ORDER
S.L. Peeran, Member (J)
1. These appeals arise from common order-in-original No. 85/87 dated 30-6-1987, passed by the Collector of Central Excise, Cochin. By this order, the Learned Collector has confirmed the demand of Rs. 51,81,048.50 under Rule 9(2) of Central Excise Rules, 1944 read with the proviso of Section 11A(1) of the Central Excises and Salt Act, 1944. He has imposed penalty under Rules 173Q, 9(2), 210 and 226 of the Central Excise Rules in the following manner :
1. M/s. Calicut Rubber Company, : Rs. 10,00,000.00 Calicut
2. Shri K.S. Stephen : Rs. 5,00,000.00
3. Shri K.S. Paul : Rs. 5,00,000.00
4. Shri K.S. Prakashan : Rs. 5,00,000.00
Besides the above order, the Learned Collector has also confiscated land, building, machinery used in connection with the manufacture, storage of the tread rubber under Rule 173Q of the Central Excise Rules. However, he has granted redemption of seized goods on payment of fine of Rs. 25,000/-.
2.(i) The facts of the case leading to the adjudication proceedings are that on 10-8-1985, the Superintendent of Central Excise, Calicut and party proceeded to appellant’s company and found 261 kgs. tread rubber unaccounted as per registers. The said quantity was seized under a Mahazar. In his statement dated 12-8-1985, the appellant’s partner Shri K.S. Stephen is said to have admitted that the said quantity was not accounted; that he was running a tyre retreading concern by name Jayaraj Tyres, Calicut in partnership with his son, with a branch at Kasargode and that the entire requirement of tread rubber in his retreading unit was being met by Calicut Rubber Company; that during 1984-85, the company had consumed a quantity of 1325 kgs. of sulphur and during 1985-86, till the date of search 125 kgs. of sulphur in the production of tread rubber; that he was showing a price of Rs. 13.50 per kilogramme of tread rubber; that the cost of. raw material required for the production of one kilogramme of tread rubber itself would work out to Rs. 13/- and if wages and normal profit were added; the price would be much more; that the quantity of the tread rubber which Calicut Rubber Company was producing was Rs. 20.00 per kilogramme in the market.
2.(ii) The premises of Calicut Rubber Company and factory of Jayaraj Tyres attached to the unit was also searched again on 20-9-1985 and 120 documents found therein were recovered under a recovery memo. Shri V.C. Padmanabhan Nair, Foreman of the Jayaraj Tyres was also examined and in his statement dated 20-9-1985, inter alia, he had stated that 150 kgs. of tread rubber was required for the retreading done normally in his unit per day and the entire requirement of tread rubber was removed from the Calicut Rubber Co. as and when required. Shri Padannavalappil Basheer, a worker of the appellant’s company stated, inter alia, that on an average, about 500 to 600 kgs. tread rubber was produced at the appellant’s company per day.
2.(iii) The premises of Jayaraj Tyres near 3rd Railway Gate, Calicut was also searched and 99 items of records were seized under a Mahazar. Shri A.P. Abdullakutty, Foreman of the factory in his statement dated 20-9-1985, inter alia, has stated that daily on an average, 15 to 16 tyres of cars, jeep, van or auto-rickshaw were retreaded in his unit and the rubber required for the same used to be received from the appellant’s company. Smt. Jayarani, Clerk of the Company, in her statement dated 20-9-1985 stated that she was keeping cash and accounts in the unit; that retreading of tyres of Government vehicles done in the unit was properly accounted but the retreading of tyres of private vehicles was mostly not accounted; that money received from private company and its particulars were noted by her in a piece of paper and the money along with the paper were sent to Shri K.S. Stephen, the proprietor at the end of every day; that tread rubber requirement was intimated by foreman Abdullakutty to the residence of the proprietor and rubber used to come from the appellant’s company mostly without bills, that some bills purporting to be for purchase of tread rubber by Lakshmi Rubber Works, National Rubber Works, Lakshmi Industries, Phoenix Industries etc. used to be produced, but payments were not effected from company accounts, that these were not real bills. Shri T. Karunakaran, Manager of the firm in his statement dated 20-9-1985 stated that retreading of tyres belonging to private parties done at his factory was mostly not accounted. Sixteen to eighteen tyres were retreaded in his unit per day, the “rubber utilised was to come from other manufacturers per day to his unit were also false”. Shri P.A. Abraham, representative of the firm, in his statement dated 20-9-1985 stated, inter alia, that about 16 tyres used to be retreaded in the unit per day; that the tread rubber required, used to come in four or five rolls from the factory at West Hill; that Retreading done for private parties was mostly not accounted, but charges were collected by Smt. Jayarani and sent to the proprietor every day evening.
