sole basis for establishing clandestine removal in absence of corroborative evidence like clandestine purchase of raw material, excess use of electricity etc. - Demand not sustainable - Section 11A of Central Excise Act, 1944 read with Rule 9(2) of erstwhile Central Excise Rules, 1944.”
·         CCE, Coimbatore v/s Velavan Spinning Mills [2004 (167) ELT 91 (Tri.-Chennai)]:-
“Demand - Clandestine removal - Evidence - Private note books and some statements relied by Revenue - Figures do not tally with seized private note books and no systematic method of maintaining records, noted - Commissioner (Appeals) found that investigating authority has not properly investigated and not brought forth corroborative evidence on record to prove purchase of raw materials, manufacture of goods, payment made to labourer, use of electricity and sale of final product - In absence of all relevant evidence, no fault committed by Commissioner in setting aside demand - Rule 9(2) of erstwhile Central Excise Rules, 1944 - Rules 4 and 8 of Central Excise Rules, 2002.”
The analysis of above cases made it ample clear that the allegations should be proved with the help of cogent and corroborative evidences. Though some of the above judgments relate to the issue of clandestine removal, yet their ratio was clear that every allegation should be backed by the cogent and corroborative evidences. In the present case, it had been alleged that the appellant had cleared 923.50 thans of semi-processed fabrics to M/s Shree Rohit Syn Fab (P) Ltd for stentering without payment of central excise duty but this fact of clandestine clearance was not supported by cogent and corroborative evidences, which becomes very essential when the factum and authenticity of records maintained was not disputed and the demand had been confirmed only on the basis of confessional statement that had been retracted. Thus, the above cited decisions were equally applicable in the present case and considering the ratio of above decisions, the impugned order in original should be invalidated.
Without prejudice to the above submissions, even if it was accepted for the sake of argument only that the appellant were liable for the clearances of semi-processed fabrics to M/s Shree Rohit Syn Fab (P) Ltd., then too there arose no excise duty liability on the appellant as Shri Kishore Singh had stated in the retracted statement that the appellant were engaged in processing of only cotton fabrics and not synthetic fabrics. Accordingly, the appellant were eligible for availing the benefit of exemption notification no. 3/2001-CE dated 01.03.2001. The serial no. 114 of the said notification was produced for the sake of convenient reference as follows:
 

 
On perusal of the above serial no., it was clear that processing of cotton fabrics without aid of power was leviable to Nil rate of central excise duty and as the appellant had also processed cotton fabrics without aid of power, they were rightly eligible to claim the benefit of the exemption contained in the notification and accordingly, the demand of central excise duty confirmed against them along with interest and penalty was not sustainable and deserved to be quashed. The appeal should therefore be allowed.
 
In continuation to above, it was submitted that the appellant were eligible to avail the benefit of this notification as they did not have any facility of electric processing on the cotton fabrics. Therefore, even if the allegations of the impugned order were accepted for the sake of argument only, then too, the demand was not sustainable. The fact that the appellant did not have any facility of electric processing had been stated by Shri Kishore Singh, the munim of the appellant in his retracted statement dated 8.4.2002. Also, the department has not proven otherwise. In other words, if the department alleges that they were not eligible for benefit of this notification, it was liable to prove the same and the assessee could not be asked to prove the negative. Reliance was placed on the following judgment in this regard:-
·         M/s Aviat Health Care Pvt Ltd Vs CC & CE, Belapur [2008-TIOL-1924-CESTAT-MUM.]
Allegations were purely conjectural and ipse dixit in nature - It was trite law that it was for the Revenue to substantiate its allegations and not for the assessee to prove the contrary - Revenue loses Rs.5.62 Crores Central Excise undervaluation case at the hands of the Tribunal. :MUMBAI CESTAT;
In view of above decision, it was clear that if the department intended to deny the benefit of this notification to the appellant, then it had to prove that the appellant had the facility of the manufacturing with the aid of power. Since this burden had not been discharged, the impugned demand was not sustainable and was liable to be quashed.
