IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR ------------------------------------------------------ (1) CENTRAL EXCISE APPEAL No. 16 of 2005 ROCHI RAM & SONS V/S UNION OF INDIA (2) CENTRAL EXCISE APPEAL No. 17 of 2005 INDIA WATCH PARTS MANUFACTURERS V/S UNION OF INDIA (3) CENTRAL EXCISE APPEAL No. 18 of 2005 ROCHEES WATCHES LIMITED V/S UNION OF INDIA Mr.LR MEHTA, for the appellant / petitioner(s). Mr.VK MATHUR ) Mr.RISHABH SANCHETI) for the respondents. Date of Order : 17.3.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI DEO NARAYAN THANVI,J. ORDER ----- These three appeals arise out of the common judgment of the learned Customs, Excise & Service Tax Appellate Tribunal, dated 6.4.2004, deciding Excise Appeals No.2666, 2667, 2668 and 2669. The Appeal No.16/2005 seeks to challenge the order, passed in Excise Appeal No.2667, while Appeal No.17/2005 seeks to challenge the order, passed in Excise Appeal No.2669, and Appeal No.18/2005 seeks to challenge the order, passed in Excise Appeal No.2666. These three appeals are by three different appellants, but are closely interrelated, and are, therefore, being decided by this common order. Necessary facts are, that the officers of the Directorate General of Central Excise Intelligence searched the premises of the three appellants on 3.5.2001, under the belief, that they were evading Central Excise Duty, by clandestinely removing the excisable goods, without payment of duty, and were misusing the modvat credit scheme, by diverting inputs, namely mechanical watch movements, on which credit was being availed. The relevant records were resumed under the respective Panchnamas, prepared at the premises, on the said date for further investigation. The stock verification of excisable goods was also conducted at the various premises, which is said to have led to detection of variation in stock, as indicated in the show cause notice. Thereafter, reply to show cause notices were filed by different persons, and certain evidence was also recorded, and ultimately the learned Commissioner passed the order Annex.1, dated 10.3.2004, confirming various demands, and levying various penalties on different appellants. We need not quote the operative 2 part of the order, as even the operative part runs into three long closely typed pages. The appeals were filed against the order, and the learned Tribunal passed the impugned order. The broad controversy was about procuring mechanical watch movements, and not using them, and clandestine removal of watches, and some discrepancy about the number of watch cases, and watch movements etc. It appears that the matter was gone-into, on facts, by the learned Commissioner, but then, a look at the order of the learned Tribunal shows an entirely sorry state of affairs, inasmuch as while deciding Appeal No.2666, the learned Tribunal found that 255970 mechanical watch movements were imported, on which modvat credit of Rs.24,35,647/- was availed, and these movements were imported by them for manufacture of quartz watches, and the learned Tribunal proceeded by relying upon the statement of Ishar Das, that such movements could not be used in the manufacture of quartz watches. The learned Tribunal also negatived the contention, that those were not mechanical watch movements, but were quartz watch movements, and on that basis, it was found, that the modvat credit was illegally availed, and the demand thereof was 3 confirmed. Then, the demand raised in the sum of Rs.36,87,053/-, and Rs.61,410/- on the ground of shortage of 96017 pieces of watch cases, and 7548 pieces of quartz movements, was rescinded by the learned Tribunal, on account of absence of any tangible evidence to prove the clandestine clearance of the same by the company in the market to various buyers. Then, the demand of Rs.69,79,797/- raised on account of clandestine removal of 247007 watch cases, was also set aside, on the ground, that mere unsatisfactory explanation regarding the entries in the documents by the authorized signatory of the company, did not warrant an inference, that these goods were manufactured and removed clandestinely, in absence of any tangible evidence to prove the correctness of these entries, and actual removal of goods to various buyers by the company in the market. Similarly, the demand of Rs.36,587/- and Rs.26,066/- on the basis of note pads, and loose papers, recovered from two dealers of the watches, one from Jabalpur and other from Gwalior, was also set aside, on the ground, that it could not be legally confirmed, as none of the dealers had disclosed the names of the employees, who sold these watches against cash payments. Then, the Appeal No.2667 was taken up, and the Tribunal straightaway proceeded to find, that a duty 4 of Rs.5,12,343/- and Rs.6,79,563/- had been confirmed, for having illegally availed modvat credit on the mechanical watch movements, which were not physically received by them, and duty of Rs.6,75,109/-, which was confirmed on account of clandestine removal of wrist watches without payment of duty, was set aside, for want of sufficient proof of removal of watches by the firm, as entered in the slips, without corroboration. Then, deciding the Appeal No.2668, the demand of various amounts, confirmed by the Commissioner, has been set aside, on the ground of absence of tangible evidence to prove the removal of the goods as such, after taking the credit by the Firm. It was found, that mere non-manufacturing of mechanical watches, during the period in dispute, by the Firm, did not lead to an irresistible conclusion, that the watch movements were disposed of as such, especially when the Firm had offered explanation, that the movements were rendered waste. Then, deciding Appeal No.2669, the demand of Rs.15,49,762/- was confirmed, on account of modvat credit having been wrongly availed on mechanical and quartz watch movements, which were later on removed in a clandestine manner as such. Again it was found, that the mechanical watch movements could not be utilized in the manufacture of digital electronic watches, as for that, digital modules were required. 