2.(iv) The premises of Jayaraj Tyres, Kasargode and the residence of the Manager of the unit were searched on 20-9-1985.14 items of documents found at the factory were seized under the Mahazar. Shri P.S. Joseph, Manager of the unit, in his statement dated 20-9-1985 stated that about 1.4 tonnes of tread rubber and 25 litres of solution per month used to come to his unit from their head office at Calicut during the preceding five years, and consumed there in retreading and no accounts were maintained by him for the receipt of tread rubber, that accounts of retreading done were available at Head Office only and money received from private parties used to be remitted to Head Office in cash.
2.(v) The premises of Jayaraj Tyres, Kanhangad was searched on 2-9-1985 and 19 items of documents were seized under a Mahazar. Shri A. Kun-humon stated in his statement dated 20-9-1985 that he used to purchase tread rubber from the appellants’ company and other units. Shri K.S. Stephen, Proprietor of Calicut Rubber Company was his wife’s uncle; the tyres of Government vehicles received in his unit for retreading were got done at Jayaraj Tyres, Kozhikode of which Shri K.S. Stephen was partner; that he used to get tyres for resoling from Jayaraj Tyres, Kasargode; that he did not get bills for tread rubber received from Kozhikode and the price used to be remitted in cash. Shri V. Sudharman, a worker at the unit, in his statement dated 20-9-1985 stated that four to five tyres used to be retreaded iri his unit a day and the tread rubber used to be purchased from Calicut Rubber Company and that about 750 kgs. rubber was required in his factory per month.
2.(vi) The premises of Jayaraj Tyres, retreading factory at Mangalore was searched on 20-9-1985 and 19 items of documents were seized. The premises of Jayaraj Tyres, office at Balmatta Road was also searched and 28 items of documents were seized under a Mahazar. Shri M.C. Jacob, stated in his statement dated 21-9-1985 that whenever he visited Mangalore, he used to assist Shri K.S. Paul Raj, Managing partner of the firm in canvassing business and that Shri Paul Raj used to get tread rubber from Calicut Rubber Company. Shri Kalluvalappil Purushothaman, Clerk of the concern stated in his statement that he used to transport tyres of auto-rickshaw, scooters etc. received at their office to the factory; that tread rubber from Calicut used to be collected by him from Mangalore Railway Station; that weekly about 2 consignments of 10 bundles each used to come booked in different names such as Purushu, Johny, Raju, Raman, Paul, Prakash, Sunil or Jayaraj Tyres, that Shri Paul Raj used to bring tread rubber from Calicut in Jeep; that mostly bills did not accompany the consignments and that he used to prepare invoices for retreading Government Tyres in the unit. Shri C. George, a worker at the factory in his statement dated 21-9-1985, stated that tread rubber required for retreading in his unit used to come mostly from Calicut and the rubber coming by rail used to be collected by Purushothaman.
2.(vii) Shri Thottasseri Abdurahiman of Mannarghat stated in his statement dated 20-9-1985 that building No. 9/437 at Mannarghat in which the Jayaraj Tyres, Mannarghat was functioning was purchased by him and brothers, during January, 1985 and that the Machinery were removed earlier by the owners and they purchased the building from Shri Prakasan.