It was further submitted that when the demand itself was not tenable, the question of paying interest on the same did not arise. Hence, the impugned order in original confirming interest was also liable to be set aside.
 
The appellant further submitted that penalty had been imposed under section 11AC on the allegation of wilful suppression and clandestine removal of goods by them. In this regard, it was submitted that the impugned order was not legal and proper in imposing penalty under section 11AC as none of the ingredients had been proved that were essential for imposing penalty under this section. It was submitted that penalty under this section was very harsh and so it was mandatorily required to substantiate the necessity of imposing penalty under this section along with reasons which had not been done. Moreover, it was worth mentioning that in view of the above submissions, it was clear that the appellant being processor of cotton fabrics without aid of power were entitled for availing the benefit of exemption under serial no. 114 of the notification no. 3/2001-CE dated 01.03.2001 and so when there was no excise duty liability as such, there was no good reason to suppress the real facts and actual clearances of the processed cotton fabrics by the appellant. Accordingly, penalty under section 11AC was not imposable at the outset. Therefore, the impugned show cause notice confirming penalty under section 11AC was totally erroneous and deserved to be set aside. The appeal should be allowed.
 
In continuation to above, it was reiterated that penalty under section 11AC was imposable only if there was any fraud, collusion, suppression of facts with an intention to evade payment of duty. In other words, the penal action under section 11AC was invocable only if the extended period was invocable as the pre-requisites for invoking the extended period as well as pre-requisites for penal action under section 11AC were the same. As already proved in the forgoing paras, there was no suppression of facts with an intention to evade payment of duty. Since they were eligible for availing the benefit of notification no. 3/2001-CE there was no reason of suppressing anything from the department. Therefore, the conditions prescribed under section 11AC were not satisfied, as such, the penal provisions under this section were not attracted. It had been held in the case of Hindustan Steel v. State of Orissa [1978 2 ELT J 159 (Supreme Court)] that an order imposing penalty for failure to meet statutory obligation was a result of proceedings which were quasi judicial in nature and penalty should not ordinarily be imposed unless the person acted deliberately in defiance of law or was guilty of misconduct or dishonest or acted in conscious disregard of his obligation. It was further held in the case of Orient Ceramics and Industries [1987 (32) ELT 218 (I)] that words ‘with intent to evade payment of duty’ were very significant and unless and until the intention to evade payment was proved on part of assessee, no penalty could be imposed. Similar judgment was given in the following case:-
·         CCE, Chandigarh-II Vs M/s Sarvpriya Industries Ltd [2010-TIOL-523-HC-P&H-CX.]-
Central Excise - Supreme Court decisions in Dharmendra Textile as well as in RajasthanSpinning& Weaving Mills do not lay down that for every short payment of duty, penalty was automatic: Dharmendra Textile as well as in RajasthanSpinning& Weaving Mills was that mandatory penalty under Section 11AC of the Act was not applicable to every case of non-payment or short-payment of duty. Thus, even though the authorities may have no discretion once conditions stipulated under Section 11AC of the Act exist, in absence of fulfilment of such conditions, penalty could not be levied. In this view of the matter and the finding of the Tribunal that there was no allegation of suppression of facts with intent to evade the payment of duty, the penalty under Section 11AC of the Act was not warranted. No substantial question of law arises: PUNJAB AND HARYANA HIGH COURT
Thus, without proving the suppression of facts, penalty could not be imposed under section 11AC or under Cenvat Credit Rules, 2004. Therefore, the impugned show cause notice was liable to be quashed.
