Per G.R. Sharma:

This is an appeal against the order of Commissioner of Central Excise, New Delhi confirming a demand of duty of Rs. 43,52,716.34 for the period 1.4.84 to 31.5.85 for clandestine clearance of bed sheets, bed spreads etc. from the appellants through official liquidator under Rule 9 (2) and Section 11A of the Act. The Commissioner further confirmed a demand of duty of Rs. 1,72,694.26 from the appellants through official liquidator for wrongful availment of benefit of Notfn. No. 77/83-CEdt. 1.3.83 for the period 1984-85. He also confiscated 132 bichhona sets, 17 packages containing 204 bichhona sets, 40 cartons containing bed sheets, pillow covers, top sheets etc. and 38 cartons containing bed sheets, pillow covers etc. He also gave an option to the appellants through official liquidator to redeem these confiscated goods on payment of redemption fine of Rs. 1.50 lac with the direction that this option may be exercised within 30 days of receipt of this order. He also imposed a penalty of Rs. 25 lac on the appellants. Against this order, the appellants have filed the present appeal before us.

2. The facts of the case are that the Central Excise Officers carried out checks in the factory of the appellants at Sahibabad and also a number of their office premises including search of the appellants' registered office at New Delhi. On examination of the records, it was found that the appellant company was receiving duty paid cotton fabrics in running length from their sister concern M/s. Dior International. Sahibabad and were manufacturing items like bed sheets, bed spreads, table cloths, napkins etc. by cutting the fabrics in running length to required sizes and then hemming and stitching them. It was claimed by the appellants that these fabrics in running length, they were sending to fabricators/job workers. The appellants also claimed that the items like bed sheets, bed spreads, table cloths, napkins etc. were manufactured by the job-workers/fabricators. During the search of registered office three card boxes containing 132 bichhona sets in duly packed marketable condition were recovered and were seized. From the godown of M/ s. Dooars Transport Agency 17 cartons containing 12 bichhona sets were recovered and seized. From the store rooms of M/s. Dooars Transport Agency 38 bichhona sets removed by the appellants and 40 more cartons of bichhona sets were seized. These goods were seized in the reasonable belief that they were liable to confiscation. Incriminating documents were also noticed in the premises searched. The same were also seized in the reasonable belief that they were relevant and pertained to the goods which were liable to confiscation.

3. On scrutiny of the documents seized and the statements of the various persons, it was found that the appellants had evaded duly amounted to Rs. 43,52,716.34 during the period 1.4.84 to 31.5.85 and that there was wrongful availment of duty of Rs. 1,72,694.26. Accordingly a show cause notice was issued to the assessees asking them to explain as to why the duty should not be demanded from them, why the goods found at various places should not be confiscated and why a penalty should not be imposed on them.

4. After examination of the records of the case as the appellants had not availed the opportunity of being heard in person or cross examination of the witnesses, the Commissioner passed the order as indicated above.

5. Shri M. Venkataraman, Id. advocate for the appellants submitted that the appellants are engaged in the manufacture of bed sheets, bed spreads, table cloths and napkins. For the manufacture of these items, they procured duty paid fabrics. These fabrics were cut into small pieces to make bed sheets, bed spreads, table cloths, napkins and pillow covers. He submitted that insofar as napkins and pillow covers are concerned he is not adducing any argument on these items inasmuch as the appellants were prepared to pay duty on these items; that these items were not co