TMI Blog1993 (4) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... s raided the premises of the appellants and also the residences of the proprietor of the appellant industry Shri. P.V. Varghese and that of Shri A.V.M. Achuthan on 10-9-1987 and searches were carried on. This raid was done on the information received by the department that the appellants were incorrectly availing the exemption granted to SSI units under Notification Numbers 83/83, 85/83 and 175/83. As a result of the raid, and the extensive investigation done by the department, the appellants were issued with a show cause notice dated 18-12-1987 along with detailed annexure running into about 233 pages: Page 20 of the SCN states that: From the scrutiny of records pertaining to M/s. KFI and the investigation made on various aspects from different agencies including those who purchased Rubber foam products from M/s. KFI, it appears that M/s. KFI have evaded central excise duty by adopting the following modus operand and mis-used the exemption granted to the small scale units by the Govt. from time to time. (i) M/s. KFI suppressed production of rubber foam goods viz. cavity sheets, pillows, cushions in the records maintained under Central Excise Rules (as required under Rule 173G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Trust Rubber Industries (hereinafter referred to as M/s. TRI). This firm is registered in sales tax and is housed in the same premises in which the factory of M/s. KFI is housed. M/s. KFI never declared in the declarations filed with the department about the existence of this firm which appears to be their own family concern. This firm M/s. TRI is dealing with sale purchase of foam goods, rubber compounds/M.C. sheets and latex adhesive. It appears that this firm has been created and housed in the same premises in which the factory of M/s. KFI is located with an intention to cover the clandestine removal of the foam goods manufactured by M/s. KFI as is evidenced from the following facts and circumstances : (i) As per the accounts maintained by M/s. TRI they had sold the various goods during each financial year as under : Product 1982-83 1983-84 1984-85 Foam 14,04,842.70 9,61,804.20 NIL Rubber Cornpound M.C. Sheets 2,84,692.50 5,36,822.70 1,10,112.75 M/s. TRI are reported to have purchased foam goods from the following firms: (i) M/s. Thomson Rubber Industries; (ii) M/s. Nisi Trading Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Trading Co. by M/s. TRI was diverted to M/s. KFI. The statement of Shri Tilak Raj dated 18-9-1987 (owner of premises of so called Nisi Trading Co.) is enclosed as Annex. XVIII. It has also come to notice during investigation that M/s. KRC have been storing latex purchased by them in the factory premises of M/s. KFI as is evidenced from the statement of Shri O.P. Punnose of M/s. KFI and Shri Thampan of M/s. KRC. Their statements in this regard have already been referred to in this notice in foregoing paragraphs. This arrangement appears to have been made with a view to divert the stock of latex to M/s. KFI clandestinely and to cover such removal, M/s. KRC could issue bills showing sales of latex to other buyers. This intention of M/s. KRC is corroborated by the statement of Shri Thomas Kuruvilla dated 25-9-1987 in which Shri Kuruvilla has stated that sales of latex as shown in the ledgers of M/s. KRC was deliberately being stored within the premises of M/s. KFI with a view to divert the same for the production of foam goods. M/s. KRC which is a related concern of M/s. KFI (as Shri P.V. Varghese is the Managing Director of this firm and he is proprietor of M/s. KFI) is engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the invoices/bills. From the scrutiny of the records and the investigation made, it appears that M/s. KFI have deliberately declared less value in their invoices issued during the financial year 1982-83 to 1987-88 up to 9/87. This fact is borne out from the following prices mentioned in their bills/invoices: Products Cavity Sheets Factory price per PCS 1. 465 KCS 75x36x4 Rs. 340/- 2. 365 KCS 75x36x3 Rs. 290/- 3. 865 KCS 75x36x2 Rs.250/- 4. 75605 KPS Rs. 90/- 5.162 KCS Rs.125/- 6. 1565 KCS Rs. 180/- 7. 301 KSC 21x22x3 Rs. 40/- 8. 421KSC 21x22x4 Rs.50/- 9. 318 KSC 18x18x3 Rs. 35/- 10. 