The appellant further submitted that the impugned demand was the result of investigation initiated against them as on 9.9.2001. The appellant was a party to investigation alongwith a number of other parties. The investigation was concluded on 23.10.2003 when the show cause notice C. no. V(55) 15/off/Adj-II/120/2003/6155-56 dated 23.10.2003 was issued. This show cause notice was the outcome of the investigation initiated on 9.9.2001 and it covered all the aspects of the investigation and raised the duty demand on the main accused – M/s Shree Rohit Syn Fab Pvt. Ltd. And penalty was proposed on the other co-accused including the appellant. The issuance of this show cause notice was evident of the fact that the investigation had been completed as on 23.10.2003. However, after one and a half year of this show cause notice, the impugned show cause notice dated 9.7.2005 was issued to the appellant. It was reiterated here that this show cause notice was never received by the appellant and the fact of issue of the show cause notice which was dated as 9.7.2005 had come to their notice by analyzing the impugned order in original which at para no. 12 had mention of this fact. Thus, the impugned show cause notice which was the basis of confirming the demand was issued on 9.7.2005, i.e. after one year and nine months of completion of investigation. It was also worth mentioning here that the facts and circumstances under which both the show cause notices had been issued were exactly same and were based upon the same investigation. Thus, the department had issued the impugned show cause notice after such a long time of completion of investigation. This was not sustainable as when the department had knowledge of all the facts and circumstances at the time of issue of earlier show cause notice dated 23.10.2003.  Issuing show cause notice after such a long time of completion of investigation was not sustainable and was liable to be set aside in view of following decisions:-
·         GAMMON INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, GOA [2002 (146) E.L.T. 173 (Tri. - Mumbai)]
Demand - Limitation - Delay in issue of show cause notice - Show cause notice issued after two years of completion of enquiry - Suppression of facts - Appellants’ contention that the construction of bridge was before the eyes of the general public hence no suppression, accepted - Period of delay in issuing show cause notice being identical to the period of delay in J.S.L. Industries Ltd. v. CCE, Ahmedabad [1999 (109) E.L.T. 316 (Tribunal)], demand being time barred, not sustainable - Section 11A of Central Excises Act, 1944. [para 4]
This judgment was affirmed by hon’ble Supreme Court and it was cited as Commissionerv. Gammon India Ltd. - 2002 (146) E.L.T. A313.
·         COMMISSIONER OF CENTRAL EXCISE, INDORE Versus PRASHANT ELECTRODE [2006 (196) E.L.T. 297 (Tri. - Del.)]
Demand - Limitation - Delay in issue of show cause notice - Show cause notice issued after two years of completion of investigation - Delay not properly explained by Revenue - Demand time-barred - Section 11A of Central Excise Act, 1944. - The Department had ascertained that there was shortage of finished goods as well as inputs as on 28-1-2000. The statement of the partner was recorded on the same day who admitted the facts of the shortages. This being the fact before the authorities, the authorities did not move in action till 16-4-2002 to issue a show cause notice to the respondents. In the absence of any continued investigation from 28-1-2000 to 16-4-2002, the plea of the Revenue that the investigation was in process, cannot be accepted. Further thereafter, the statement of the partner admitting the shortages was itself an end of investigation inasmuch as there was no further requirement of any investigation. Since the investigation was complete on 28-1-2000 itself and the issuance of the show cause notice on 16-2-2002, delay has not been properly explained by the Revenue, and more particularly, in the absence of any investigation being continued, the demand was time-barred. [2002 (146)E.L.T. 173 (Tribunal); 2002 (146) E.L.T. A313 (S.C.) relied on]. [paras 4, 5]
·         MONIKA ELECTRONICS LTD. Versus COMMISSIONER OF C. EX., DELHI [2006 (204) E.L.T. 468 (Tri. - Del.)]
Demand - Limitation - Shortage in inputs - Show cause notice issued almost after four years of recording of statement of concerned persons during visit of factory by Central Excise officers - Demand hopelessly barred by limitation - Section 11A of Central Excise Act, 1944. - It was a settled law that a show cause notice which was issued after two years then it was non est as affirmed by Supreme Court in the case of Gammon India Ltd. [2002 (146) E.L.T. A313 (S.C.)] in an appeal against order of the Tribunal as reported in 2002 (146)E.L.T.173. [para 9]
·         NEMINATH FABRICS Versus COMMISSIONER OF CENTRAL EXCISE, SURAT-I [2009 (234) E.L.T. 525 (Tri. - Ahmd.)]
