[Order per : B.S.V. Murthy, Member (T)]. - M/s. Jai Ambe Textiles were engaged in the processing of textile fabrics with the aid of power operated machinery including Hot Air Stenter. The Government of India introduced levy of Central Excise duty on the basis of Annual Production Capacity and appellants were covered by the scheme. Consequently as required under the provisions of Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules 1998, (for short Textile APCD Rules) appellants filed the declaration dated 23-12-1998 and based on the declaration, Annual Production Capacity was fixed for the period from 16-12-1998 to 31-3-1999 and communicated to the appellants on 21-4-1999.

2. The appellants filed a declaration dated 1-4-1999 for fixation of Annual Production Capacity (for short APC) for the financial year 1999-2000. Appellants also filed a revised declaration on 4-5-1999 declaring three cylinders of size of 3 Mtrs in length and 3.54 Mtrs in width and one drying cylinder of 1.36 Meter length. Jurisdictional Deputy Commissioner reported that the Chartered Engineer appointed by the appellants had certified the length of the drying cylinder as 1.75 Mtrs instead of 1.36 Mtrs as declared by the appellants in their revised declaration dated 4-5-99. Based on verifications reports, the Commissioner provisionally fixed the production capacity at Rs. 536.74 lakhs and annual duty liability at Rs. 68.695 lakhs for the year 1999-2000 which was communicated to the appellants on 1-11-1999. Consequent to budget changes, from 1-3-2000 APC for the month of March was modified and communicated to the appellants on 19-5-2000 based on the declaration filed by them on 1-3-2000. The appellants represented against the provisional fixation on 1-11-1999 vide their letter dated 13-1-2000 and after a personal visit and personal hearing, the Commissioner fixed the APC finally for the year 1999-2000 vide his Order No. 9/2000 dated 15-2-2001. On appeal filed by the appellants, the matter was remanded to the Commissioner to decide the issue in the light of the judgment of the Hon’ble Supreme Court by the Tribunal vide Order dated 26-6-2001. Accordingly, the Commissioner in his Order in Original No.(Section 3A)/2003 dated 23-12-2003 re-fixed the APC. Benefit of exclusion of galleries as per the judgment of the Supreme Court in Sangam Processors case (T) was extended but the length of the drying cylinder was added on the ground that drying cylinder was aiding to the process of heat setting of the fabrics. The appeal filed by the appellants resulted in remand of the matter vide Order dated 5-10-2005 of the Tribunal with a direction that the request made by the appellants for supply of documents should be complied with and appellants should be given sufficient time for submitting a proper reply.

3. Parallel proceedings were also started on the basis of a visit of the officers to the appellants unit on 30-4-1999 and the investigation conducted by them which resulted in issue of a show cause notice proposing to include the length of the drying cylinders for the purpose of fixation of APC for the period from 16-12-1998 to 30-4-1999 and confiscation of seized fabric during the visit and penalties etc.. The proposal in the form of show cause notice culminated in the Adjudication Order No. 8/2001 dated 20-7-2001 whereby the demand for duty with interest was confirmed, seized fabrics were confiscated, penalties were imposed and plant and machinery was also confiscated. An appeal filed against this Order, resulted in a remand order by the Tribunal on the ground that APC fixed by the Commissioner vide his impugned order dated 15-2-2001 had already been set aside and since the order dated 20-7-2001 relied upon the order dated 15-2-2001 for the purpose of APC, the Tribunal required the Commissioner to re-fix the APC on the basis of the decision of the Supreme Court in Sangam Processors case. Thus there were two orders of the Tribunal remanding the cases to the Commissioner for afresh adjudication. The first order of the Tribunal is A/1112/WZB/2005 C2/EB dated 5-10-2005 with reference to the Order in Original dated 23-12-2003 fixing APC for the period from April 1999 to March 2000. The second order of the Tribunal is A/900/02-NB(D) dated 30-7-2002 with reference to the order of the Commissioner dated 20-7-2001 which was the Adjudication Order with reference to show cause notice issued consequent to the visit of the officers to the unit on 30-4-1999 wherein the APC for the period from 16-12-1998 to April 1999 was re-fixed and seized fabrics were confiscated etc.. The present impugned order has been passed by taking up both the issues remanded by the Tribunal. In the impugned order the Commissioner has decided that the length of the drying range cylinders has to be taken for the purpose of APC from 16-12-1998 onwards up to 31-3-2000 and he has also confiscated the seized fabrics demanded differential duty consequent to re-fixed APC with interest as applicable, has imposed penalty of equal amount in respect of duty demand arising as a result of revised fixation of APC for 1998-1999 has confiscated plant and machinery and has imposed penalties.