418 KSC 18x18x4 Rs.40/- The above prices remained effective for the entire period right from 1982 to 1987 though the cost of production including labour charges went on increasing with the passage of time. The statement of Shri. O.P. Punnose admitting the above fact is enclosed Annexure XIV. (ii) During the course of search in the residenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri O.P. Punnose and Shri Thampan referred to above. Both the firms have interest in each other company and both the companies have promoted the business of each other. The godown of latex of M/s. KRC is housed in the premises of M/s. KFI. In view of this fact, the price as indicated in the price lists of M/s. KRC appears to form the price of product of M/s. KFI for assessment. In view of facts and circumstances as discussed in the foregoing paragraphs, the aggregate value of clearances of Rubber foam goods during each financial year from the factory of M/s. KFI works out to be as under: (Details given in Annex. XXVI). Year Total value of the goods (in Rs.) 1981-82 Rs. 35,66,188.00 1982-83 Rs. 45,31,874.00 1983-84 Rs. 46,73,843.00 1984-85 Rs. 37,85,498.00 1985-86 Rs. 39,55,642.00 1986-87 Rs. 48,32,955.00 1987-88 (up to 9-9-1987) Rs. 21,75,537.00 36. Since, the aggregate value of excisable goods falling under erstwhile T.I. 16A cleared during 1981-82 from the factory of M/s. KFI, had exceeded Rs. 15 lakhs, they were not entitled to exemption under Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey failed to submit classification list/price list in respect of excisable goods manufactured in the factory as required under Rules 173B 173C of the said Rules. (iv) They failed to maintain account for the goods manufactured as required under Rules 173G and 226 of the said Rules. (v) They removed the excisable goods without determining duty liability as required under Rule 173F and without cover of gate pass as required under Rule 52A of the said Rules. (vi) They removed the excisable goods from the factory without discharging duty liability as required under Rules 9(1) and 173G of the said Rules. 39. It appears that the said M/s. Kanam Foam Industries have wilfully suppressed the material true and correct information in the declarations filed by them for the financial years 1982-83 to 1986-87 as referred to in para-13 of this notice and also furnished wrong certificates on such declarations and thus availed exemption under Notification Nos. 80/80-C.E., dated 19-6-1980, 83/83-C.E., dated 1-3-1983, 85/85-C.E., dated 17-3-1985 and 175/86-C.E., dated 1-3-1986 as amended with intention to evade payment of excise duty. They have also not shown true and correct value in the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In response to the show cause notice, the appellants - M/s. KFI filed a detailed reply, dated 23-12-1988 along with annexure running to about 748 pages. A separate reply was filed by M/s. KRC vide dated 9-5-1989 along with annexure running to 919 pages. 5. Thus the main contentions raised in the show cause notice is paraphrased in paragraph-10 of the Memorandum of Appeal by appellants which is reproduced herein below :- 10. The main contentions raised in the show cause notice were: (i) That during the period Dec. 82 to 9th Sept. 87 KFI were not manufacturing Micro Cellular sheets (M.C. Sheets) or Hawai chappals and sheets as indicated in the books of accounts but all such clearances of M.C. sheets and Hawai chappals were in fact rubber foam goods manufactured and cleared as M.C. Sheets and Hawai chappals and thus the entire value of sales of M.C. Sheets and Hawai chappals were to be considered as rubber foam goods and excise duty to be paid on the same. (ii) Kanam Rubber Company Pvt. Ltd., was showing in their records purchases of rubber foam goods not only from KFI but also from other companies like Thomson Rubber Industries, Mahavir Industrial Enterprises, etc. But a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88.00 1982-83 Rs. 45,31,874.00 1983-84 Rs. 46,73,843.00 1984-85 Rs. 37,85,498.00 1985-86 Rs. 39,55,642.00 1986-87 Rs. 48,32,955.00 1987-88 Rs. 21,75,537.00 6. The show cause notice alleged that duty amount of Rs. 1,01,98,239.14 was evaded by KFI as given in the Tabular Column below :- Year Resin (Rs.) Spl. (Rs.) Total (Rs.) 1982-83 (from Dec.1982) 9,75,561.40 48,778.07 10.21,339.47 1983-84 25,70,613.65 1,28,530.68 26,99,144.33 1984-85 20,82,023.90 1,04,101.19 21,86,125.09 1985-86 21,75,603.10 1,08,780.15 22,84,383.25 1986-87 16,66,477.50 - 16,66,477.50 1987-88 3,37,768.50 - 3,37,768.50 98,08,048.85 3,90,190.09 1,01,98,238.14 The show cause notice proposed to confiscate the seized goods valued Rs. 15,025 from KFI apart from the proposal to impose penalty for the violations of Rules 173B, 173C, 173G, 226 and Rule 9(1). 