Demand - Limitation - Clandestine removal - Central Excise Officers visiting appellant’s factory, recording appellant’s Director’s statement, recording last statement of Director on 19-12-2003 and completing the investigation and Department issuing show cause notice on 9-5-2005 - Show cause notice barred by limitation - Law on the issue settled by several decisions of the Tribunal and Supreme Court holding that show cause notice issued six months after completion of investigation barred by limitation - Impugned order set aside - Section 11A of Central Excise Act, 1944. [paras 5, 6]
·         SHREE RENUKA SUGARS LTD. (SRSL) Versus COMMISSIONER OF C. EX., BANGALORE [2007 (210) E.L.T. 385 (Tri. - Bang.)]
Demand - Limitation - Clandestine removal - Evidence - Investigation was done in 2002 and show cause notice was issued only in 2005, proving inordinate delay of 800 days - Moreover, no evidence as to excess production, excess receipt of raw materials or electricity consumption to establish clandestine manufacture and removal - In the absence of concrete evidence, demand not sustainable - Time-bar also applicable - Section 11A of Central Excise Act, 1944. [para 5]
·         KATHIRAVAN PIPES LTD. Versus COMMISSIONER OF C. EX., COIMBATORE [2002 (147) E.L.T. 1266 (Tri. - Chennai)]
Demand - Limitation - Show cause notice having been issued beyond six months from date of completion of investigation by Department, demand hit by time bar - Section 11A of Central Excises Act, 1944.[1995 (75)E.L.T.377 (Tribunal); 1996 (82)E.L.T.323 (Tribunal); 1987 (32)E.L.T.124 (Tribunal) relied on]. [para 11]
·         JETEX CABURETTORS PVT. LTD. Versus COMMISSIONER OF C. EX., VADODARA [2007 (210) E.L.T. 73 (Tri. - Ahmd.)]
Demand - Limitation - Plea taken before original authority in first round of litigation - Fact that Tribunal did not deal with same and remanded matter on other principles not means that plea of limitation stands rejected - Open for lower authorities to deal with it - Notice issued after period of 6 months from date of visit of officers barred by limitation - Section 11A of Central Excise Act, 1944. [paras 5, 6]
·         PRISM MILLS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, VAPI [2009 (233) E.L.T. 389 (Tri. - Ahmd.)]
Demand - Limitation - Clandestine removal - Loose documents recovered and statement recorded during visit by Departmental Officer on 19-10-2000 - Show cause notice issued after a period of 6 months from the date of visit of officers and completion of investigation barred by limitation - Section 11A of Central Excise Act, 1944. [2007 (210)E.L.T.73 (Tribunal) followed]. [para 6]
·         COMMISSIONER OF C. EX., AHMEDABAD-I Versus NANDESHWARI PACKAGING [2009 (235) E.L.T. 697 (Tri. - Ahmd.)]
Demand - Limitation - Show cause notice issued after period of six months from date of search and even after completion of investigations, barred by limitation - Impugned order setting aside demand sustainable - Section 11A of Central Excise Act, 1944. [2004 (173)E.L.T.225 (S.C.) followed]. [paras 1, 2]
In the above cited decisions it was held that the show cause notice issued after period of six months from the date of completion of investigation was barred by limitation. In the instant case, the impugned show cause notice has been issued after one year and nine months of the completion of investigation which was not sustainable in the light of above cited decisions. Therefore, the benefit of above cited decisions including the judgment of Supreme court was duly extendable to the appellant and the impugned order in original deserved to be set aside.
 
Reasoning of the judgment:-The appellant had contested order on four issues which were taken up one by one. The first point was regarding violation of principles of natural justice as appellant had alleged no proper service of SCN, Hearing letter and OIO by the Deptt., the impugned order found mention of 22.11.2005 on which hearing was held but no one from appellant side appeared. There was no mention of any other date or the number of times personal hearing was offered to the appellant. As regard service of OIO, as per the C. Ex. Range Pali letter Dt. 05.12.2011 it is evident that OIO was affixed on the main gate of the available address of appellant as stipulated u/s 37C of the C. Ex. Act, 1944. In light of the above, it was found that that the facts and circumstances of the impugned order were similar to that of Ms Flower & Tissue India Ltd. Vs Commr. Of Customs, Jaipur [2014(309) ELT 505 (Tri.-Del).
