1996 (4) TMI 443 - AT - Central Excise

Issues Involved:
1. Confiscation and Redemption of Tread Rubber
2. Imposition of Personal Penalties
3. Seizure of Plant and Machinery
4. Alleged Clandestine Removal and Evasion of Central Excise Duty
5. Validity of Invoices and Purchase Records
6. Capacity and Production Capability of the Factory
7. Application of Rule 9A(5) of the Central Excise Rules, 1944
8. Status of Nicky Rubber and Chemicals as an Independent Unit

Comprehensive, Issue-wise Detailed Analysis:

1. Confiscation and Redemption of Tread Rubber:
The Collector, Central Excise, confiscated 7 rolls of tread rubber weighing 229.500 kgs. packed in sacks labeled 'Shalimar Rubber Industries, Vengola.' These were found without proper documents and were seized. The Collector allowed them to be redeemed on payment of a fine of Rs. 1,000/-. The Tribunal confirmed the confiscation and redemption order.

2. Imposition of Personal Penalties:
The Collector imposed a personal penalty of Rs. 3 lakhs on M/s. Shalimar Rubber Industries, Rs. 20,000/- each on the partners, and Rs. 1,000/- on Shri Boban P. Alias. The Tribunal, considering the totality of facts and circumstances, reduced the penalty on M/s. Shalimar Rubber Industries to Rs. 1 lakh and on the partners to Rs. 10,000/- each. The penalty on Shri Boban P. Alias and the confiscation of plant and machinery were upheld.

3. Seizure of Plant and Machinery:
The Collector confiscated the plant and machinery of M/s. Shalimar Rubber Industries and allowed redemption on payment of a fine of Rs. 20,000/-. The Tribunal did not interfere with this aspect of the order.

4. Alleged Clandestine Removal and Evasion of Central Excise Duty:
The Collector alleged that M/s. Shalimar Rubber Industries had clandestinely removed tread rubber from their factory premises from January 1984 to November 1986, evading Central Excise duty amounting to Rs. 12,88,968/-. The Tribunal found that the case was built on both statements and documentary evidence, confirming the demand for duty.

5. Validity of Invoices and Purchase Records:
The Collector found that M/s. Shalimar Rubber Industries purchased 49,850 kgs. of carbon black using fictitious names. The Tribunal upheld this finding, giving weight to the endorsement by Shri Sunny P. Kunnath that these invoices related to the purchase of carbon black by M/s. Shalimar Rubber Industries.

6. Capacity and Production Capability of the Factory:
The appellants argued that the factory's capacity was limited due to the small number of laborers. However, the Tribunal found that the factory sometimes operated in two shifts, allowing for the production of 1,61,121 kgs. of tread rubber during the period in question.

7. Application of Rule 9A(5) of the Central Excise Rules, 1944:
The appellants contended that the duty should be calculated based on the rate in force on the date of clearance. The Tribunal agreed with the Collector's reliance on Rule 9A(5), which states that the rate of duty applicable shall be the rate in force on the date of the demand notice or the date of payment, whichever is earlier.

8. Status of Nicky Rubber and Chemicals as an Independent Unit:
The Tribunal found that Nicky Rubber and Chemicals was not an independent unit but a dummy unit of M/s. Shalimar Rubber Industries. This was based on admissions by Shri Boban P. Alias and the appellants' reply to the show-cause notice, indicating that Nicky Rubber and Chemicals did not have any independent existence.

Conclusion:
The Tribunal confirmed the demand for duty and the confiscation orders while reducing the penalties imposed on M/s. Shalimar Rubber Industries and its partners. The appeals were disposed of accordingly, with modifications to the penalties.

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