7. The same show cause notice was issued to KRC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70,39,900.66 under Rule 9(2) of Central Excise Rules, 1944 read with Section 11A of Central Excises and Salt Act, 1944 and require M/s. Kanam Foam Industries, Kirti Nagar In Area, New Delhi to forthwith pay the aforesaid amounts. (vi) Foam rubber goods valued at Rs. 15025/- seized from the factory premises of KFI were provisionally released and since the party failed to produce the goods in terms of the bond, I order for enforcement of bank guarantee to the extent of Rs. 5000/- towards value of the goods. (vii) Foam rubber goods valued at Rs. 49,440/- seized from the godown premises of Kanam Rubber Co. and listed in Annexure B to the Panchnama dated 10-9-1987 are held to be liable to confiscation under Rules 173Q and 226 of the Central Excise Rules, 1944. However, since these goods have already been released provisionally to the party and the party failed to produce the goods in terms of bond, I order enforcement of Bank guarantee to the extent of Rs. 17,000/- towards value of the goods. (viii) In view of serious nature of offence committed by M/s. KFI, I impose a penalty of Rs. 7.25 lakhs on M/s. KFI under Rule 173Q of Central Excise Rules, 1944 and penalty of Rs. 1000.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are used for purposes other than retreading, re-rolling of old tyres are wholly exempt from duty and hence goods in question normally cavity sheets and other rubber foam sheets would be wholly exempt from payment of duty. 9(ii). Regarding Classification : It is argued by the learned Advocate that there is no dispute regarding MC sheets and chappals being wholly exempted as no latex had been used in the manufacture of these items from rubber using Coagulated rubber only. It is urged that the item fall under erstwhile T.I. 16A(2) and not under T.I. 16A(1) as classified by the Department, and hence the exemption cannot be denied to them. The item is not latex foam sponge and cannot be so considered and its classification has to be done under T.I. 16A(2) only as sheets. It is manufactured in a mould and, what comes out is in the form Scooter Seat an article of latex foam sponge, it is in the form of sheet and not latex foam sponge by itself. Latex foam sponge can be in any shape, even of a shape of scooter seat and hence as a sheet it should be classified under T.I. 16A(2) and not as a latex foam sponge, as above by Department. It is sold as Cavity Sheet, as admitted by the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch plates, sheets and strips of unhardened rubber would be covered by sub-item (2) as are not made of latex foam sponge. Sub-item (1) of T.I. 16A is a more specific tariff entry to cover mattresses, cushions etc of latex foam sponge than sub-item (2) which is applicable to plates, sheets and strips of rubber other than that of latex foam sponge. I, therefore, reject party s contention that rubber foam goods in question were properly classifiable under T.I. 16A(2) during the relevant period and hold that classification of these products under T.I. 16A(1) as indicated in the show cause notice is the correct classification. 11. We are agreeable with this finding that the goods emerging from the mould are not in the nature of plates, sheets and strips. They emerge in the shape of latex foam sponge in that there are cavities. They are put to uses of pillows and mattresses and not as plates which are put to uses of re-rolling, retreading or repairing of tyres as referred to in the Notification No. 71/68-C.E., dated 1-4-1968. Those emerging in the form of latex foam sponge cushion seats in unfinished or naked foam have been held to be classifiable under T.I. 16A(1) in the case of CCE, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e thereunder articles made of latex foam sponge is, therefore, hardly relevant for classification of the subject seats. We hold that the original entry Latex foam sponge covered latex foam sponge in all its forms and varieties and hence the subject seats too were covered by it." This ruling has again been followed in the case of Collector of Central Excise, Madras v. Apex Rubber (P) Ltd., as reported in 1987 (32) E.L.T. 593. Paragraph-6 is reproduced below: 6. The point for decision in this appeal is whether the products in dispute be classified under TI 16A(1) or under T.I. 68. Item 16A(1) of the C.E.T. prior to 1-3-1982 read as latex foam sponge". After 1-3-1982 also, the item read as latex foam sponge . The explanation to the item includes articles made of latex foam sponge. The goods were cleared as latex foam sponge in specific shapes and sizes both before and after 1-3-1982. The Appellate Collector was of the view that latex foam sponge in specific shapes and sizes are classifiable as motor vehicle parts under TI 34A prior to 1-3-1979 and under TI 68 as non-specified motor vehicle parts after 1-3-1979. The process of manufacture has been set out by the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ruling