1988 (11) TMI 215 - AT - Central Excise

Issues Involved:
1. Ownership of exercise note books.
2. Validity of statement by Shri V. Agarwal.
3. Capacity of production of the appellant firm.

Issue-wise Detailed Analysis:

1. Ownership of Exercise Note Books:
The primary issue was whether the two exercise note books, recovered by the Central Excise Anti-Evasion officers, belonged to the appellant firm. The department alleged that these books contained entries of chokes despatched by the appellant firm, indicating clearances without payment of duty. The appellant firm denied ownership, arguing that the books were miscellaneous and not regular account books, containing entries of items unrelated to their business. They contended that the books might belong to other units sharing the same premises. The adjudicating authority linked the books to the appellant firm based on the name "S.M. Enterprises" on the covers and the statement of Shri V.N. Agarwal. However, the Tribunal found substantial merit in the appellant's plea that entries of unrelated goods in the books indicated they did not belong to the appellant. The Tribunal remanded the matter to the adjudicating authority to determine if any entries in the books related to goods not dealt with by the appellant. If so, the books could not be linked to the appellant firm.

2. Validity of Statement by Shri V. Agarwal:
The statement of Shri V. Agarwal, a partner of the appellant firm, dated 17-8-1982, was crucial to the department's case. This statement allegedly admitted that the exercise books reflected despatches of chokes not recorded in regular accounts to evade duty. The appellant firm challenged the voluntariness and legal validity of this statement, arguing it was made under duress and recorded before an inspector, not a gazetted officer as required under Section 14 of the Central Excises & Salt Act. The Tribunal noted that the statement's validity was questionable, especially since some entries in the books pertained to goods unrelated to the appellant's business. The Tribunal directed the adjudicating authority to reassess the statement's significance based on the findings regarding the ownership of the books.

3. Capacity of Production of the Appellant Firm:
The appellant firm argued that their production capacity was insufficient to manufacture the quantity of chokes alleged by the department. They presented a certificate from Chaudhary Trading Co. and later from M/s. B. Dev & Associates, indicating their machine's capacity to produce only 100-125 chokes in 8 hours. The department countered that the firm could have purchased wire-wound bobbins from outside, and the factory could produce more chokes if operated continuously. The Tribunal considered this issue secondary, contingent on the ownership of the exercise books. If the books were not linked to the appellant, the capacity argument would be moot. Conversely, if the books were linked, the production capacity would need further scrutiny. The Tribunal did not provide a definitive finding on this issue, pending the remand's outcome.

Conclusion:
The Tribunal allowed the appeal by way of remand for a de novo decision, directing the adjudicating authority to determine the ownership of the exercise books and reassess the statement of Shri V. Agarwal. The Tribunal also ordered the refund of Rs. 1,50,000/- deposited by the appellant under Section 35F of the Act, as the original order was set aside.

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