Second issue was that demand was solely based on retracted statement of Mr. Kishore Singh, Munim/Accountant of the appellant. Whereas the Deptt. had repeatedly issued summons to Mr. Dilip Gulecha, Proprietor, of the appellant to appear on 16.4.2002 and 29.5.2002 and on retraction/representation of Kishore Singh competent authority had replied to him that the same was not tenable. As such the appellant were offered enough opportunity to present their case. On the other hand, the fact of clandestine clearance was not supported by cogent and corroborative evidences, the demand could not be sustained merely because confessional statements had been given to the investigators. All the other relevant factors should also be considered to raise the duty demand. When the statements were retracted, it was imperative on the department to have brought corroborative evidences to substantiate the allegations of clandestine clearances by the appellant. The analysis of case laws of Gujarat High Court in the case of CCE vs Omkar textile Mills Pvt. Ltd. [2010(259) ELT 687 (Guj.)] and of Bombay High Court in the case of Asst. Collector of Customs (Pre.) Bombay vs Ahmed Abdulkarim [2009(247) ELT 97(Bom.)] made it ample clear that the allegations should be proved with the help of cogent and corroborative evidences, which became very essential when the factum and authenticity of records maintained was not disputed & demand had been confirmed only on the basis of confessional statement that had been retracted.
Third point of contention was on the issue of appellant’s entitlement for availing the benefit of notification No. 3/2001-CE dated 01.03.2001, that the appellant were processing cotton fabrics without the aid of power had not been substantiated by them, as such it was not tenable.
The fourth issue regarding the demand being hit by limitation, it was found that after completion of investigations and issuance of SCN against main accused- M/s Rohit Syn. Fab. in October 2003, the appellant was issued SCN on the same grounds in July 2005 i.e. after more than one & half year. In the earlier SCN dated 23.10.2003 also appellant was one of the parties. The SCN issued in the impugned order was not sustainable in view of the decisions in following cases:
·                     Gammon India Ltd. Vs CCE Goa [2002(146) ELT 173 (Tri. Mumbai)] this judgement was affirmed by Hon’ble Supreme Court in CCE Goa Vs Gammon India Ltd. [2002(146)ELT A313(SC)]
·                           CCE, Indore Vs Prashant Electrode [2006(196) ELT 297 (Tri.- Del)]
·                           Neminath Afbrics Vs CCE, Surat-I [2009(234) ELT 525 (Tri.- Ahmd.)]
·                           Prism Mills Ltd. Vs CCE, Vapi [2009(233)ELT 389 (Tri.-Ahmd.)]
 
In view of the above, it was found that the impugned order had been passed in violation of Principles of natural Justice without giving effective opportunity to appellant of being heard and such was not tenable. Also the demand of duty was hit by time bar.
 

Decision:-Appeal was allowed.

Conclusion:-The gist of the case is that communication of show cause notice and providing sufficient opportunity of hearing is necessary before adjudicating the show cause notice. Before passing any judgement, principles of natural justice must be kept in mind and the assessee must be given a reasonable opportunity to put his case. Moreover, after adjudicating the show cause notice, it is the duty of the adjudicating authority to serve order in original to the assessee. Merely pasting order in original on the main gate of appellant’s closed factory gate is not proper method when the fact that the factory has been closed is known to the department. Not only this, when a statement has been retracted within reasonable period of time, the onus to prove that the statement was valid lies on the department. Hence, a retracted statement cannot be the sole basis of confirmation of demand and imposition of penalty and adjudication of a SCN. The charge of clandestine clearance is very grave and is liable to be discharged by producing sufficient and corroborative evidences. Additionally, it is to be noted that the show cause notice must be issued within reasonable time limit after completion of investigations. After the expiry of the reasonable time, the SCN shall be treated as time barred and it shall have no validity whatsoever.
**************