4. M/s. Jai Ambe Textiles hereinafter referred to as the appellant have filed appeal against this order. In addition to the above an appeal filed by the Revenue against the order of Commissioner (Appeals) dated 12-9-2003 is also before us. In this case the Commissioner (Appeals) has set aside the order passed by the Adjudicating Authority demanding differential duty for April 2000 - May 2000 by including drying range cylinders. The Commissioner has observed in his order that in view of the order dated 26-6-2001 of the Tribunal, the decision regarding non inclusion of gallery would also apply to the drying range cylinders. The Revenue has filed appeal stating that the Hon’ble Tribunal had not come to the conclusion that the drying range cylinders and galleries are same and had directed for re-determination of the issue. Therefore the observations of Commissioner (Appeals) that duty amount short paid is on the gallery portion is not correct and actually it is on the drying range.

5. The points urged by the learned advocate, Shri Anand Nainawati, on behalf of the appellants and on the appeal memorandum are enumerated in brief hereunder and will be discussed in detail subsequently.

5.1 The order passed by the Commissioner revising the APC amounts to a review of his own order and as held by Tribunal in several decisions, especially in the cases of fixation of APC itself, the proper course to be adopted was to file an appeal and therefore on this ground itself the appeal filed by the appellants has to be allowed.

5.2 The Commissioner in his impugned order has relied upon the observations of the Commissioner and justification for inclusion of the drying range for the purpose of APC in the Orders in Original dated 15-2-2001 and 23-12-2003 and this shows total non application of mind on the part of the Commissioner and he could not have relied upon the grounds adopted in orders set aside by the Tribunal on 5-10-2005.

5.3 The Revenue has failed to observe principles of natural justice and the documents, photographs and video cassette requested for by the appellants have not been given to them thereby depriving their right to defend their case properly. Since the APC fixation has been done on the basis of evidence of video graph and photographs, in the absence of their availability to the appellants to defend their case, APC cannot be revised.

5.4 In the absence of supply of documents like RG-1 register, lot register, photographs and video graphs, requested by the appellants, the confiscation of seized fabrics and imposition of penalty for violation of Central Excise provisions relating to seized fabrics have to be set aside.

5.5 The learned counselor after arguing the points in detail submitted that appeal has to be allowed.

6. The learned D.R. relies on the rationale adopted by the Commissioner in his order for fixation of APC and confiscation of seized fabrics etc..

7. We have considered the submissions made by both the sides in detail and have pursued the records also in detail.

7.1 The first point the learned advocate vehemently argued was that the order of the Commissioner amounted to a review of his own order which he was not empowered to do and therefore the order itself is totally invalid. The argument of the learned advocate is that once APC was fixed on the basis of verification reports submitted by the officers of the department on filing a declaration on 23-12-1998, the APC stood fixed final thereafter. He submitted that the order of the Commissioner dated 21-4-1999 communicating the APC was final and if any modification was required, the department should have filed an appeal against this order. He relies on the following decisions in support of this contention.

(i)      Pooja Castings Pvt. Ltd. - (Tri.-Bang.)

(ii)  Sunny Textiles Ltd. - (Tri.-Bang.)

(iii) Nakaoda Steel Mills Pvt. Ltd. - (Tri.-Del.)

(iv) Arvind Refractories Pvt. Ltd. - (Tri.-Del.)

7.2 Before we consider this argument, the relevant provisions under Textile APCD Rules are reproduced for convenience.

“3. The annual capacity of production referred to in rule 2 shall be determined in the following manner, namely :-

(1) an independent processor shall declare-

(i)         the number of hot-air stenters installed in his factory;

(ii)        the name of the manufacturer of each of the hot-air stenter, its identification No. and the date of its purchase;

(iii)       the number and size (both the length and width in centimeters) of chambers in each of the hot-air stenters;

(iv)       the total value of processed fabrics referred to in rule 2, produced or manufactured in the preceding financial year;

(v)        the total quantity of processed fabrics referred to in rule 2, produced or manufactured in the preceding financial year;

(vi)       the total value of processed fabrics referred to in rule 2, cleared from the factory in the preceding financial year; and

(vii)      the total quantity of processed fabrics referred to in rule 2, cleared from the factory in the preceding financial year

to the Commissioner of Central Excise (hereinafter referred to as the Commissioner), with a copy to the Assistant Commissioner of Central Excise.

