TMI Blog1999 (1) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... ined penalty of Rs. 1.00 lac has also been imposed on the appellants under Rules 9(2), 52A and 173Q of the Central Excise Rules, 1944. The Collector has ordered confiscation of 16,633 Kgs of 31s SF DHRC yarn valued at Rs. 6,32,054.00 and granted release of the goods on provisional basis on payment of redemption fine of Rs. 1,25,000 lacs. 2. The brief facts of the case are that the appellants are manaufacturers of yarn including staple fibre yarn. Some of the yarn manufactured by them are cleared in hank form and the hank yarn in plain reel is exempt from payment of duty while hank yarn in cross reel is liable to payment of duty. The Officers of the HQ Preventive, Coimbatore visited the mills by surprise on 24-4-1987. In a stock challenge conducted by them they found staple fibre yarn weighing 16,633 kgs in double cross reel form (DHCR). However, the yarn was entered in the statutory book as double yank plain reel (DHPR) yarn free of duty. Thereafter, the officers seized stock of 31s SF yarn weighing 16,633 Kgs and the same was released provisionally to the assessees on execution of bond. Although on the spot clarification, the management claimed that their recording of DHCR yarn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct from the mills, but purchased the same from yarn dealers. In the cross-examination of the yarn dealers, it has come out that it was their practice to buy the goods with reference to count only and not with reference to the form. (4) It was claimed that the letters obtained from various Mills to the effect that there was no demand for 31s SF DHPR yarn had no evidentiary value. (5) That the wrong recording of the form of the seized yarn was a clerical mistake and was not indicative of any mala fide on the part of M/s. Ambal Mills Pvt. Ltd. Therefore, these goods cannot be subject to confiscation, under Rule 173Q since there was no contravention of the Central Excise Rules. Summing up it was claimed that the wrong recording was a clerical error and the proceedings initiated under show cause notice should be dropped. 4. The Collector in the impugned order held that the appellants had recorded 16,633 kgs of 31s SF yarn in DHCR form is dutiable and the yarn in DHPR form is exempted from payment of duty. This circumstance itself is sufficient for ordering confiscation as the same was done with a view to clear the exempted category of DHPR and he therefore held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HCR was recorded as DHPR in the records of the Mill. Therefore, to substantiate this admission, material corroborative evidence will have to be looked for. The evidence available is in the form of statement of Shri K. Nanjappan, Production Manager, which was also recorded on the same day i.e. 24-4-1987. In his statement he has corroborated the admission made by C.D. Menon. The Collector has noted that this statement has not been retracted by Shri K. Nanjappan although an attempt for retraction has been made on his behalf by CD Menon. He noted that in fact Shri K. Nanjappan has even specified the date i.e. 5-3-1987 from which this misrepresentation was adopted by them. The Collector has noted that one more material corroboration is that not only the mis-representation existed in RG 1 Register, but also it was carried to the Bailing Register and the Reeling Register. The first Register is the statutory Register, but the other two are in the nature of private registers of the assessee. He has noted that since mis-representation has been done systematically in these registers, the charge of clearance of yarn under the wrong nomenclature during the period is proved and hence the demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh sales of yarn were made by the mills direct to the dealers, on record, the yarn was sold through some distributors who in turn had appointed sub-brokers. He has noted that the evidence of sub-brokers is instrumental in showing that the contradictions between the mill and the buyers were made without their knowledge and perspective. He has also noted another statement of C.D. Menon dated 14-8-1987 in which he was asked to comment on certain changes made on the face of certain contracts. He has noted that it is significant to see that these contracts are dated prior to 5-8-1985 since which time admittedly the Company had made it a policy to manufacture only DHCR yarn. Therefore, the Collector has held that in these contracts, the wording DHCR has changed into DHPR . He has noted that the explanation for this change given by C.D. Menon in his statement dated 4-8-1987 is clear and very satisfactory. Collector has noted that he has attempted to evade this issue by saying that his change was not material change inasmuch as the price for both the DHPR and DHCR yarn was the same. The Collector has also noted the presentation of evidence in the form of opinion of several mills manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officials of SITRA and SIMA at Coimbatore and heavily relied upon such evidence. He pointed out that those relevant material which was never referred to the appellants which is violative of the principles of natural justice. Hence on this ground along the impugned order requires to be set aside. He pointed out that C.D. Menon had retracted his statement and his statement alone cannot be relied upon to hold that the appellants had not manufactured plain reel and supplied the same showing in the evidence as plain reel. He pointed out that there was enormous evidence which were in the form of letters produced by the appellants to show that they had been supplying both types of hanks. He pointed out that these letters had been produced after the adjudication order along with appeal memo and being in the nature of additional documents should be accepted and the matter could be remanded for de novo consideration. He also referred to the certificate issued by the Director, Handloom vide his letter dated 17-9-1987 to show that in Erode during the relevant period of 1987 there were 52,527 number of Handlooms and 2394 Powerlooms and likewise in 1995 there were 48,933 and 39212 Handlooms and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector has not dealt with the cross-examination portion which materially alters the allegation in the show cause notice. He submitted that the Collector has proceeded on the basis of certain admissions made at the initial stage which was contradictory to the records and documents. Therefore, he sought for remand of the matter. 9. The learned DR defended the order vehemently and forcefully. He pointed out that the evidence produced are additional evidence and cannot be accepted at this stage. He pointed out that extensive finding has been arrived at by the Collector which was corroborative in nature. He pointed out to the modus operandi adopted by the assessees to clear cross reel hanks showing it in the documents as plain reel hanks only to evade payment of duty as there was stiff competition in the area. The Collector has also brought out extensively the manner in which it was done and it was supported by corroborative evidence. He has also referred to the statement of Elengo who has not retracted the statement and it is supportive of the allegation. He pointed out to the sale made to powerloom industry and it had been established that only cross reel hanks was used in the powerl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal memo and also produced along with the paper book in the form of letters of Director of Textile Industries, letters of Southern India Mills Association and the technical note of the Expert is required to be allowed. We order accordingly. 11. Now we have to proceed to determine the case in the light of these documents and also to see as to whether the allegations made in the show cause notice is sustainable. As we have noticed that the Collector initially has prejudged the issue by relying upon heavily on his personal study of the matter and discussions with officials of SITRA and SIMA which has resulted in the violation of principles of natural justice. Therefore, findings and the conclusion arrived at get vitiated and such findings are required to be set aside and the matter remanded for de novo consideration. 12. It is also seen that there is no clear appreciation of the enormous documentary evidence produced by the appellants to show that there was clearances of plain reel hanks. They have also produced evidence of the dealers and mills who have admitted about receipt of both types of yarn. These evidence is counter to the evidence produced after receipt of show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X
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