2.(viii) The residence of Shri K.S. Stephen at Calicut was searched and 12 items of documents were seized under the Mahazar. Shri Immanuel Pradasan, son of Shri K.S. Stephen and partner of Jayaraj Tyremould Industries, stated in his statement dated 20-9-1985 that his father K.S. Stephen and brother K.S. Paul Raj and K.S. Yesudas Jayaraj were partners in the Jayaraj Tyremould Industries; that they had branches at Mangalore, Kasargode, and Kanhangad, all supervised by his father; that tread rubber produced at Calicut Rubber Company was consumed in the branches of Jayaraj Tyres; that since 1980, the production and distribution of tread rubber at appellant’s factory was under his complete responsibility; that the entire finances of the units were controlled by his father; that the retreading unit of Jayaraj Tyres, Calicut, attached to the appellant’s factory was also managed by him; that there were two mills in the factory of size 12 X 30 and 16 X12; that in the big mill, 12 to 14 batches of tread rubber weighing 38.5 kgs. each were produced in one shift; that according to requirement upto 20 batches a day were produced; that raw materials also used to be purchased in the name of the company as well as in the name of several individuals; that sulphur used to be imported as also indigenous sulphur purchased; that about 2 bags of indigenous sulphur used to be purchased every month without bills; that his father used to arrange supply of raw-materials; that the bills in the name of the Company which were accounted were kept by him and others in different names were destroyed; that sulphur was taken at the rate of 500 grammes for a mix yielding 38.5 kgs. tread rubber and 250 grammes for a mix yielding 20 kgs. tread rubber used to be despatched to branches through Railway Parcel, Road Parcel, and buses; that consignments were booked in different names such as Prakash, Rajan, Babu, Paul, etc., that the bills were signed by him as Manager; the workers knew him as a partner of the firm; that the bills were not issued correctly for the quantities of tread rubber issued to Jayaraj Tyres; that the proceeds of tread rubber supplied to sister concerns were not actually realised, but adjustment entries were made; that the tyres of private vehicles retreaded at Jayaraj Tyres units were mostly not accounted; that as the quantity of tread rubber supplied by Calicut Rubber Company to the branches of Jayaraj Tyres were not correctly accounted, he used to obtain bills from concerns like National Rubbers, Lakshmi Rubber Industries etc., to camouflage the unaccounted supply; that he used to under-value the production of the appellant’s company; that for the last six or seven years, about 12 to 14 tonnes of tread rubber per month used to be produced in his factory; that they started a unit at Mangalore in 1981-82; that the production prior to that was about 10 tonnes a month. According to him, the production and removal of tread rubber from the company during the preceding years were as follows :-
_______________________________________________________________________
Year Production Annual Price declared Price at
per month Production (approx.) market rate
in tonnes in tonnes Ex-Tax
1 2 3 4 5
_______________________________________________________________________
1979-80 10 120 Rs. 9.50 Rs. 15/-
1980-81 10 120 Rs. 9.50 Rs. 15/-
1981-82 12 150 Rs. 9.50 Rs. 15/-
1982-83 12 to 14 tonnes 160 Rs. 12.50 Rs. 16/-
1983-84 12 to 14 tonnes 160 Rs. 13.50 Rs. 18/-
1984-85 12 to 14 tonnes 156 Rs. 13.50 Rs. 20/-
1985-86 12 to 14 tonnes 52 Rs. 13.50 Rs. 22/-
(upto July,
1985)
_______________________________________________________________________
During the above periods, he had supplied to Jayaraj Tyres at Koz- hikode, at the rate of 4 tonnes per month, to Mangalore at...tonnes per month, to Kanhangad at the rate of 1.5 tonnes per month and to Mannarghat, at the rate of 500 tonnes every month.
2.(ix) Shri K.S. Stephen, the partner of Jayaraj Tyres and the appellant’s company stated in his statement dated 20-9-1985, that he was partner alongwith his son, Paul Raj of Calicut company where tread rubber was produced; that the company was functioning under the complete responsibility of his son Immanuel Prakasan; that he was Managing Partner of Jayaraj Tyres, Calicut, functioning at Third Railway Gate, Calicut with factory at Development Plot, Industrial Estate, Calicut, and branch at Kasargode; that his 3 sons, Paul Raj, Yesudas, Jayaraj and Immanuel Prakasan were partners and management was done by his second son Yesudas Jayarajan; that he was controlling the entire finances of the units; that his eldest son Paul Raj was running Jayaran Tyres, Mangalore Tyres, Mangalore, a tyre retreading unit with some members of his family as partners, that his nephew Kunhumon was running a retreading unit at Kanhangad under the name Jayaraj Tyres, Kan-hangad; that tread rubber required for all above retreading units was supplied by the appellant’s company; that Jayaraj Tyres had a unit at Mannarghat functioning till November, 1984; that all the above units developed to the existing stage by him; that he used to arrange supply of raw materials to Calicut Rubber Company as per the requirements placed by Prakasan; that the production at the appellant’s company was not accounted in full; that it was done so with his knowledge and permission as duty was payable on turnover exceeding Rs. 7.5 lakhs; that as the entire production was consumed in their own units, suppression of production and surreptitious removal did not cause any problem; that raw materials required for unaccounted production used to be purchased without bills or in some other names on payment in cash and not in cheques; that retreading of tyres belonging to private parties was mostly not accounted; that his son Prakasan used to arrange bills showing purchase of tread rubber from other units without actually purchasing tread rubber, shown in the bills; that profits from his concerns were utilised for their development and he admitted that everything stated in the statement of Prakasan was true and correct.