(2) on receipt of the declaration referred to in clause (1), the Commissioner shall take necessary action to verify its correctness and ascertain the correct value of each of the parameters given in such declaration. The Commissioner may, if he so desires, consult any technical authority for this purpose.

(3) the annual capacity of production of processed textile fabrics specified in rule 2 in respect of a factory of an independent processor shall be determined keeping in view the following factors, namely :-

(i)   the number of chambers (of a hot-air stenter), each of which having a rail length of upto 3.05 metre on each side, installed in such factory shall be construed as one chamber and any fraction exceeding such rail length of any such chamber shall be computed on a pro rata basis;

(ii)      the average value of the processed textile fabrics (per sq. m) referred to in rule 2 for such factory arrived at by dividing the total value of such processed fabrics cleared from the factory in the immediately preceding financial year by the total quantity of such processed fabrics, cleared during that financial year;

(iii)     for the textile fabrics produced by the new units or the closed units of such factory for which it is not possible to calculate average value under sub-clause (ii), the average value of such fabrics shall be as declared by the independent processor at the time of making the declaration, provided that the amount of duty payable on such fabrics shall be re-worked out at the end of a financial year on the basis of actual average value of the textile fabrics produced in the financial year in such factory’

(iv)    the average value of production per chamber per month as :-

(a)        in the case of fabrics of average value of upto and including Rs. 30 per square metre, Rs. 11.72 lakhs, and

(b)        in the case of fabrics of average value of exceeding Rs. 30 per square metre, Rs. 15.63 lakhs.

(4) the Commissioner of Central Excise shall, as soon as may be, after determining the annual capacity of production on the basis of the average value of processed textile fabrics and the number of chambers (of a hot-air stenter) of the factory of the independent processor, by an order, intimate the same as also the rate of duty applicable to the independent processor :

Provided that the Commissioner may determine the annual capacity of production on provisional basis pending verification of the declaration furnished by the independent processor and pass an order accordingly. Thereafter, the Commissioner may determine, the annual capacity, as soon as may be, and pass an order accordingly.”

7.3 A specific query was put to the learned advocate as to why the appellants had submitted a fresh declaration on 1-4-1999, if the APC fixed in respect of declaration given on 23-12-1998 is final. The learned advocate had replied that even though there is no requirement under the Rules, the appellants had filed it. However, a perusal of the relevant Rules above shows that the appellant was required to file a fresh declaration on 1-4-1999, according to Rule 3 of APCD Rules.

From the Rules reproduced above it may be seen that the Commissioner is required to take the total value, quantity of processed fabrics produced and cleared from the factory during a financial year which automatically means that the annual capacity has to be fixed every year and it has to be based on production and clearance of the previous year in addition to the norms relating to machinery. Therefore the argument advanced by the learned advocate that the APC fixed 21-4-1999 is permanent does not follow from the rules and appellants have correctly filed another declaration on 1-4-1999. Therefore the APC order dated 21-4-1999 passed by the Commissioner relates only to the year 1998-1999 and for the year 1999-2000, the Commissioner was required to fix APC afresh. For this purpose after the declaration was filed on 1-4-1999 and visit of the officers on 30-4-1999, appellants filed a revised declaration on 4-5-1999 and they also filed a Chartered Engineer’s certificate regarding drying range cylinder on 5-5-1999. These declarations, Chartered Engineer’s certificate, verification report submitted by the field officers and the Commissioner’s own personal visit form the basis for the order fixing APC for the year 1999-2000 passed by the Commissioner on 15-2-2001. This is not a revision of the order dated 21-4-1999 but a fresh order altogether. Therefore the arguments advanced by the learned advocate that Commissioner cannot review his own orders does not help him as far as APC determined for the year 1999-2000 is concerned.