of Pelisetty Somasundaram (P) Ltd., case (supra). This case deals with general principles of interpretation of taxing statute and does not have a direct bearing on the classification of the Tariff Entry and hence in view of the ruling in M.M. Rubber Co. s case (supra) and that of Apex Rubber (P) Ltd. s, case (supra), settling the issue of classification, the ruling relied by the learned Advocate is on general principle of interpretation of Taxing Statute would not be of much help. Moreover admittedly the appellants themselves were classifying these products under T.I. 16A(1) and as such, the learned Collector s finding is confirmed. As regards chappals, there is no dispute regarding its classification under T.I. 36. As regards classification of the impugned goods in the new Tariff, CET 1985, the appellants have not raised any dispute about it before the lower authorities and also before us and no arguments have also been placed. Thus no findings are called for. 13(i)(B). Grounds regarding allegation KFI never produced MC Sheets Hawai Chappals : The charge is that the appellants had suppressed the production and clandestine removal of foam rubber goods. It is alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no documentary evidence had been furnished by the party to show that any damaged pieces of MC sheets were converted into rubber compound and latex rubber, which is generally used for manufacture of foam rubber goods was actually used for dry rubber goods. The learned Collector has also held that in the absence of any authoritative basis to work out the input/output ratios, particularly with regard to requirements of dry rubber and other chemicals, it is difficult to accept the party s plea that quantity of pending stock of semi-finished goods shown in the balance sheets represented the quantity of rubber compound available with the factory for manufacture of dry rubber goods and that for manufacture of one MC sheet it required 2.5 kg. of rubber compound and for manufacture of one Hawai sheet, it required 2.2 kg. of rubber compound. He has also upheld Department s contention that KFI could not have manufactured and sold MC Sheets and Hawai chappals of the value shown to have been sold by them in their balance sheets for the respective years, since they are found to have been selling dry rubber in the form of rubber compound and apart from the expenditure involved in purchase of othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-1985 to 31-3-1986 of Rs. 8484.00; period 1-4-1986 to 31-3-1987 of Rs. 11,57,518.00 and 1-4-1987 to 9-9-1987 of Rs. 3,20,331.00 - as those of value of clearance of rubber foam goods is wrong for several reasons stated by them in the written replies. 14(ii). As regards the allegation in show cause notice that the declarations given during the relevant time, KFI did not indicate the manufacture of MC sheets and Hawai chappals, they have stated that KFI was engaged in manufacture of rubber goods right from 1971. During the relevant time, i.e. prior to 1978 there was no exemption to rubber foam goods manufactured by SSI. Hence, excise duty was paid during the relevant time. Necessary classification lists were duly filed in this regard. In the Classification List production of MC sheets were specifically shown and exemption was claimed. They corresponded with Department during 1978 when Notification 71/78 was introduced regarding the total value of clearances of rubber foam goods during the preceding financial year. In the documents, Classification list and correspondence with Department, production of MC sheets had been shown. The annual value of clearances of rubber foam goods righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 1971 onwards. They state that right from the time they started production of rubber foam goods, MC sheets, it was never their practice to maintain separate daily production register for MC sheets; as what was produced was sold to the customers. All the sales of MC sheets were duly mentioned in the delivery challans, invoices, sales register, ledger entries and balance sheet. They state that there is a separate section called dry rubber section in the factory to manufacture MC sheets and later on Hawai chappals. They state that the very purpose of starting the dry rubber section in their factory apart from the latex foam section, was to make use of those dried (coagulated) rubber latex which over a period of time gets spoiled by becoming dry which could otherwise be sold only as scrap. The coagulated rubber latex can never be used for making latex foam sponge goods. They state that right from 1971 onwards this dry rubber latex was used in the dry