Jyoti Balasundaram, Member (J)

1. The above application under Section 129E of the Customs Act, 1962 seeks waiver of pre-deposit of duty of Rs. 7,29,023.05 and penalty of Rs. 10 lakhs levied imposed by the order of the Addl. Collector of Customs, upon caps manufactured out of synthetic woollen rags exported in contravention of the export policy and DEEC Scheme, under which the goods for export should have been manufactured out of 100% acrylic fibre imported by the applicants.

2. We have heard Shri B.B. Gujral, learned counsel for the applicant and Shri Rajesh Dhingra, learned SDR for the Department.

3. The main thrust of the argument is that the principles of natural justice have been flagrantly violated in as much as the valuable right of cross-examination of witnesses whose opinions reports have been relied upon by the Department, has not been afforded to the applicants, in spite of several requests in writing in this regard. Our attention has been drawn to the reply to the show cause notice, handed over at the time of, personal hearing, to several other letters, forming the correspondence on the subject. The learned advocate also contends that there is a strong prime facie case on merits as the Textile Committee SASMIRA first opined that the goods are of 100% acrylic only later changed their opinion on the basis of visual examination, and let export order was given goods were exported. On the financial aspect, it is submitted that the applicant is a proprietary concern with a capital of Rs. 7.58 lakhs including borrowed capital and the profit for the year ending 30-12-1989 is only Rs. 36,471.13 as reflected in the balance sheet profit loss account.

4. In reply, the learned SDR submits that, under Sections 107 108 of the Customs Act, the quasi-judicial authority has power to compel attendance of witnesses only upto the stage of inquiry the power is not available at the adjudication stage. Regarding the merits, he relies upon the opinions of the Books Appraiser, Deputy Chief Chemist SASMIRA that caps are not made out of 100% acrylic fibre. He also submits that the applicant being a 100% Export Oriented Unit, it must be financially sound.

5. We have heard both sides carefully considered their submissions. The adjudicating authority has denied the opportunity of cross-examination on the ground of non-justification of the reason for cross-examination has relied upon the judgment of the Hon'ble Supreme Court in MANU/SC/0285/1972 : AIR 1972 S.C. 2136 and the Hon'ble Madras High Court in MANU/TN/0525/1979 : 1982 (10) ELT 386 in support of his finding on this point. The merits of the matter can be more appropriately dealt with during the hearing of the appeal, There is force in the argument on violation of the principles of natural justice. The Tribunal has time again held that denial of opportunity to cross-examine witnesses whose statements are relied upon by the Department amounts to violation of the fundamental principle of natural justice. The cases cited by the adjudicating authority are also not applicable to the facts of the present case in as much as the Supreme Court decision held that principles of natural justice do not require that persons who have given information should be allowed to be cross-examined on the statements made before Customs authorities the Madras High Court decision contained no finding on this issue.

6. In the above circumstances, we feel that this is a fit case for grant of waiver of pre-deposit. The requirement of pre-deposit of duty penalty is dispensed with stay of recovery thereof granted, pending disposal of the appeal.

7. The application is hereby allowed.