TMI Blog1995 (10) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing years were as follows :- Year Production per month in tonnes Annual Production in tonnes Price declared (approx.) Price at market rate 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 Kozhikode, 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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, furnisshed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tness 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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