[Order per : Jeet Ram Kait, Member (T) (Oral)]. - These three appeals arise from three separate orders-in-original as noted above. The issue arising for determination in the appeals filed by M/s. Woodmen Industries and M/s. North Bihar Plywood Industries relates to value adopted in respect of different grades of plywood falling under Chapter 44 of the CETA, 1985, while in the case of the other appellants, viz. M/s. Kitply Industries Ltd., the question involved is legality of the penalty imposed on them under Rule 26 of the Central Excise Rules, 2002 (erstwhile Rule 209A). Since facts and law involved in all these appeals are common, they were heard together and orders were reserved. All these appeals are therefore taken up together for disposal by this common order.

2. Appeal No. E/508/02 is filed by M/s. Woodmen Industries against the order-in-original No. 48-MP/Commr/2002, dated 30-3-2002 whereby the Commissioner has confirmed a duty demand of Rs. 23,97,676.00 on the appellants under the proviso to Section 11A(1) of the C.E. Act, 1944, the Act for short besides levying a redemption fine of Rs. 10,00,000/-. He has also imposed mandatory penalty equal to the amount of duty demanded, in terms of Section 11AC of the Act and also ordered for charging interest under the provisions of Section 11AB of the Act.

2.1 The brief facts of the case are that the appellants (M/s. WI for short) are a SSI Unit engaged in the manufacture of Plywood and Blackboard on their own and under the brand name of ‘Kitply Pearl’ and ‘Kitply Lohit’ etc. in terms of a contract with M/s. Kitply Industries Ltd. (M/s. KPL, for short) and cleared the same on payment of duty to M/s. KPL. M/s. WI have allegedly contravened the various provisions of the C.E. Rules, 1944 inasmuch as they have misdeclared the assessable value of their product meant for the buyer company i.e. M/s. KPL with an intent to evade payment of C.E. duty. During search of the premises of M/s. WI, by DGAE officers on 24-3-98 certain incriminating documents were recovered and the same were seized which revealed that the M/s. WI had made an agreement with the Buyer company to manufacture plywood (unfinished and partly finished) on behalf of the buyer company as per the specification supplied by the latter viz. M/s. KPL and M/s. KPL agreed to sell the products at the price agreed between them. It also transpired from the records that the goods manufactured were marked as per the requirement of the Buyer company and the goods were regularly inspected by the buyer Company. The liability and responsibility to procure all the required raw materials to manufacture the goods as per the required specifications rested exclusively with the manufacturer viz. M/s. WI. The records allegedly revealed that Kitply brand goods were sold at a price much higher than what was reflected in the invoice. Statement was recorded from Shri Shiv Ratan Agarwal, Chartered Accountant from whose diary transaction pertaining to the appellants were found and in the statement recorded on 12-1-99 he had accepted that entries in the seized record relating to Sl. Nos. 3/SMI/Cal/98 and W/WMI/Cal/98 were written by him, but he could not explain the various entries. Statement was also recorded from Sri Arvind Kumar Sultania, the constituted Attorney of the appellants on 16-2-99. Proceedings were thereafter initiated against the appellants by issue of show cause notice bearing No. DGAE, F. No. 73/Cal/CE98/690, dated 7-7-2000 alleging under-valuation with regard to the goods supplied by the M/s. WI to M/s. KPL which culminated in the order impugned as noted above. The period of dispute in this appeal is from 1-3-97 to 24-9-97.

3. Appeal No. E/514/2002 is filed by appellants M/s. North Bihar Plywood Industries (M/s. NBP for short) against the Order-in-Original No. 45-MP/Commr/2002, dated 27-3-2002 by which the Commissioner has confirmed a duty demand of Rs. 21,60,075/- on the appellants under the proviso to Section 11A(1) of the Act and also imposed mandatory penalty of equal amount under Section 11AC of the Act. He has also ordered for payment of interest under Section 11AB of the Act. There is also penalty of Rs 10,00,000/- on the appellants under the provisions of Rule 173Q(2) of the Rules. The allegations against the appellants and the circumstances leading to the issue of show cause notice to them are identical to the case of the other appellants viz. M/s. WI as in this case also the seized records bearing Nos. 3/SMI/Cal/98 and W/WMI/Cal/98 were relied upon.

4. Appeal No. E/497/2002 is filed by appellants M/s. Kitply Industries Ltd. against the order-in-original No. 46/MP/Commr/2002, dated 28-3-2003 by which the Commissioner has imposed a penalty of Rs. 25,00,000/- on the appellants in terms of Rule 26 (erstwhile Rule 209A) of the C.E. Rules, 2002. The allegation against the appellants was that they paid the cash amounts to M/s. WI and M/s. NBP over and above the Bill amounts paid by Cheque for supply of different varieties of plywood and therefore they had knowledge that both the other appellants have suppressed the value of the goods supplied to them and they have therefore connived with the other appellants. After considering the reply furnished by the appellants, the order impugned imposing penalty as noted was passed against which the appellants have come in appeal.