rubber section along with bought out dry rubber (RMA) and synaprene (synthetic rubber) to make MC sheets, Hawai chappals etc. Hence, they deny the charge that they never produced these items and value of clearances of MC sheets and Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing periodical returns showing consumption of RMA (Raw rubber) to the Rubber Board. (Emphasis supplied by us). They had produced balance sheets and the ledgers as the basic documents apart from the sales invoice and purchase invoices, giving all the details and also payment of rubber cess for manufacture of MC sheets (documents also filed before us as annexures). They state that the learned Collector was not at all justified in rejecting these documents and the great detailed corroborated and unflinging evidence produced by them. The learned Collector had taken a view that no documentary evidence had been produced in respect of 1976 and hence on this basis had rejected the entire evidence. They state that they produced the documents in annexure D enclosed as Anx. 14 to written submissions but the learned Collector had chosen to ignore these vital pieces of evidence in their favour to deny the allegations as false. They state that Collector had taken a view that 6 kgs. of rubber compound are needed for making one MC sheet, is based on their project report. They state that project report had considered the MC sheets of size and thickness of 36x38x6 inch, but the actual production as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. KFI) as regards both of them having stated that there was no cutting machine and show cause notice drew an inference that MC sheets could not have been manufactured; they state that it had been explained that Shri Varghese was merely stating that KFI did not have a cutting machine for making Hawai chappal. They state that for manufacture of MC sheets no cutting machine was needed. It is contended that as soon as the rubber sheets are made in green stage itself, cutting is done for the required size by hand blades and, thereafter the green sheet is cured and thereafter it is sold. Therefore, there is no need for a cutting machine for MC sheets. They say that Principal Collector Shri T. Roy had seen this on his visit to the factory and had been satisfied on this point. Therefore, in the show cause notice, the Department had attempted to raise an unnecessary confusion regarding the statements of Shri Varghese and Shri Punnose. 14(ix). As regards the reliance of the workers of Jagdish Chand S.P. Sharma by the Department regarding non-manufacture of MC sheets during the last three years, it is explained that Shri S.P. Sharma had given the statement that the production of MC sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se evidences and non-appreciation of the evidence on record and not giving any findings to reject them also would make the order unsustainable in law. The learned Collector had also not considered the evidence of Shri Punnose, which had not been demolished by cross-examination also. The Department had engaged a very competent Advocate and the witnesses had all been cross-examined and the testimony of the witnesses of S/Shri Punnose, Varghese, Jagdish Chand and S.P. Sharma, was bound to have been accepted. That non-consideration of these evidence has made the order bad in the eye of the law. 16. In purchase ledger, dry rubber had been referred, which meant raw rubber other than latex or synthetic rubber. In sales ledger also rubber foam goods had been distinguished with other goods of Hawai chappals, MC sheets and they had also been referred to as dry rubber goods. But the Department had come to a wrong conclusion that they had sold dry rubber as such in dry stage. Such a conclusion is wrong as no rubber cess is leviable on dry rubber. The cess is paid on consumption of dry rubber for manufacture of dry rubber goods like MC sheets and chappals. They had purchased synthetic rubbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have noted in detail the charge on this point, the finding of the learned Collector, the grounds and arguments urged by the learned Advocate. The learned Collector has totally rejected the evidence both oral and documentary placed by the appellants with regard to the manufacture of MC sheets and Hawai Chappals. The question is as to whether the learned Collector is justified in rejecting the evidence placed by the appellants and if not how much reliance can be placed to compute the total value of clearances for these two products. The learned Collector has come to this conclusion due to the fact that the appellants were not declaring to the Assistant Collector and filing details of