7.4 The second submission made by the learned advocate regarding APC fixation is that Commissioner could not have relied upon the observations of the Commissioners in the orders in original passed on 15-2-2001 and 23-12-2003 since both of them have been set aside. Before we proceed to dispose the correctness of APC fixed, this contention has to be considered and disposed of. We do not find any substance in this argument. The order passed by the Commissioner on 15-2-2001 was set aside by the Tribunal vide order dated 26-6-2001 and the matter was remanded to the Commissioner directing him to re-examine the matter in the light of the decision of the Larger Bench of the Tribunal in Sangam Processors Bhilwara Ltd. v. C.C.E., Jaipur reported in (Tri.-LB) and it was also observed that the other issue regarding drying range cylinder may also be reexamined in the light of that decision. Therefore in terms of the decision of the Tribunal the Commissioner was required to exclude the galleries for the purpose of APC as held by the Larger Bench of the Tribunal and in the light of the observations he was also required to examine whether the drying range cylinders are to be considered as galleries. The Commissioner in his order dated 23-12-2003 passed after the remand, excluded the galleries but held that the drying cylinder is aiding to the process of heat setting of drying of fabrics and therefore is required to be considered for determination of APC. It is to be noted that the Commissioner did not give detailed logic for inclusion of drying range cylinders for the purpose of APC in the order dated 23-12-2003. But by this time, the appellants had requested the Commissioner to furnish various documents such as RG-1 register, lot register, photographs and video graphs etc. recovered on 30-4-1999 and they had requested for these documents while submitting their reply to the Commissioner. In the appeal proceedings against the order dated 23-12-2003, the matter was remanded to the Commissioner on 11-10-2005 directing that the request made for supply of documents vide letter dated 29-7-2003 should be complied with and appellants should be given time to make further submissions. Thereafter the impugned order in the present appeal has been passed.

7.5 The discussion above clearly shows that the Tribunal never went into the merits of the case. Whether the drying range cylinders are to be included or not has never been considered by the Tribunal. The orders have been set aside for totally different reasons and it is a settled principle that in remand proceedings, the authority to whom the case has been remanded is required to consider the issues as per the directions in the remand order. Therefore in the absence of the fact that observations of the Commissioner for inclusion of drying range has not been considered by the Tribunal at all, we do not find anything wrong if the Commissioner relies upon the observations of the Commissioner in the earlier O-in-O for his conclusions. The Hon’ble Gujarat High Court in C.C.E. & Customs v. Chandubhau Shiroya reported in (Guj.) observed as follows :-

“9 The legal position of in this regard is, by now, well-settled. The giving of reasons in support of their conclusions by judicial, quasi-judicial and administrative authorities when exercising jurisdiction is imperative, in order to avoid any element of arbitrariness or unfairness which may attach to unreasoned conclusions. The Tribunal is a quasi - judicial forum and while deciding matters, it has to bear in mind that a speaking order is required to be passed as it is adjudicating upon the Order-in-Appeal made by the Commissioner (Appeals) in which the Order-in-Original has merged. As the order made by the Tribunal is an appealable one, it should be ensured that it is founded on cogent reasons. The reasons contained in an order may not be lengthy or elaborate but, at the same time, they must reflect proper application of mind and an understanding of the pros and cons of the matter, as well as the legal position, which has led the Tribunal to come to its conclusion, more so, when the conclusion arrived at by the Tribunal differs from the conclusion arrived at by the adjudicating and Appellate Authorities.”

7.6 From the above it is quite clear as to what is required is that the Commissioner has applied his mind and has not blindly followed somebody else’s opinion. In this case the Commissioner has not simply relied upon the observations of other Commissioners in their orders which becomes quite clear from the reproduced relevant para below :-

“12(V) The second issue to be decided is whether cylinder is to be taken into account for fixation of APC as per Explanation I of the APC Rules. I have gone through the contention of the assessee in this regard basically contending, inter alia that cylinder is not attached to the stenter and does not aid the process of heat setting or drying of the fabrics and therefore they are not covered under the said Explanation I. This issue has been gone into in details by my predecessor in his order dated 15-2-2001 and I am fully in agreement with the findings arrived therein. For the sake for brevity, instead of reproducing certain parts of that order which are relevant for the purpose, the said order dated 15-2-2001 is enclosed. It has been discussed in detail therein that as per Textile Technology, the subject cylinder clearly aid the process of heat setting/drying of the fabrics. Further, regarding whether such drying cylinder has to be attached with the stenter, I agree with my predecessor’s findings that physical attachment is not a criteria. The cloth is automatically fed into the stenter from drying range cylinder and therefore when read with the interpretation of work “attached” in the case of Balarpur Industries Ltd., Yamunanagar v. CCE, New Delhi - (Tribunal) and CCE, Ahmedabad’s Trade Notice No. 25/1999 dated 1-3-99, I hold that the drying range cylinder are covered as per the said Explanation I of the APC Rules, 1998 and are to be taken into account for fixation of APC. Taking this into account and also decision dated 4-1-2001 of Larger Bench of Tribunal in the case of Sangam Processor, Bhilwara Ltd. v. CCE, Jaipur, I hold that APC fixed vide Order-In-Original dated 23-12-2003 and reproduced in para 8 above correct.”

7.7 He has not only relied upon the observations of the Commissioner in the previous order but has also explained the reasons for his agreement. Therefore we do not find any justification in the argument advanced by the learned advocate.