5 When the matter came up for hearing, vide order dated 14.2.2008, we had sent for the record, which has been received. The record is voluminous, and we find, that since the learned Tribunal was final court of fact, it was required to go through the entire record, with the assistance of the representatives of the either side, and even by itself, to arrive at the conclusions of facts, while hearing the appeals. Arguing Appeal No.16 of 2005, learned counsel for the appellant pointed out, that a modvat credit of Rs.10,94,320/- only had been availed, as against which the demand of Rs.24,36,570/- has been confirmed. Faced with this, learned counsel for the respondents showed us the statement, annexed with the show cause notice, but then, that also showed the availing of modvat credit of Rs.13 lacs & odd, and then the figure of Rs.24 lacs & odd was sought to be justified on the ground of it being inclusive of the countervailing duty, which was not paid. While from the calculations, made on the paper, we find, that the figure on which the demand has been confirmed, represents the amount of total excise duty of 16%. It is required to comprehend, that a demand has been confirmed only on account of illegally availed 6 modvat credit, and not inclusive of any other amount. Then, a combined reading of portions of the judgment, whereunder demand has been confirmed, and demand has been set aside, does give am impression to us, that the things are lying in utter confusion, inasmuch as either the goods have been disposed of, or they have not been disposed of. To understand the ground, of want of user of the imported movements, the goods must be available with the manufacturer, or should have been cleared after the payment of requisite excise duty, and if the goods are found to have been disposed-of, the basic raw material, being the basic watch movements, whether mechanical or quartz, were also required to be traced, as to under what documents, they have been procured, and whether modvat credit has been availed by respective appellants or not. It does not stand to reason, that the manufacturer would not use the movements obtained after availing modvat credit, and would manufacture watches by using some other movements, which he obviously must have procured by import, as they are not shown to be indigenously manufactured, and would not claim modvat credit on them. Likewise, if mechanical movements are not capable of any use, or are believed to have not been used, then either the mechanical movement should have been found in the stock, or they must be established to have been 7 clandestinely disposed of, which fact of clandestine disposal must be found to have been proved, on the parameters considered by the learned Tribunal, on which the other clandestine removal has been adjudicated. We are informed that against the portions of the judgments, wherein demand has been dropped or set aside, the department has filed appeals, which are said to be pending at Jaipur Bench, and against the portions of the judgments, wherein the demands have been confirmed, these appeals have been filed. In our view, the above recapitulation is more than enough to show, that the matters have been decided by the learned Tribunal in absolute hotchpotch manner, without application of mind, and without examining the entire record, from the appropriate standpoint, to arrive at an ultimately reconcilable conclusion, of the whole scenario. In such circumstances, instead of ourselves undertaking the long drawn exercise of examining the entire record from the standpoint of every import, manufacture, disposal, stock of every article, and production, and then, to arrive at a conclusion, one way or the other, about the sustainability or confirmation of demand, or dropping of demand, we better stand advised, to set aside the entire judgment 8 whole hog, with respect to all the four appeals, and remit the whole matter to the learned Tribunal back, with a direction, to give reasonable opportunity of hearing, rather patient hearing, to both the sides, to examine the record threadbare, from all standpoints, with the assistance of the representatives of both the sides, and by itself also, independently, objectively and dispassionately, of course without allowing either of the parties to adduce any fresh evidence, or material, and then to decide the matter afresh, as to whether any of the demands, maintained or deleted, are required to be maintained or deleted. Accordingly, all these appeals are allowed. The impugned judgment, deciding all the four appeals, is set aside whole hog, and the matters are remanded back to the learned Tribunal, for deciding the appeals afresh, bearing in mind the observations made above, obviously, the natural consequence of setting aside will flow. Since the matter is already very old, it is expected, that the Tribunal will decide the appeals expeditiously, but shall not adopt any slipshod method, under the garb of expeditious disposal. ( DEO NARAYAN THANVI ),J. ( N P GUPTA ),J. RANKAWAT JK, PS 9