input and output ratio as per the notification regarding the production of these two items; absence of records of production, that they had failed to explain the huge difference between purchase and sale figures of dry rubber and they did not disclose or even hinted at the possibility of sale of MC sheets and Hawai chappals having been accounted for under the head of dry rubber. That they had not produced documentary proof to show that any damaged pieces of MC sheets. That in absence of any authoritative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llector. However, both of them filed affidavits clarifying their stand and they were subjected to cross-examination by the Advocate engaged by the Department and the Department was not able to shake their testimony inasmuch as that the items were manufactured and also in respect of Jagdish Chand s statement that he had joined only 10 days ago. The attendance register had been placed to show that Jagdish Chand had joined the service only 10 days prior to search and raid done by Department. The Department has not placed independent evidence to contradict the stand of these witnesses. The statement of Punnose is an independent testimony. He was only a manager and not the proprietor. The Department despite their cross-examination has not been able to show any contradiction or variations in their stand with that of Varghese or other workers. The appellants has produced the affidavit of two other workers namely Mani Ram and K.P. Singh to show that these items were manufactured. The Department did not choose to cross-examine them. Therefore there is sufficient corroboration of production of these goods. 18. As regards the non-production of proper evidence of getting the rubber sheets cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent evidence to prove the charge that the appellants had cleared Rubber Foam goods in the guise of MC sheets/Hawai chappals, and hence this charge fails. But the extent of clearances of both the items is required to be verified to arrive for computing the total clearances of the goods for the period in question. We make it clear that balance sheet alone cannot be taken as a proof for the quantity of clearances of the two items but the appellants should corroborate the figures in balance sheet with the evidence on records, as we have held that the evidence placed before the authorities requires acceptance. 19.1 (C) Grounds made out against the allegation regarding purchase of Rubber foam goods by KRC to be treated as were of KFI (i) The show cause notice alleged that purchases of rubber foam goods by KRC from different manufacturers/suppliers, other than from KFI, were all to be treated as those manufactured and supplied by KFI, has been vehemently denied as totally incorrect. They have produced voluminous evidence to contradict the stand of the Department and to prove that both the Units are having independent purchase/sales and to show that the allegation is unfounded. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They contend that the learned Collector had accepted about the payments made to Mahavir Jain and, therefore, there was no reason to have accepted the evidence of payments made to other parties also. 19.2 As regards the allegation that whatever goods purchased by KRC is to be deemed to be purchased by KRI, he contended that the learned Collector had accepted the evidence of Mahavir Jain but the rejection of evidence of Thomas Kuruvilla of United Enterprises was wholly unjustified. Thomas had given his statement in a state of shock as he had been bedridden due to fracture and major accident. Later he filed affidavit and without the cross-examination. Evidence of payment by KRC to Thomas and United Enterprises had been placed on record. Therefore, the rejection of their evidence was wholly unjustified. He contended that if deduction to these clearances, which are legitimate are given then the entire clearances would be within the exemption limit. He relied on the ruling rendered in the case of Ramlal Khataria v. Collector of Central Excise, Patna, reported in 1992 (43) ECR 310 in support of this plea. 20. As regards the allegation of manufacture by KRC as that of Kanam Rubber I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for sales to KRC, the learned Collector has not referred to this evidence. Therefore, a statement, which has been resiled loses its evidential value. If the first statement is corroborated by other circumstantial evidence and other documents, then the resilement has no effect and first statement becomes acceptable. In this case, the learned Collector has held that no documentary evidence of payment or transportation charges has been taken as a circumstance to hold that clearance was done by Thomas KRC. It is noticed that Thomas s statement is not corroborated by Varghese or Punnose or anyone from KRC. There are ledger entries in his account books for transport payment also. At best, this transaction raises a suspicion, but it cannot be a sole instance to uphold this charge. In fact the Department has not placed any evidence in respect of United Enterprises and its clubbing of clearances with KRI aggregate clearances is wholly unjustified. 