2.(x) Shri K.S. Yesudas Jayaraj, second son of Shri K.S. Stephen and partner of M/s. Jayaraj Tyres, who manages Jayaraj Tyres, Calicut in his statement dated 20-9-1985, fully corroborated the version of his father Shri K.S. Stephen and younger brother Immanuel Prakasan.
2.(xi) Shri M. Sadanandan, an associate of Shri K.S. Stephen and his family, stated in his statement dated 20-9-1985 that he joined Jayaraj Tyres in 1969; that he continued there till 1976; that even after leaving Jayaraj Tyres, he continued to guide Stephen and his sons in maintaining account: that from 1979 onwards Shri Immanuel Prakasan was running the affairs of Calicut Rubber Company; that from his association with Shri K.S. Stephen and his sons, he knew that the production at the appellant’s company was not fully accounted which they managed by purchasing raw materials without bills, retreading tyres belonging to private individuals was seldom accounted at Jayaraj Tyremould Industries and that Shri Prakasan used to arrange bills from other tread rubber manufacturers without actually purchasing the quantity covered by the bills.
2.(xii) State Bank of Travancore, in their letter dated 23-9-1985, furnis-shed details of sulphur stored and delivered to the appellant’s company under key-loan arrangement from 1979 to 1985. The appellant’s company imported sulphur which they stored in the godown which has 25 kgs. in one bag. of the quantity of 120 bags imported, during August, 1984, the quantity deposited in the godown was only 110 bags and so 10 bags should have been consumed directly without depositing in the godown. Shri Prakasan in his statement dated 20-9-1985, stated that besides imported sulphur, they used to purchase 2 bags of indigenous sulphur every month. Indigenous sulphur used to 50 kgs. in 1 bag and so the quantity purchased would be 1200 kgs. per year. The quantity of tread rubber which the company could have produced with the suplhur they have consumed admittedly was given in Annexure “A” to the show cause notice.
2.(xiii) Shri C.S. Arun, son of Shri Sankarankutty in his statement dated 17-12-1985 stated that he was running Lakshmi Rubber Industries from August, 1984 to April, 1985 in partnership with Shri K.I. Jacob; that the unit was producing tread rubber; that they used to sell tread rubber in retail and also wholesale to various buyers who did not insist on bills; that Shri Immanuel Prakasan of Calicut Rubber Company, used to collect the bills from them without taking the rubber covered by the bills and that they could oblige Prakasan as most of their real purchasers did not insist on bills.
2.(xiv) Shri E.V. Venugopalan, Proprietor of Lakshmi Rubber Industries in his statement dated 20-1-1986 stated that the price of tread rubber shown in such declarations was Rs. 20/- per kg. in November, 1983, Rs. 22/- per kg. in April, 1984 and April, 1985 which were the prevalent market rates on these days; that he leased the factory to Shri K.I. Jacob and Shri C.S. Arun Kumar in August, 1984, that he knew that they were selling their products without bills and also giving bills to help certain parties without actually selling the goods covered by them and that he therefore, terminated the lease in April, 1985 and all the records were with him.
2.(xv) Shri Mathew Skaria, Depot Manager, M/s. Samira Enterprises, Calicut, dealers in Rubber Chemicals, in his statement dated 20-1-1986, stated that no licence was required for purchasing their goods: that anyone could purchase from them on payment; that Calicut Rubber Company, were the regular Customers; that he could not say how much goods were purchased by them, as they could purchase through others also.
2.(xvi) Shri K.S. Paul Raj, Managing partner of the appellants’ company in his statement dated 24-1-1986, stated that the appellants’ company used to supply tread rubber required for retreading units under their control at Calicut, Kanhangad, Kasargode, Mangalore and Mannarghat; that there was a case against them regarding unaccounted production and clearance of tread rubber from Calicut Rubber Company; that he would discharge the responsibility if the accounts were found wrong; the financing of all their concerns were controlled by his father; that the tread rubber used to be transported from Calicut, through Rail, Bus, Road parcels and even in their own jeep; that sulphur was imported and also locally purchased according to requirement; that reclaim rubber used to be purchased from M/s. Supreme Rubber Works Mangalore and Super Works, Combatore and that no licence was required for the purchase of chemicals for the manufacture of tread rubber.
