1984 (9) TMI 187 - AT - Central Excise

Summary

Issues Involved:
1. Illicit removal and non-accounting of tread rubber.
2. Faulty electricity meter and its impact on production calculations.
3. Capacity of the manufacturing unit.
4. Determination of production based on electricity consumption.
5. Statements made by the managing partner under alleged duress.
6. Collector's findings on production capacity and unaccounted production.

Detailed Analysis:

1. Illicit Removal and Non-Accounting of Tread Rubber:
The appellants, M/s. Triveni Rubber & Plastics, were found to have removed 5807 kgs. of tread rubber from the factory without proper accounting in their manufacturing records. The Assistant Collector of Central Excise, Kottayam, conducted a search on 30th September 1981, which led to the discovery of unaccounted raw materials and production. The managing partner admitted that the consignment notes covering the 5807 kgs. of tread rubber were related to unaccounted clearances. He also acknowledged receiving raw materials without bills and using them for production, which was then cleared without accounting. This admission was corroborated by another partner.

2. Faulty Electricity Meter and Its Impact on Production Calculations:
The appellants argued that the order of the Collector was based on incorrect calculations of electricity consumption. They claimed that a faulty electricity meter, replaced in May 1980, recorded low consumption. The Collector's reliance on electricity consumption as the sole basis for determining production was challenged, as the appellants used electricity for other purposes besides producing tread rubber, such as lighting and producing masticated rubber for job work.

3. Capacity of the Manufacturing Unit:
The appellants contended that the Collector did not consider the actual capacity of their unit. They detailed the capacity of their mixing mill and extruder, which could produce 360.50 kgs. of tread rubber per shift, translating to a maximum of 108,000 kgs. per annum. They argued that the Collector's computation of 249,891.360 kgs. was unrealistic and did not account for various operational disruptions.

4. Determination of Production Based on Electricity Consumption:
The Collector's determination under Rule 173E of the Central Excise Rules, 1944, was criticized for focusing solely on electricity consumption and ignoring other relevant factors like installed capacity, raw material utilization, and labor employed. The appellants highlighted that during January, February, and March 1980, the power consumption was for producing masticated rubber, not tread rubber. The Collector's failure to recognize this was deemed a significant oversight.

5. Statements Made by the Managing Partner Under Alleged Duress:
The appellants argued that the managing partner's statement, given under nervous tension and fear, should not be relied upon. They claimed that the statement contained inaccuracies, such as mentioning the purchase of tread rubber, which the factory did not engage in. However, the tribunal found the statement credible, noting that it was detailed and corroborated by another partner. The managing partner's admission of unaccounted clearances was seen as a deliberate and planned operation to stay within exemption limits.

6. Collector's Findings on Production Capacity and Unaccounted Production:
The Collector's findings that the factory could produce between 600 kgs. and 1000 kgs. per shift were supported by evidence of production records showing higher outputs on certain days. The tribunal noted that the non-consecutive days of high production indicated potential suppression of production records on other days. The Collector's conclusions were deemed reasonable, given the overall conduct of the appellants and their admissions of unaccounted production and clearances.

Conclusion:
The tribunal upheld the Collector's order, rejecting the appeal. The Collector's determination of production and clearances was found to be based on sufficient grounds, and the appellants' arguments regarding the faulty meter and production capacity were not persuasive. The managing partner's admissions and the factory's conduct supported the charges of illicit removal and non-accounting of tread rubber.