Per P.S. Bajaj:

This appeal has been filed by the appellants against the order in original dated 21.4.2000 passed by the Commissioner vide which he had confirmed the duty demand of Rs. 22,44,086.79 and imposed penalty of equal amount along with the interest, on them.

2. The facts giving rise to this appeal may briefly be stated as under:

3. The appellants were engaged in the manufacture of woollen worsted yarn falling under Chapter 51 (sub-heading 5103.10) of the CETA. they were clearing this yam in cones in the guise of yarn in plain (straight) reel hanks and wrongly availing benefit of Exemption Notification No. 26/94-CE dated 1.3.94 as amended by Notification No. 90/94-CE dated 25.4.94. on receipt of information, their factory premises were visited by the Preventive Staff of the Central Excise in the presence of Shri Sanjiv Aggarwal, Director of the appellants company. The staff conducted physical verification of the fully finished goods lying in the stock and the same were found in order as per balance recorded in the RG.1 Register. However, list of the various buyers to whom the woollen yam was sold by the appellants, was taken and most of the buyers were located at Amritsar and Ludhiana. on enquiry from those buyers, it revealed that the appellants had sold them worsted woollen yam not in plain (straight) reel hanks, but in cones as they all in their respective statements stated so. However, description in the invoices issued to the buyers given was worsted woollen yam 'H'. The statement of Shri Sanjiv Aggarwal. Director of the appellants was also recorded on 2.6.95 wherein he admitted availment of benefit of SSI exemption during the year 1994-95, but maintained that the woollen worsted yam in plain (straight) reel hanks was sold and the same was chargeable to nil rate of duty in terms of Exemption Notification No. 26/94-CE dated 1.3.94. However, from the statement of the buyers and the examination of sale invoices, it revealed that during the period 25.4.94 to 31.3.95 the appellants had cleared woollen worsted yam in cones valued at Rs. 2,47,63,798/- without payment of duty of Rs. 22,44,086.79. they were served with show cause notice dated 27.1.99 vide which duty demand of Rs. 22,44,086.79 was raised by invoking the extended period of limitation and penalty was also proposed to be imposed on them. After getting their reply to that show cause notice wherein they denied the allegations and maintained that they cleared worsted woollen yarn only in plain (straight) reel hanks and not in cones and even mentioned so in their invoices at the time of sale to the buyers and as such they were not liable to pay the duty being entitled to the benefit of exemption Notification No. 26/94-CEdated 1.3.94. they also prayed for summoning of the witnesses whose statements were recorded, for cross- examination during the adjudication proceedings, but the Commissioner did not cause the presence of those witnesses and proceeded to decide the case. He through the impugned order confirmed the duty demand as mentioned in the show' cause notice and also imposed penalty of equal amount payable with interest on them.

4. The appellants have come up in appeal before the Tribunal.

5. The learned counsel for the appellants has assailed the validity of the impugned order on the ground that it has been based only on surmises and conjectures and not on any legal evidence as the statements of the witnesses recorded at the back of the appellants, could not be used as substantive evidence against them without permitting their cross-examination. therefore, the impugned order is illegal and deserves to be set aside. in support of his contention, he has placed reliance on Sharma Chemicals Vs. CCE Calcutta-II 2001 (42) RLT 631 and Shalimar Agencies Vs. CCE Kandla, 2000 (38) RLT 897.

6. Regarding the imposition of penalty, the learned counsel has contended that the same could not be imposed under Section 11-AC of the CEA as the period of alleged evasion of duty i