2.(xvii) Shri Thankachan George, Managing partner of M/s. National Rubber Works, Kannadikkal, in his statement dated 27-1-1986 stated that they used to sell tread rubber on cash and invoices used to be prepared in the name required by the man who tendered cash; that their invoices were in loose sheets till 5-11-1985 and without printed serial Nos. till 15-7-1985; that he knew the proprietors of Jayaraj Tyres, Calicut and the appellants’ company, that none of them purchased Rubber from his unit and that their workers had purchased at times.
2.(xviii) M/s. Supreme Rubber Works, Mangalore furnished the particulars of reclaimed rubber supplied by them to the appellants’ company, Jayaraj Tyres and some of their employees. It is stated by the department that it is on record that they were purchasing reclaimed rubber from other sources as well. The quantity of tread rubber which they would have produced with the reclaimed rubber supplied by M/s. Supreme Rubber Works, Mangalore also was given in annexure B to the show cause notice. Particulars of electric energy consumed by consumer No. 2639 viz; Shri K.S. Stephen from March, 1980 to December, 1985 furnished by the Assistant Engineer, Electrical Major Section K.S.E. Board, West Hill showed that consumption of electrical energy by Calicut Rubber Company was very high. The quantity of tread rubber which their units at Calicut, Kanhangad, Kasaragod and Mangalore would have consumed to retread the tyres which they had actually retreaded was given in annexure ‘C to the show cause notice. Therefore on the basis of his statement and the evidence collected by the department, it was alleged that in the show cause notice, the appellants M/s. Calicut Rubber Company, Calicut had during the last 5 years, immediately preceding 10-8-1985, produced and cleared tread rubber as detailed in the show cause notice.
2.(xix) It was also alleged that the appellants had clandestinely manufactured and cleared 889.900 metric tonnes tread rubber, without payment of Central Excise duty for the period 8/80 to 7/85 from their factory premises with an intention to evade payment of duty, by suppressing the production and misdeclaration in order to avail the exemption contained in Notification No. 80/80, dated 19-6-1980, 83/83, dated 1-3-1983 as amended. Therefore, it was alleged that the appellants had contravened the provisions of Section 6 of the Central Excises and Salt Act, 1944, Rule 173B, 173C, 173F, 173G(1) and 174 read with Rule 9(1), Rule 173G(2), Rule 52A, Rule 173G read with Rule 53 and 226 of the Central Excise Rules, 1944, and therefore, they were directed by show cause notice dated 6-2-1986, to explain as to why the Central Excise duty of Rs. 35,36,906.10 should not be demanded from them under Rule 9(2) of the Central Excise Rules, 1944, read with the proviso to Sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944 and why a penalty should not be imposed on them for contravention of various rules of Central Excise Rules, 1944 and why the 261 kgs. of tread rubber under seizure in respect of which the offence appeared to have been committed should not be confiscated under Rules as stated in Central Excise Rules, 1944 and why any land, building, conveyance, material or any other thing used in connection with the manufacture, production, storage, removal or disposal of the said rubber should not be confiscated under Rule 173Q Sub-rule 2(a) of the Central Excise Rules, 1944.
