1992 (7) TMI 294 - AT - Central Excise

Summary

Issues:
- Duty evasion and confiscation of fabrics
- Burden of proof on the Department
- Compliance with Rule 174A and notification No. 305/77
- Role of processing houses in duty payment

Analysis:

The case involved appeals against an order by the Addl. Collector of Central Excise & Customs, Vadodara, regarding duty evasion and confiscation of fabrics. The appellants purchased grey fabrics and had them processed by various processing houses. During a search at the appellants' shop premises, discrepancies in stock and duty payment documents were noted, leading to a duty demand and confiscation order. Penalties were imposed on the appellants. The main contention raised by the appellants was that the burden to prove duty evasion rested on the Department, and no investigations were conducted at the processing houses to establish the alleged evasion. The appellants argued that they were traders and not required to maintain all duty payment documents. They also cited a Supreme Court decision holding processing houses responsible for duty payment.

The Department, represented by the ld. SDR, argued that the appellants, by getting fabrics processed by independent processors, fell under Rule 174A and notification No. 305/77, making them manufacturers with legal obligations. The Department contended that since the appellants failed to provide evidence of duty payment for their sales, duty could be demanded from them. The SDR emphasized that as manufacturers, the appellants were responsible for ensuring duty payment on goods processed on their behalf.

After considering the arguments, the Judge found that no statements were recorded from the processing houses or verification of their stock/documents was conducted. The absence of duty payment documents raised suspicion of evasion but did not constitute sufficient evidence for adjudication. The Judge noted that duty can only be demanded from manufacturers, as established in a Supreme Court decision. Since no investigations were conducted to establish duty evasion and the conditions of the notification were not shown to be violated, the Judge allowed all three appeals, setting aside the order and providing consequential relief to the appellants.