7.8 The next point advanced by the learned advocate is that their request for the following documents and photographs was not responded to by the Revenue and therefore on the grounds of non observance of principles of natural justice the appeal has to be allowed. The documents etc. requested by the appellants are as under :-

7.9 As observed rightly by the Commissioner, these documents, photographs and video graphs have not been relied upon for the purpose of fixation of APC for the year 1999-2000 by the Commissioner. Therefore the plea made by the appellants before the Tribunal when the appeal and stay petition against the order of the Commissioner dated 23-12-2003 fixing the APC for the year 1999-2000 was taken up that they have not been provided the documents and photograph listed above and therefore principles of natural justice has not been observed was not correct. The documents, photographs and the video graphs related to the visit of the officers on 30-4-1999 which resulted in issue of a show cause notice on 27-10-1999 and also resulted in a separate adjudication order dated 20-7-2001. In this case there was allegation of suppression of facts that the appellants had not declared drying range and had not accounted fabrics correctly etc. and in that case the documents required by the appellants were relevant. Therefore as far as fixation of APC for the year 1999-2000 is concerned, the supply or non-supply of the documents photographs and video graphs are not relevant and do not affect the rights of the party in any manner. This becomes clear when the APC fixation itself is discussed by us in the forthcoming paragraphs as to whether the APC fixation by the Commissioner has to be upheld or not.

8. After disposing of the three main preliminary objections which were argued by the learned advocate vehemently, we take up the issues involved in two cases before us but covered by the single impugned order. Firstly the issue of correctness of APC fixed for 1999-2000 is taken up.

8.1 The APC for the year 1999-2000 was taken up as per the requirement of the rules after filing of declaration by the appellants on 1-4-1999. However on 30-4-1999, there was a visit of the Central Excise officers to the appellants’ factory where they found excess fabrics which were seized and also found that the appellants had failed to declare the drying range cylinders. In any case as already observed, the visit of the officers on 30-4-1999 is relevant only for the purpose of the offence case registered against the appellants and not for APC fixation. However it is relevant only because after the visit of the officers, the appellants filed a revised declaration on 4-5-99 and a Chartered Engineer’s certificate on 5-5-1999.

8.2 First of all before considering the order it is required to consider undisputed facts. The undisputed facts are that the drying cylinders’ range is installed at a distance of 3 feet from Hot Air Stenter. This has been confirmed by the Chartered Engineer’s certificate dated 5-5-1999 and also the opinions of another textile expert submitted by the appellants. The Chartered Engineer Shri Deepak C. Shah in his opinion dated 5-5-1999 says that the length of drying range is 175 cms. It does not have mechanical or electrical drive. The cylinders are used for squeezing of water purpose and all the cylinders are having steam connection. Shri Ramesh Joshi, Professor of LD Engineering College also in his report has stated that the length of the drying range is 175 cms, it does not have mechanical or electric drive and it has a function of remove and squeeze out the extra water from the fabrics and simultaneously through airing of the fabric. Shri Deepak C. Shah has further elaborated his opinion given on 5-5-1999, on 19-6-1991 where he states that the drying range is at about 3½ feet from the stenter machine. Both the experts have said that the cylinder range cannot be said to be attached to the Hot Air Stenter machine. The experts have also said that the appellants have a separate drying range located separately from the Hot Air Stenter line.

8.3 The first dispute raised by the appellants is that the length of the drying cylinder has been taken wrongly as 175 cms. In view of the expert’s opinion, Chartered Engineer’s opinion and appellants’ own declaration, the length of the cylinder has to be taken as 175 cms and therefore on this ground Commissioner’s order has to be upheld.

8.4 The next important aspect is whether the drying range cylinder has to be included for the purpose of working out APC. The first contention of the appellants is that the drying range cylinder is not physically attached and therefore cannot be included. Even though appellants have stated that in the absence of photograph and video graph, no conclusion can be drawn about the includability of drying cylinder range, yet the following grounds support the Revenue’s case.

(i)    The panchnama wherein it has been brought out that these machines are installed in sequence has not been questioned till now.

(ii)   Shri Mahim Kumar Aggarwal the Proprietor who was present during panchnama has agreed that padding machine, drying range and stenter machine were installed in sequence.

(iii)  It has also not been denied that fabrics once fed into the padding machine, come out only after padding, drying, heat setting and stentering process.

(iv)   The Commissioner has also explained that there is no dispute on this fact also that the drying range cylinder is installed at a distance of 3 feet from Hot Air Stenter.