2.(xx) The department issued a corrigendum vide C. No. V/16A/15/4/85 Cx. Adj. dated 17-2-1986 and collected the duty amount of Rs. 51,81,048.50 which has been confirmed in the show cause notice. The appellants filed a detailed reply to show cause notice. The appellants had filed a common reply to the show cause notice. The reply states that they had maintained their books correctly and there is no reason as to why excise duty proposed in the show cause notice should not have been worked out as per records maintained by them. It is stated that the department arrived at the production figures shown in the annexure to the show cause notice purely on the basis of assumption and presumption without any scientific basis and therefore, it was required to have been worked out correctly with due regard to the statements given by them. It has been stated that the appellants are doing resoling and retreading of used motor tyres. Similar, concerns are being run at Mangalore, Kasargode and Kanhangad and they are independent units. However, they admitted that they had dealing with the appellants’ company. It is also stated that there is no common interest between them. Their income is separate and that the business itself is thoroughly different. It is also stated that the documents seized from their custody on the simultaneous raids made by the premises does not disclose any type of misconduct on their part. The show cause notice does not deal with any of the documents seized and that they had not been given opportunity to examine the documents. Their conduct had been above board and that, none of the information furnished by them was contrary and false. It is stated that they were manufacturing the goods under the constant supervision of the officers of the department and the department officials had conducted visits and checks periodically and hence there is no suppression or misconduct. It is also stated that the statements were recorded under coercion. It is also stated that the officers had seized 261 processed rubber as unaccounted one which is not correct. It is also stated that the statements were dictated by the officers under coercion and threat. They denied having sold tread rubber at Rs. 13/- per kg. and also the contention of the department that the price is Rs. 20/- per kg. and the entries relating to the sales are false. It is stated that there are different varieties of rubber and that they had purchased rubber at higher rates as the books would disclose. The rubber tread at Rs. 13/- per kg. is of inferior quality of the rubber. The cost of production of this variety is very much less than the cost of production of other varieties. This variety had been sold at Rs. 13/-per kg. and this could be verified from the books or accounts. They have stated that the evidence of their workers, manager and foreman are of no value. The entries of the private works, whenever carried on, if at all done, has been entered in the accounts books. They have stated that the main work of the appellant’s company is resoling of tyres of vehicles owned by the Government. Work done for private individuals is only in stray cases. The statement of accounts contains entries regarding expenditure and income in connection with such work. Therefore, as can be seen from the statement of Shri K.S. Stephen and Shri Paul Raj, the charges can be demonstrated to be incorrect. The statement of Karunakaran and Abraham also stand on the same footing. They admit that some of the associated concerns are run by other relatives. However, on raid to these units, the department had found in each of the unit, number of tyres of private vehicles or autorikshaws. The departmental officers had found unaccounted goods at that time. They stated that the department had not examined any private vehicle or autorikshaw owner to base their case and there are no such statements from them. They have also stated that the show cause notice seeks to work out the quantity of production from the sulphur used. They have stated that they have not been getting sulphur apart from the quantity evidenced from the books. The allegations that they have been purchased at the rate of 2 bags of sulphur extra every month is completely false. They have stated that it is difficult to get sulphur of the type used in the Industry apart from official sources. They have stated that it is not possible to purchase without a bill. Therefore, they stated that calculating production on the basis of sulphur is totally incorrect and baseless. They stated that Mr. Immanuel cannot be relied on regarding, the quantity of production and he is not expert and does not know the process of mould manufacture. Therefore, his statement regarding quantity of sulphur utilised for curing a mix is incorrect. They have also denied the allegation that false adjustment entries had been done by them and that false bills were obtained from other concerns. They state that the statement of Shri K.S. Stephen, K.S. Yesudas, Jayaraj and M.S. Sadanandan recorded by the department are incorrect statements and they should not have been relied without they have been subjected to cross examination. They also requested for supply of copies of these statements relied by the department. They also stated that the department has calculated the production on the basis of the rubber and its utilisation on assumption only. They stated that they had carried out the work of resoling and retreading for Government owned vehicles only. They did not have necessary machinery for manufacture of tread rubber. They denied having suppressed or having cleared the goods clandestinely and submitted that the department had not produced any evidence in support of the changes made in the show cause notice.
3. We have heard Shri D.N. Mehta, the Learned Advocate for the appellants, and Shri T.R. Malik, the Learned DR for the Revenue.
4. The Learned Advocate submitted that the case made out against the appellants is on the basis of assumption and presumption. He also submitted that no opportunity was granted to cross-examine the witnesses and nor reasons furnished for denying the cross-examination. He also submitted that the statement recorded were not supplied nor they have given opportunity to examine the seized records and to take copies from them. He also submitted that they were entitled to the benefit of SSI Notification and that the department had not worked out the value of clearance correctly and also should have granted them the benefit of the first clearances. The department had not proved the charges of clandestine removal. He submitted that the production figures cannot be worked out on the basis of averages and it was required to have been proved by virtue of evidence, purchase of inputs and by sale of the same. He submitted that the department was required to have seen as to whether the appellants were having necesary machinery and that they had utilised so much of electricity for production of 889.900 M.T. of tread rubber during the alleged period. He submitted that the confiscation was not valid. He also submitted that the department had not properly worked out the classification and they had merely arrived at the figures and confirmed the duty. Therefore, he submitted that the entire procedure adopted by the department is illegal and contrary to law. He also submitted that the other units were owned by independent persons. Their clearance cannot be clubbed. He submitted that Shri K.S. Stephen, Immanuel and Prakasan had not given voluntary statements and they cannot be relied. The Learned Advocate relied on catena of judgments in support of his case to show that the department cannot base their case on assumption and presumption and also on the basis of printed note books without any corroborative evidence. In this regard, he relied on the judgments as follows :-
