1992 (9) TMI 214 - AT - Central Excise

Issues Involved:
1. Legality of the duty demand of Rs. 2,06,479.20.
2. Imposition of penalties on M/s. Kushana Rubber Works and the Managing Partner.
3. Appropriation of cash security for confiscated goods.
4. Validity of the formula used for calculating tread rubber production.
5. Allegations of clandestine production and removal of goods.
6. Reliability of statements made by Shri P.M. Bavu and Shri N.K. Razak.

Issue-wise Detailed Analysis:

1. Legality of the duty demand of Rs. 2,06,479.20:
The Tribunal confirmed the duty demand of Rs. 2,06,479.20 imposed by the Collector of Central Excise, Cochin. The duty was demanded based on evidence of clandestine production and removal of tread rubber without payment of duty. The Tribunal found that the formula used to calculate the production was justified and supported by evidence, including statements from the firm's foreman and Managing Partner.

2. Imposition of penalties on M/s. Kushana Rubber Works and the Managing Partner:
Penalties of Rs. 75,000 on M/s. Kushana Rubber Works and Rs. 10,000 on the Managing Partner, Shri N.K. Razak, were initially imposed. The Tribunal, while confirming the findings of clandestine removal, reduced the penalties to Rs. 20,000 for the firm and Rs. 5,000 for the Managing Partner, considering the small scale of the manufacturer.

3. Appropriation of cash security for confiscated goods:
The Collector appropriated cash security given for the provisional release of goods weighing 690 Kgs. found liable for confiscation. The Tribunal did not explicitly address this issue separately, implying acceptance of the Collector's decision as part of the overall judgment.

4. Validity of the formula used for calculating tread rubber production:
The Tribunal upheld the formula provided by Shri P.M. Bavu, which stated that 3 kgs. of raw rubber and 3 kgs. of reclaimed rubber produced 15 kgs. of tread rubber. Although an alternative formula was later provided, the Tribunal found the initial formula credible and supported by the evidence, including the statements and the pattern of raw material usage.

5. Allegations of clandestine production and removal of goods:
The Tribunal confirmed the allegations of clandestine production and removal of tread rubber. Evidence included excess quantities found during a factory check, unaccounted despatches from Lorry and Railway Parcel Offices, and payments received without corresponding entries in statutory records. The Tribunal found these factors collectively demonstrated clandestine activities.

6. Reliability of statements made by Shri P.M. Bavu and Shri N.K. Razak:
The Tribunal found the statements made by Shri P.M. Bavu and Shri N.K. Razak credible. Shri Bavu's initial formula was accepted, and Shri Razak's admission of suppressed production was considered reliable despite a delayed retraction. The Tribunal dismissed claims of coercion or threat, noting the lack of timely retraction and credible evidence to the contrary.

Conclusion:
The Tribunal upheld the duty demand and found sufficient evidence of clandestine production and removal of goods. The penalties were reduced considering the small scale of the manufacturer, but the overall findings and conclusions of the Collector were largely affirmed.

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