(v)    The Chartered Engineer himself has stated that the cylinders have steam connections.

(vi)   Commissioner has personally visited the unit. Thus, to confirm these facts neither the photographs nor the video graphs are required and therefore their absence does not affect the case of the Revenue even though Commissioner has mentioned photographs in his order.

8.5 The next point is the role of the drying range cylinders in the process. The appellants contend that the role of the drying range cylinder is not drying but only squeezing out water. The Commissioner has discussed the role of the drying range cylinders in his order which is reproduced below :-

“I shall first examine the use of drying range cylinder in a processing unit. According to the textile technology, one of the simplest methods of drying by conduction is that of passing the cloth over steam heating cylinders known as cylinder drying. It is also called can drying or drum drying. The machine consists of hollow steam heated revolving drums or cylinders around which the cloth passes giving up its moisture as it moves forward. Steam under pressure is passed into the cylinders through the hollow frame work of the machine i.e. the special bearings known as "doll heads" and the nozzle of the cylinder steam condenses inside the cylinder as it gives up its latest heat when water evaporates from the wet cloth. This machine helps in drying and also heat setting and colour fixation to some extent.

Once the cloth has passed through drying range cylinders and fed into stenter the setting time in the stenter will be less i.e. the unit can attain more productivity while maintaining the required quality. Such drying range cylinders are introduced before stenters so as to get more and faster production as the setting time in the stenter are reduced.

It is also not required that drying range cylinder should be physically attached. Physical attachment is not the criteria. The purpose is that drying range cylinders are a step before the stenters. The cloth is automatically fed into the stenter from the drying range cylinder. Such drying range cylinders are meant for particular stenter machines. These are aligned and placed in such a way along the drive force that cloth can automatically and directly go into the stenter. Drying range cylinders are installed in such a fashion that after drying the cloth on drying range cylinder these are fed into stenter directly for continuous process.

CCE Ahmedabad’s Trade notice 25/99 dated 1-3-99 specifically clarifies that as per explanation I to Notification No. 42/98-Ce (NT) a float drying machine or any other equipment of a length 3.05 metres installed in or attached to the stenter for aiding the process of heat setting or drying fabrics shall be deemed to be one chamber of a stenter and any fraction of such length shall be computed on a pro rata basis.”

8.6 The above discussion clearly shows that the drying range cylinder clearly aids in the process of heat setting/drying of the fabrics. We also find that Commissioner has properly cited explanation (1) to Rule 5 which provides "For the purpose of this notification, a float drying machine or any other equipment of a length 3.05 meters installed in or attached to a stenter for aiding the process of heat setting or drying of the fabrics shall be deemed to be one chamber of a stenter and any fraction of such length shall be computed on a pro rata basis. It is to be noted that it is not necessary that the machinery or equipment installed is required to be called a drying machine. It can be any equipment installed or attached to a stenter which aids the process of heat setting or drying of the fabrics. It is not denied that the cylinders are having steam tubes and steam can be passed through which means heat is applied. It has also been agreed by the appellants that water is squeezed out when the fabrics pass through the drying range cylinders. Squeezing out of the water and application of heat to anyone would definitely appear to be a drying process. If not drying, the drying range cylinder in this case definitely aids in heat setting or drying process for the stenter machine. Therefore the Commissioner's conclusion that the drying range cylinders assisted the stenter machine in heat setting or drying and therefore the length of the cylinder has to be taken into account has to be upheld.

8.7 The next ground taken up by the appellants is that the machine is not attached to the stenter machine therefore the length cannot be included. This aspect “a word attached” was considered in Ballarpur Industries Ltd. Yamunanagar v. CCE reported in (Tribunal). According to this decision physical attachment is not the criteria but should be considered from functional utility. In this case even though the drying range cylinder is not attached, the fact remains that the fabrics moved continuously from padding machine to the end. Therefore functionally it is definitely attached. Commissioner has visited the unit and he has observed that even otherwise there is no other way of attaching the drying range to a stenter as it is the mechanical form of state which pulls the fabric in a continuous chain and no separate mechanical devise is needed for attaching the drying range. In view of the above discussion we find that without relying upon any of the evidence recovered by the officers during their visit on 30-4-1999 except panchnama and the statement of the Proprietor both of which have not been disputed and both have been supplied to the appellants other evidences such as declarations, visit of the Commissioner himself, expert opinion are sufficient to arrive at the decision which the Commissioner has reached. Therefore the Commissioner’s order fixing APC for 1999-2000 has to be upheld.