5. Shri B.N. Chattopadhyay, learned Consultant appeared for the appellants M/s. WI and M/s. NBP. The learned Consultant reiterated the grounds of appeal and submitted that the appellants have entered into an agreement with M/s. KPL whereby M/s. WI manufactured plywoods of different types according to the specifications given by M/s. KPL (the buyer) and the purchase orders based on a negotiated price were placed on the appellants by M/s. KPL. He further submitted that the main allegations against the appellants are that some rough scribbling in a note books was recovered from a Chartered Accountant viz. Shri S.R. Agarwal from his premises and entries in the said note book allegedly indicated that the appellants realised more amounts than what were contracted in the agreement and on that basis differential duty has been demanded. He submitted that differential duty cannot be demanded based on mere scribbling in the note book of some one else as the appellants are not responsible for the scribbling done in the note book maintained by the Chartered Accountant who is not a functionary of the appellants. He has also submitted that the Commissioner has also relied on some statement of Shri Shambhu Nath Jajodia, Director of M/s. KPL whose statement did not figure in the show cause notice. Therefore, the order impugned traversed beyond the scope of the show cause notice and on that ground itself the same is required to be set aside. He submitted that the demand is made without any basis. Further the appellants wanted to cross-examine said Chartered Accountant and their request was not granted and parts of the statement of the Chartered Accountant which is found to have been favourable to the Department has been relied upon. In the circumstances, the statement of Shri S.R. Agarwal, Chartered Accountant cannot be relied upon. Further, no enquiry has been conducted with the buyer viz. M/s. KPL, to support the case of the department. He has made similar arguments in respect of the appeal filed by M/s. NBPL also. He in the background of the case, prayed for setting aside the orders-in-original and allowing the appeals.

6. Shri K.K. Banerjee, learned Counsel appearing for the appellants M/s. KPL submitted that the allegation against the appellants are that they have paid excess amount to the M/s. WI and M/s. NBPI than what was covered by the bill and the appellants had knowledge that the other two concerns have suppressed the value of the plywood supplied to them. He submitted that there was no evidence whatsoever to support the allegation of the department against the appellants. Further, under the impugned order, the appellant firm has been imposed a penalty of Rs. 25,00,000/- under the provisions of Rule 26 of the C.E. Rules (erstwhile Rule 209A). He submitted that no penalty under this rule can be imposed on a firm and penalty under this rule can be imposed only on a person. In support of his plea he cited the order of the Tribunal in the case of Aditya Steel Industries v. CCE, Hyderabad reported in wherein it was held that penalty under Rule 209A cannot be imposed on partnership firm.

7. We have considered the submissions made by the learned Consultant for the appellants and the learned JDR for the Revenue. First we take up the appeals of M/s. WI and M/s. NBPI. In respect of both these appellants common arguments have been advanced by the learned Consultant. Appellants M/s. WI are a partnership firm. The constituted attorney of the said partnership firm is one Arvind Kumar Sultania.