22. The appellants have pointed out that KRC and KRI are independent units. KRC being a Private Limited Company and KRI is an independent proprietory concern, they have been having mutual business and maintained records. The contention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpound; (xi) Sales of MC sheets, rubber compound etc. were made by TRI on regular invoices and payments received through cheques; (xii) No verification has even been made by the Department from the customers as to whether they received MC sheets, rubber compound or rubber foam goods; (xiii) Officers were regularly visiting the premises of KFI and TRI because of the declaration given by KFI to the Provident Fund Department: (ii) They rely on the order of the Provident Fund Commissioner who has held on investigation that TRI workers and KFI workers are different and independent as TRI had different plant, machinery and manufacturing facilities and hence workers of both the Units cannot be clubbed for Provident Fund purpose. The learned Collector had ignored to look into the evidence, which is not justified. (iii) They contend that the Department had not placed any evidence to prove this charge and the learned Collector had also not got any reasons to hold that TRI never manufactured MC sheets, rubber compound and latex adhesives. They contend that TRI is an independent unit with separate plant and machinery for manufacture of MC sheets and rubber compound etc. and they were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be within the exempted limit. The officers had visited the office of NISI Trading at Devnagar at Karol Bagh in 1987. But the owner of the building one Shri Tilak Raj had stated that the NISI Trading, his tenants, had vacated the building. The Department however had without any shread of evidence concluded that all purchases made by TRI from NISI Trading should be considered as those done by Kanam. The learned Advocate stated that this could not be done with any corroborative evidence at all. The reference is a mere conjucture and Department had not proved this charge. The statement of Shri Tilak Raj supported the appellants and the learned Collector was not justified in ignoring this aspect of the matter. He contended that total supplies by NISI trading to TRI was less than Rs. 2 lakhs, even if they were added the clearances would be less than the exempted limit. 24. On a careful consideration of this allegation, we find that the learned Collector has given a very brief finding on this issue. He has proceeded on the basis of the statement of Punnose that TRI is under one roof in a hall which is connected with our factory , and also has proceeded on the basis of the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited company with eleven shareholders and five directors. It is stated that Varghese is one of the shareholders of the company and one of the directors and hence he could not be said to control the affairs of KRC. KRC is basically a trading company being the main distributor of titanium dioxide manufactured by Travancore Titanium Products Limited, a public sector undertaking. KRC had been in business right from 1962 much before KRI had ever started. More than 80% of the turnover of KRC was from Titanium Dioxide and the sale of MC sheets or rubber foam goods formed less than 20%. It is situated in a busy trading area namely Darya Ganj and therefore, it is not easy to stock and sell some of the goods like rubber foam goods, MC sheets etc apart from the major activity of dealing in Titanium dioxide. They also buy and sell natural rubber and latex for which they hold licence from Rubber Board. They were filing proper returns to the Rubber Board. The price of rubber foam goods sold by KFI to .... was the same as the price at which rubber foam goods were sold by KFI to KRC. They had produced the invoices and all the necessary evidence and thus they being independent persons with diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as reported in 1989 (39) E.L.T. 143, para-9. 