1. D.R Steels Industries v. Collector of Central Excise [1995 (78) E.L.T. 492]
2. Collector of Central Excise v. Reliance Textile Industries Ltd. [1985 (19) E.L.T. 497]
3. Bhagwandas Harjpal v. Collector of Customs (Prev.), Calcutta [1995 (78) E.L.T. 80]
4. Western Transformer & Equipment Pvt. Ltd. v. Collector of Central Excise, Jaipur [1995 (78) E.L.T. 512]
5. Kashmir Vanaspati (P) Ltd. v. Collector of Central Excise [1989 (39) E.L.T. 655]
6. T.M. Industries v. Collector of Central Excise [1993 (68) E.L.T. 807]
7. Ebenezer Rubbers Ltd. v. Collector of Central Excise [1986 (26) E.L.T. 997].
5. The Learned DR relied on the findings given by the Collector and submitted that the statements recorded were all voluntary in nature. Therefore, the appellants’ contention on this point that they had not voluntarily given the statement should be rejected. In this regard, he relied on the following judgments :-
1. Collector of Central Excise v. K. Ranganathan [1995 (76) E.L.T. 261]
2. P.P. Chandrasekhara Pal & Sons and Ors. v. Collector of Central Excise [1986 (24) E.L.T. 131]
3. Barnagore Jute Factory Co. v. Inspector of Central Excise – [1992 (57) E.L.T. 3].
He submitted that the consumption of raw material and electricity would itself be sufficient to show that the appellants had manufactured the alleged quantity of tread rubber. He submitted that there has been clandestine removal. He submitted that in the absence of any SSI certificate produced by them, the question of grant of exemption does not arise.
6. We have carefully considered the submissions made by both the sides and have perused the records. The Learned Collector has not considered their contention and rejected the same basing his findings on the evidence and the statements given by the appellants, and on the consumption of sulphur by the unit and also on the ratio of production given by Shri Immanuel Prakasan. The Learned Collector has referred to the consumption of electricity during the period March, 1980 to December, 1985, but it does not state the consumption of the units utilised but it only says that they thought the consumption was very high. The duty has been confirmed mainly on the basis of annexures ‘A’ to ‘C’ of show cause notice. It has not been shown in the impugned order as to how much tread rubber was produced every day; as also the quantum of sulphur said to have been imported and as to how much electricity was required for production of 889.900 kgs. of the tread rubber alleged to have been manufactured during this period and as to whether the appellants had necessary machinery, manpower and raw material for its production. These evidence have not been discussed in the impugned order, However, the Learned Collector has only discussed in detail the statements and there has been no consideration or detailed finding regarding the valuation arrived at by the appellants. Therefore, it is necessary for us to take into consideration the replies made by the appellants to the show cause notice and the submissions made before us, while deciding the matter in question. It has been pointed out before us that the Collector has mainly proceeded to confirm the duty on the basis of statement recorded by the department. The Learned Collector has held that the statements are given voluntarily. We agree with the Learned Collector that the statements are voluntary and that there has been no coercion in recording the statements as can be seen from the nature of the respective statements. The reply to show cause notice merely states that they are not voluntary statement. However, if there was any coercion or fraud by the officials then the appellants could have immediately reconciled from the statements on the very next day. In the reply to the show cause notice, the appellants themselves have contended that they do not suggest that the department had intentionally foisted a false case against them. Therefore, when there is no allegation of false case having been made out against them and that there is no individual resilement by the witnesses at the earliest point of time, therefore, we have to come to the conclusion that the statements given by the witnesses are voluntary. As regards the plea of denial of opportunity to cross-examine the witnesses, it has to be stated that the appellants are the accused persons and their statements are not held to be false and that the case against them is on the basis of their own statement and hence the question of calling them for cross-examination does not arise. It is only the independent witnesses like foreman, workers, manager who can be called for cross-examination, if only they wanted them to be produced. There was no specific prayer before the Collector and the Collector has also been referred to such a prayer in the impugned order. We hold that there has been no violation of principles of natural justice, none.