8. M/s. NBPI are a proprietorship firm and the proprietor is Smt. Puspa Sultania, wife of Shri Santosh Sultania who is another brother of Arvind Sultania and Suresh Sultania. The partners of the Partnership firm, the proprietary concern, the constituted attorney and the Shri S.R. Agarwal who runs the Chartered Accountant firm are all close relations. On verification of the seized records from the Registered Office of M/s. WI, Calcutta, on 24-3-98, it was found by the officers from serial Page No. 6 of the seized record bearing Sl. No. 3/WMI/Cal/98 vis-a-vis bill No. 31, dated 17-8-97 and No. 4/WMI/Cal/98, it was alleged to have revealed that some extra realization of money from the buyer company has been made by the appellants. We observe that the case against the appellants on allegation of under-valuation of the various sizes plywoods has been built up on the basis of recovery of the above seized records and the entry found in the note book of the Chartered Accountant firm of Shri Shiv Ratan Agarwal. We observe that the department has not come out with any other material/corroborative evidence to support the scribbling made in the personal note book seized from the Chartered Accountant. In the statement recorded from the said Chartered Accountant on 12-1-99, as noted in para 3 (viii) of the order-in-original pertaining to M/s. WI, the said Chartered Accountant on being confronted with the various entries have accepted the entries as having been made by him, but at the same time he had expressed his inability to explain the entries found therein. We also note that the appellants in reply to the show cause notice clearly stated that their constituted attorney looked after their business and he was also summoned by the officers and he had also given statement under Section 14 of the C.E. Act, wherein he had clearly stated that he had no knowledge about the existence of personal diary maintained by the Chartered Accountant. When confronted by the investigating officers, the C.A. had mentioned that the entries had been made based on message received from the appellants, but he could not explain the entries, while at the same time, the constituted attorney had stated that they have not passed on any such message. In the face of this contradiction, it is not understandable as to why the department has failed to make further investigation, particularly when the appellants wanted to cross-examine Shiv Ratan Agarwal, C.A. When the department wanted to rely on a piece of evidence and that too not well explained by the giver of the statement and which statement has been relied upon by the department against the appellants, it does not stand to reason why the request of the party for cross-examination has not been afforded. The request of the party for cross-examination of the said Chartered Accountant has been noted by the Adjudicating authority in para 12 of the order impugned in the case of M/s. WI. He has rejected their request by merely stating in paras 17 of the said impugned order that it was a ridiculous attempt to get rid of the tentacles of law by putting on the pretence of estrangements with him. We have also gone through the allegations made against the buyer of the goods viz. M/s. KPL and we find that no investigation has been done as to the details of extra amount alleged to have been paid to M/s. KPL on account of under-valuation, except in respect of a sum of Rs. 2,55,510/- which also has been properly explained to the effect that is the amount represented bill No. 38, dated 31-8-97 and this amount was in fact originally paid by an account payee cheque, but as the bank was closed and the appellants wanted the amount urgently, the appellants wanted the amount to be paid in cash and the cash which was kept in the briefcase of Gorachand an employee of the buyer company which was lost. The fact of making complaint before the local Police Station in regard to the loss of this amount is also borne out by records. Simply because the police complaint has been signed by the Chartered Accountant who happens to be brother of the partners of the firm, cannot be a reason to reject the explanation offered by the appellants more particularly when he has clearly stated in his statement stated that he is not at all concerned with the business of the appellants and his role was only to guide the staff in the absence of his family members. He has clearly admitted that both the partnership firm and the proprietorship firm belong to his family members. In the above background, we are not able to countenance the finding of the Commissioner and the reasons for rejection of the request of the party for cross-examination of S.R. Agarwal, CA, when the whole case is built up on the basis of the scribbling found in the personal diary maintained by the C.A. It is well settled principles of natural justice that denial of opportunity to cross-examine a person whose statement has been relied upon against other person who has been charged, is against the principles of natural justice. In the present case, in spite of the fact that the appellants have specifically requested for cross-examination of the Chartered Accountant from whose diary some entries have been found which according to the department related to the transaction of the appellants with buyer of plywoods, their request was not granted on flimsy grounds. Therefore, we are of the considered opinion that there was gross violation of the principles of natural justice. The Tribunal in the case of Sharma Chemicals v. CCE, reported in has held that when entire case of clandestine removal was depending on a person from whom note book of entries of production and removal of products have been recovered, denial of the opportunity to cross-examine the person by whom the entries were/have been made, violates the principles of natural justice. The Tribunal in the case of Arsh Castings Pvt. Ltd. v. CCE, Chandigarh reported in (Tri.) = 1995 (10) RLT 638 has held that failure of a witness to appear for cross-examination will not be a ground to penalise the appellants in law when the appellant is entitled to an opportunity of cross-examination of third party on whose statements reliance is placed. In the instant case, it is also not the case of the department that the buyer company has made any statement that they have made any extra payment. Further, coming to the validity of the entries found in the private diary, we note that there are catenae of judgments of the Tribunal, the Hon’ble High Courts and the Hon’ble Apex Court to the effect that entries made in the private note book cannot be considered as conclusive evidence unless the entries are fully corroborated. One such judgment of the Tribunal is in the case of CCE, Chennai v. Dhanavilas (Madras) Snuff Co. reported in (Tri. - Chennai) = 2003 (54) RLT 336. It is worth noting that in the instant case, the private note book have been recovered from a person who is not even a functionary of the appellants. We also find from the records, that the appellants have filed regularly RT-12 returns which have been assessed and no discrepancy were pointed out. Such being the case, levelling allegations against the assessee at a later time at the convenience of the Department is not understandable and cannot be sustained. In view of our above discussion and finding, we find no material to sustain the orders impugned against these two appellants viz. M/s. Woodmen Industries and M/s. North Bihar Plywood Industries. We would have set aside the orders impugned and remanded the matter for de novo consideration, but we find that at this distance of time, such course of action would not serve any useful purpose. We, therefore, set aside the impugned orders and allow these appeals with consequential relief if any.

9. Coming to the appeal of the other appellants viz. the buyer of the goods (M/s. Kitply Industries Ltd.) when the allegations against the main appellants have not been brought home, the penalty imposed on this appellant for abetment is not sustainable. Further, penalty on this appellant has been imposed under Rule 26 of the C.E. Rules (erstwhile Rule 209A). The said rule permits imposition of penalty on a person and not on the firm as held in the case of Aditya Steel Industries v. CCE, Hyderabad reported in . There was no confiscation of the goods either. On this score also the penalty on this appellant cannot sustain. We also observe that the Commissioner has referred to the provisions of Income-tax Act regarding issue of cheque for payment in excess of Rs. 25,000/-. If there was any violations of the provisions of the I.T. Act, it was for the Income-tax authorities to have taken objection in that regard. The Central Excise Law does not permit the Commissioner of Central Excise to assume power under the Income-tax Act. There was therefore, no need for the Commissioner to have recorded such a finding when he is discharging the functions of Commissioner of Central Excise. With this observation, we set aside the impugned order and allow the appeal with consequential relief if any.

10. In the result, all the three appeals succeed and are allowed as noted above.