9. The second part of the impugned order deals with the show cause notice issued to the appellants on 27-10-1999 proposing to revise the APC and consequently fixing the duty liability for the period from 16-12-1998 to 30-4-1999 at Rs. 6,77,419/- with interest as applicable.

9.1 Commissioner has confirmed demand of Rs. 3,97,894/- with interest and has also imposed equal amount of penalty under Rule 96 ZQ and a penalty of Rs. 10,000/- under another sub rule of 96 ZQ of Central Excise Rules, 1944. He has also confiscated the excess fabrics value at Rs. 7,56,015/- and has ordered that the same can be redeemed on payment of a fine of Rs. 1,00,000/- in lieu of confiscation. He has also confiscated land, building, plant & machinery and imposed a redemption fine of Rs. 1,00,000/- .

9.2 In this case, the APC was determined for the year 1998-1999 by the Commissioner finally on 21-4-1999. The finalization was done after verification of the premises of the appellants. However in the list of dates and events submitted by the appellants during the hearing, it has been stated that the annual duty liability was fixed at Rs. 58.367 lakhs on 21-4-1999. However I find from the order that this order is limited to fixing the annual production capacity for the year 1998-1999 and clearly indicates the duty liability as Rs. 17.10221 lakhs (sic) for the period from 16-12-1998 to 31-3-1999. Therefore as far as this show cause notice is concerned the APC is for the year 1998-1999 and we have to proceed accordingly.

9.3 The letter communicating the Commissioner’s decision on 21-4-1999 clearly says that “your Annual Production Capacity is fixed on the basis of the parameters declared by you and verified by the Jurisdictional Assistant Commissioner.” It is the appellant’s submission that the annual production capacity could not have been revised in view of several CESTAT decisions wherein it has been held that Commissioner has no power to recall or review his own order and re-determine annual production capacity which has already been finally determined after taking into consideration all relevant facts. The following decisions have been cited in this regard :-

(1)     Pooja Castings Pvt. Ltd. v. CCE, Jaipur-I - (Tri.-Del.)

(2)     Sunny Textiles Ltd. v. CCE, Hyderabad - (Tri.-Bang.)

(3)     Arvind Refractories Pvt. Ltd. v. CCE, Jaipur-I - (Tri.-Del.)

(4)     Nakaoda Steel Mills Pvt. Ltd. v. CCE, Jaipur - (Tri.-Del.)

9.4 We find that the present order dated 21-4-1999 also has to be treated as final in view of the decisions cited by the learned advocate which are applicable on facts to the present case and accordingly the re-determination of annual production capacity by the Commissioner has to be set aside. Even though on merits Revenue has a case in view of the discussion regarding APC fixation for the year 1999-2000, as far as 1998-1999 APC is concerned, the order has to be set aside.

9.5 The next issue is the seizure of excess fabrics found by the officers during their visit to the unit on 30-4-1999. The appellants had requested for documents and photographs and video graphs which have been discussed earlier, from the department on 29-5-2001 and on 30-5-2001, the Additional Commissioner (Preventive) had replied to the appellants wherein he had explained that photographs and video graphs are not relevant in view of the fact that Annual Production Capacity for the year 1999-2000 had been finally determined by the Commissioner who had taken into account the declaration filed by the appellants on 1-4-1999 the revised declaration filed by them on 4-5-1999, the Chartered Engineer’s certificate filed by them on 5-5-1999 and the personal visit of the Commissioner. Therefore he had clearly informed that the question of supplying the video clippings or photographs does not arise since the APC has been finally decided and the photographs and video clippings are not relevant. He also informed him that as far as non accountal of the fabrics is concerned, the RG-1 register and lot register were not readily traceable but from the part RG-1 register and part lot registers opened after seizure and through the RT-12 returns in which the opening stock during the month, closing balance etc. appellants can defend their case. He had also informed them that they may proceed with their defence on the basis that these records are not available. However, it is seen that in the order of the Tribunal dated 4-9-2002 passed on an appeal filed by the appellants against the order of the Commissioner dated 12-7-2001 whereby he had confirmed the demands for duty for the year 1998-1999, the appellants have submitted that the documents were not supplied nor inspection was allowed, in spite of letter from the Additional Commissioner that the records were not available. Subsequently before this Bench also the same contentions were raised but unfortunately neither the department nor the appellants noticed the letter of the Additional Commissioner dated 30-5-2001 wherein he had intimated that these records were not traceable. Finally it has been intimated that these records are not available.