7. The appellant’s plea is that they are mainly carrying on the work of retreading and resoling of old tyres of Government vehicles. They also stated that they had not manufactured tread rubber. In the light of this submission and stand taken by the appellants, it was incumbent on the part of the Learned Collector to have discussed the evidence and the basis on which the department had come to the conclusion of manufacture of tread rubber by the appellants. The appellant’s plea is that they should have been granted an opportunity to examine the seized records and take copies from the same. We find this plea made by them is to be quite justified. To this extent, we are of the view that there is violation of principles of natural justice. The mere utilisation and consumption of high electricity cannot by itself be considered as production of 889.900 M.T. of tread rubber during the period in question. The Learned Collector should have discussed the correctness of the formula relied by the department with regard to the quantity of tread rubber, said to have been manufactured by the appellants. The appellant’s contention is that sulphur is a controlled commodity and is not available without licence. Therefore, to say that the appellants might have procured sulphur from other sources is indeed a finding based on assumption and presumption. The available figures of sulphur and all other inputs should have been taken into consideration along with units of electricity consumed, to come to conclusion that so much quantity of tread rubber had been manufactured by the appellants during the impugned period. To merely say that so much of tread rubber has been manufactured during that period without evidence is mere presumption. The department has necessarily to point out from the records about the inputs, electricity consumed and the appellants having the wherewithal like manpower, machinery and all other necessary ingredients to manufacture so much quantity of tread rubber. If the seized records should say that there has indeed been such a manufacture then the evidence is required to put to the appellants and they should be called upon to explain the same. The department had merely shown the figures in annexure to show cause notice without having stated as to how they have arrived at the said figures. Therefore, the correct procedure would be to allow the appellants to examine the seized records and grant them an opportunity to take copies of the same, to enable them to counter the allegations. The department, thereafter should give the appellants an opportunity to the appellants to show that they have not manufactured this quantum of tread rubber during the period and that they were only doing the activity of retreading and resoling of the Government vehicles.
8. The appellants have stated that the tread rubber was sold at Rs. 13 /-per kg., while the department has alleged that it was sold at the higher value. This is a question of fact which is also required to be examined on the basis of evidence on record. We have examined the Annexure ‘A’ which shows the quantity of sulphur consumed, and the quantity of tread rubber which could be produced. Annexure ‘A’ states about the consumption estimate of tread rubber. Annexure ‘B’ gives the details of period, quantity of reclaimed rubber, several quantities of tread rubber which could have been produced. These figures appeared to have been arrived on the basis of the statement of witnesses. We hold that the statement of witnesses alone is not sufficient to come to the conclusion that so much quantity of tread rubber could have been produced. The appellants have submitted that the factory could not have been working round the clock and that there could be several factors for loss of production like breakdown of machinery, non-availability of manpower, and raw materials, strikes. There is no force in this submission. Therefore, to presume that they have produced so much quantity of tread rubber on an average basis is nothing but presumption and assumption. Therefore, we direct the department to rework out the figures on a scientific basis and furnish the figures to the appellants for their reply and after giving due hearing the adjudicating authority shall decide the case. Therefore, on an overall examination of the entire case, we are of the opinion that it is just and necessary that this matter should be remanded to the original authority for de novo consideration. The appellants should be granted an opportunity to examine the seized records and take copies thereof. The department should have worked out details given in Annexure A to D on a scientific basis. The appellants should be furnished with a recalculated sheet of figures and thereafter, they should be given an opportunity of hearing by the adjudicating authority, before adjudicating the matter. As we have held that there is no violation of principles of natural justice in not granting the opportunity to cross-examine the witnesses, therefore we direct the adjudicating authority to readjudicate the matter, on the basis of available records after working out correct figures. The appellants have also challenged the basis of valuation. They should be given an opportunity to show that the valuation arrived at by the department is incorrect. The appellants have also stated that they are SSI unit and that they are entitled for benefit of the Notification granting exemption to SSI unit. It was also stated by the Advocate that at best the duty which was worked out against them on the basis of the present adjudication will not be more than Rs. 6 lakhs. This matter is also required to be readjudicated. As regards the plea that each unit is an independent manufacturers, it has to be observed that this plea is not acceptable, in view of the admission made by several witnesses more particularly the father figures namely K.S. Stephen and admission made by his sons in this matter. The case has to be readjudicated on the basis of seized records only. In the show cause notice the appellants have stated that the department was aware of the manufacture of the goods. They have not produced any evidence to this effect. The appellants are at liberty to contest the plea of time bar before the original authority and we keep open this question for de novo consideration. In that view of the matter, the impugned order is set aside and the case is remitted to the original authority for de novo consideration in the light of findings.