28. On a careful consideration of this charge of under-valuation, we find that the learned Collector has not considered the various rulings given by the Tribunal, High Court and Supreme Court on this point and the Department has failed to value the goods as per Section 4 of the Act. We find that the price list found in the residence of Verghese does not pertain to KRC. The evidence shows that Verghese was to proceed legally against the competitor M/s. Patni Foam Industries who was misusing their brand name. The evidence and defence of the appellants on this charge has not been appreciated by learned Collector. If is on record that the learned Collector has dropped the valuation of rubber foam goods as of price list of Patni Foam. The prices of different manufacturers were referred to appellants to show that their competitors were selling the rubber foam goods at higher prices. They have also contended that sales were made to Karnataka Government Unit and therefore, there cannot be under-valuation. The learned Collector s finding is not in keeping with the law laid down under Section 4 of the Central Excises Salt Act, 1944 and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,47,141.00 1-4-1986 to 31-3-1987 Rs. 29,558.00 (iv) They state that TRI was not manufacturing and clearing MC sheets but while computing the value of clearances of MC sheets in the impugned order, the value of clearances of rubber compound and latex adhesives had also been added, hence it required to be excluded and give the figures as follows to read in Sl. No. 4: 1-2-1982 to 31-3-1983 Rs. 4830.00 1-4-1983 to 31-3-1984 Rs. 4360.00 1-4-1984 to 31-3-1985 Nil (v) They contend that purchase by TRI from parties other than Thomson Rubber Industries should not have been taken for computation of rubber foam goods as manufactured by KFI and hence they say that Sl. No. 5 of the annexure to impugned order should read : 1-2-1982 to 31-3-1983 Rs. 99,580.00 1-4-1983 to 31-3-1984 Rs. 1,25,415.00 (vi) They state that purchases by KRC of Thomson Rubber Industries and United Enterprises cannot be included in the clearances of KFI for the reasons stated supra by them and if these figures are excluded then Sl. No. 6 annexed to the impugned order should read as : 1-2-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrendered only when the officers were duly satisfied with the clearances of rubber foam goods by KFI which were well within the exemption limit. They state that the Department could have refused to accept the surrender of licence, if they were of the view that the value of clearances of MC sheets were also to be added for computing for the value limit for exemption from licencing control. They state that they were maintaining simplified production register which had been duly verified by the Department periodically. It is further stated that the Department had seen the production of MC sheets during the periodical visits and hence the Department was aware of the manufacturing activity of MC sheets and hence longer limit of limitation cannot be applied and all demands beyond six months are hit by time bar. 32. The appellant gave up the ground of denial of principles of natural justice with regard to non-supply of some relied documents. 33. As regards the confiscation of goods, the learned Counsel referred to the paragraph 38 of the impugned order, wherein the learned Collector had accepted the defence of the appellants but yet had gone on to impose redemption fine which is per s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that Notification No. 111 /78 does not contain any clause or stipulation requiring them to take out a Central Excise licence when they reached the value of clearance of Rs. 10 lakhs. They have contended that after issue of Notification 11/88, dated 15-4-1988, they had applied for a Central Excise Licence, which had been granted to them on 17-6-1988. Among other defences, they urged that the demands were time barred as the show cause notice had been issued on the basis of earlier show cause notice, which was under adjudication. 37. The learned Collector rejected all their pleas and confirmed the demands for the period 10-9-1987 to 31-3-1988. 38. We have heard Shri V. Lakshmikumaran, the learned Advocate for the appellant and Smt. Shanthi Sundaram, learned SDR. We find that the present proceedings and the show cause notice, dated 13-10-1988 is based on the previous show cause notice, dated 18-12-1987. The show cause notice, dated 18-12-1987 is based on the searches carried on in the premises of the appellant on 10-9-1987. After adjudication, the order was passed on 12-6-1990. We have already given our findings against the order-in-original, dated 12-6-1990 in the other appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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