9.6 The question arises as to whether the department’s case will stand without the documents requested for. A perusal of panchnama drawn on 30-4-1999 shows that in the annexure to the panchnama a worksheet showing the details of excess and unaccounted stock of manmade fabrics has been attached. This worksheet shows the lot number as per the register, balance stock as per the lot register, physical stock noticed and excess stock found unaccounted. 10 lot numbers as per register have been listed and in respect of each lot, the panchas had found excess stock. It has to be noted that while arriving at the excess stock, the stock of fabrics lying in the whole of the factory lot wise has been taken into account. The appellants have not been able to explain how there could be excess stock as compared to the stock lot wise as per the register. The panchnama has not been disputed till date. The appellants did not seek cross examination of panch witnesses. The proprietor admitted the excess stock and the statement has not been retracted till date. Further appellants also have not explained why they found it impossible to defend their case based on the advice of the Additional Commissioner who said that fresh lot register, RG-1 register have been opened and appellants have been filing returns thereafter which shows clearly that the appellants were allowed to take whatever details are required from the old lot register and the RG-1 register to continue their operation. Therefore we do not find any justification in the claim of the appellants that because documents were not supplied, principles of natural justice have not been observed since the absence of the documents, photographs and video clippings have in no way affected the defence of the appellants. The methodology adopted for the search and the result achieved as per the panchnama also shows that the officers and the panchas had adopted the correct procedure of taking the total stock of fabrics lying in various stages in the factory and comparing the same with the lot numbers and the lot register and RG-1 stock. This is the proper way of ascertaining the stock. Therefore we do not find any justification in the contention of the appellants that excess fabrics found during the visit of the officers are not liable to confiscation. Further, Shri Mahendrabhai had clearly admitted that the seized fabrics were processed and kept unaccounted with an intention to remove them without payment of duty and to evade income tax etc. and also to safeguard from the resultant increase in the duty liability during the next year. Therefore confiscation of fabrics is upheld. Taking all relevant factors discussed above into account, we do not find that fine in lieu of confiscation is excessive. Therefore it is also upheld.

Having regard to the gravity of the offence which is limited to excess stock of fabrics, we do not find at necessary that that land, building, plant and machinery should be confiscated. Accordingly, the confiscation of land, building, plant and machineries under Rule 173(Q) is set aside.

10. In view of the decision in this order that the drying range cylinders are includable for the purpose of APC, the order of the Commissioner (Appeals) has to be set aside. The Original Adjudicating Authority had confirmed the demand of Rs. 2,29,508/-. The Additional Commissioner in his order has observed that the duty liability for the month of April and May 2000 has been finally fixed by the Deputy Commissioner vide his order dated 16-2-2001. Neither the DR nor the advocate for the appellant brought it to our notice as to whether any appeal has been filed against the decision of the Deputy Commissioner finally fixing the APC on 16-2-2001. Therefore the confirmation of duty demand depends upon the final outcome of the fixation of APC by the Deputy Commissioner for the year 2000-2001. In any case the order of the Commissioner (Appeals) setting as aside the order of the Original Adjudicating Authority is not correct and therefore the matter has to be remanded back to the Original Adjudicating Authority who shall reconsider the issue. If the order of the Deputy Commissioner dated 16-2-2001 has attained finality, depending upon the outcome of appeals filed if any or if no appeal has been filed on the basis of the Deputy Commissioner’s Order, the Original Adjudicating Authority has to pass a fresh order. Needless to say he shall take into account our observations in this order. Accordingly the appeal filed by the Revenue against the order of the Commissioner (Appeals) is allowed by way of remand to the Original Adjudicating Authority.

11. In view of the above discussions :-

11.1     We uphold the APC fixed for the year 1999-2000 by the Commissioner in the impugned order.

11.2     The revision of APC fixed for the year 1998-1999 is set aside.

11.3     Penalty of Rs. 3,97,894/- and Rs. 10,000/- imposed under Rule 96ZQ are also set aside in view of the fact that revision of APC has been set aside.

11.4     The confiscation of 50,401 linear metres of processed manmade fabrics valid at Rs. 7,56,015/- under sub rule 6 of Rules 96ZQ is upheld and the fine in lieu of confiscation of Rs. 1,00,000/- imposed by Commissioner is also upheld.

11.5     Confiscation of land, building, plant and machinery is set aside.

11.6     The appeal filed by the Revenue is allowed and the impugned order of the Commissioner (Appeals) dated 12-9-2003 is set aside and the matter is remanded to the Original Adjudicating Authority for a fresh decision in the light of our observations.

(Pronounced in Court on 27-2-2009)