2001 (5) TMI 105 - AT - Central Excise

Issues Involved:
1. Contravention of Central Excise Act and Rules by Devi Rubber Products.
2. Clandestine clearance of tread rubber without payment of excise duty.
3. Reliability of statements made by employees under alleged duress.
4. Computation of production based on sulphur consumption.
5. Penalties and confiscation imposed by the Commissioner.
6. Adequacy of evidence for clandestine removal.
7. Consideration of other raw materials and production formulas.

Issue-wise Detailed Analysis:

1. Contravention of Central Excise Act and Rules by Devi Rubber Products:
The appellants were accused of manufacturing and clearing excisable goods, specifically tread rubber, without paying excise duty from November 1983 to March 1987. This resulted in an alleged duty evasion of Rs. 57,41,330.80. The Commissioner confirmed the duty evasion and imposed penalties.

2. Clandestine Clearance of Tread Rubber Without Payment of Excise Duty:
The Commissioner found that Devi Rubber Products engaged in clandestine clearance of 455.66 tonnes of tread rubber. This conclusion was based on the statements of the manager and foreman, which indicated a production capacity of seven tonnes per day and other corroborative evidence such as raw material purchase invoices and customer statements.

3. Reliability of Statements Made by Employees Under Alleged Duress:
The Commissioner relied on the statements of the manager and foreman, despite their retraction claims of being made under threat and duress. He concluded that the retractions were not substantiated with evidence, and the initial statements contained facts within their personal knowledge. Therefore, the statements were deemed reliable.

4. Computation of Production Based on Sulphur Consumption:
The Commissioner computed production based on the consumption of ordinary sulphur, as detailed in the show-cause notice. The formula used indicated that 110 grams of ordinary sulphur were required for 25 kg of tread rubber. The Commissioner found this computation method valid, despite the appellants' argument that both ordinary and crystex sulphur were used, and the total sulphur required was 375 grams per 25 kg of tread rubber.

5. Penalties and Confiscation Imposed by the Commissioner:
The Commissioner imposed a penalty of Rs. 5,00,000 on the proprietor under Rule 173Q, ordered the confiscation of land, building, plant, and machinery with a redemption fine of Rs. 2,00,000, and imposed penalties of Rs. 25,000 each on the manager, foreman, and clerk. The appellants contested these penalties as disproportionate and unjustified.

6. Adequacy of Evidence for Clandestine Removal:
The appellants argued that the evidence relied upon by the Commissioner, including staff statements and buyer statements, was insufficient to conclusively prove clandestine removal. They highlighted inconsistencies in the statements and the lack of independent corroboration. The Commissioner, however, accepted these statements as sufficient evidence.

7. Consideration of Other Raw Materials and Production Formulas:
The appellants contended that the Commissioner failed to consider the consumption of other raw materials like raw rubber and carbon black, which are principal ingredients in tread rubber production. They also provided a formula from the Rubber Research Institute of India, which was ignored by the Commissioner. The Tribunal found that the Commissioner did not adequately consider the evidence and formulas provided by the appellants, leading to a gross denial of justice.

Conclusion:
The Tribunal set aside the Commissioner's order and remanded the matter for de novo adjudication, directing the original authority to consider all raw materials and evidence provided by the appellants. The re-adjudication was ordered to be completed within three months, keeping all issues open for further consideration.

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