9911796707
TMI Blog1993 (4) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 and Rule 226 of the said rules). (ii) M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been observed from the seized records that mostly the sales were on cash payment and on the invoices the names of the buyers were not indicated. In absence of such particulars, the buyers could not be identified. This has been done with intention to suppress the clearances of foam goods in the garb of sale of chappals." 3.3 21(f) reads as follows : "As already stated in the foregoing paragraph that M/s. Kanam Group has one more concern M/s. 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. KFI who manufacture these goods in the same premises and is a sister concern. This also tends to show that the purchase of rubber foam products has been shown in the books by M/s. TRI to actually cover the clandestine removal of rubber foam products manufactured in the factory of M/s. KFI. It also appears that the latex reported to have been sold to M/s. Nisi 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed exemption both from the licencing control and also from the payment of excise duty. They were also permitted to clear goods on the basis of value declared in 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irms 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 Notification No. 80/80-C.E., dated 19-6-1980 for the year 1982-83, and accordingly duty was leviable on all goods cleared from the factory right from 1-4-1982. 37. Since the aggrega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired 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 invoices/bills for the sale of Rubber foam goods and contravened the provisions of the Central Excise Rules as aforesaid with intent to evade payment of duty. Therefore, the extended period of five years as provided under Section 11A of the Central Excises and Salt Act, 1944 is applicable in this case. 40. Since M/s. KFI have contravened the provisions as aforesaid, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 all such purchases of rubber foam goods from units other than KFI were all to be alleged as purchases from KFI only and thus excise duty ought to have been paid on those quantities of rubber foam goods by KFI. (iii) The sales of rubber foam goods by TRI were also to be construed as those manufactured by KFI and duty to be paid by KFI on all quantities of rubber foam goods sold by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39.47 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 for the confiscation of goods valued Rs. 49,440/- seized from the premises apart from imposition of penalty on them under Rule 52A." 7. The learned Collector has summarised the replies and the submissions made before him in pages 7 to 26 of his order. Pages 27 to 48 deal with his finding on the points raised before him. The final order passed by the learned Collector is at para-40 at page-49 of his order, which is reproduced hereinbelow: "40. In view of the finding above, I order as under :- (i) Value of MC Sheets/Hawai chappals sold by KFI during the years 1982-83 to 1987-88 shall be treated as the value of foam rubber goods manufactured and sold by KFI and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld 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 on M/s. K.R.C. under Rule 52A of the said rules. The balance of the amount covered under the Bank guarantee executed by M/s. KFI is ordered to be adjusted towards the penalty imposed under this order on KFI. As far as the Bank guarantee executed by M/s. KRC is concerned, the balance of the amount after inforcing Rs. 17,000/- towards value of goods of Rs. 1000/- towards penalty under this order is ordered to be returned to M/s. KRC." 8. We have heard Shri V. Lakshmikumaran, learned Advocate for the appellants and Smt. J.M. Shanthi Sundaram, learned SDR for the Revenue. Each ground raised and argument pertaining thereto and its finding is given against each of the ground r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Department and not as latex foam sponge. If the item is such as to be classifiable under both the headings, then only that heading, which is more acceptable has to be assigned. In this context reliance is placed on the ruling rendered in the case of Pelisetty Somasundaram (P) Ltd. v. Govt. of India, as reported in 1984 (17) E.L.T. p. 306, Madras High Court, In the new tariff it requires to be classified under Heading 4008 as a cellular sheet. On a specific query from the Bench, Shri V. Lakshmi kumaran, learned Advocate admitted that the ingredients being identical, the item could be considered as latex foam sponge but as it emerged in the form of a sheet and Scooter Seat, an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merging 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, Madras v. M.M. Rubber Co. Ltd., Madras, as reported in 1984 (15) E.L.T. 198. The finding given by the Tribunal in paragraphs 5 & 6 are reproduced below :- "5. We have carefully considered the matter. A part or accessory of a motor vehicle is one which is ready for fitment to the motor vehicle either as original equipment or as replacement. This is the popular or common understanding of the concept of machinery parts or spare parts. No customer of a part or accessory for his motorcycle or scooter would like to buy an unfinished article which cannot straightaway be used by him for fitment. Cushion seats cleared by the appellants in unfinished or naked form cannot be called a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 respondents as follows: "Latex cushions are made by frothing 60% centrifuged liquid latex by mechanical whipping, after adding necessary frothing chemicals. This whipping is carried out in metal bowls and using wires whisks. Different chemicals required for vulcanisation and improved gelling qualities are also added before whipping. When the frothed latex reached the desired volume, a delayed action gelling agent is added and thoroughly mixed. At this stage when the froth is still liquid, the same is transferred to aluminium moulds, which is to give the desired shape of the article produced. Then the liquid compound starts setting gradually inside the mould. The next stage of vulcanisation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding 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 that they had cleared foam products like mattresses, cushions, pillows etc. in the guise of MC sheets, and Hawai Chappals. The ground relied in the show cause notice is that they had not declared manufacture of MC Sheets and Hawai Chappals in the declaration filed by them with the Central Excise authorities, while claiming exemption from licencing control. The appellants' contention is that they are not required to file declaration in respect of these two items, as the same are exempted goods. The learned Collector has rejected this plea on the ground that there is no stipulation in the notification or in the schedule to the form prescribed under the said notification to the effect that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 other chemicals required for manufacture of MC sheets/Hawai chappals is not at all commensurate with the actual expenditure incurred on purchase of other raw material as shown in the balance sheets or purchase bills. The proof of payments of ST on MC Sheets/Hawai chappals have been rejected by the learned Collector on the ground that KFI had not maintained the required account of consumption of various raw materials for manufacture of MC Sheets/Hawai chappals nor any daily production account of finished goods. He has also held that KFI had prepared accounts to show consumption of dry rubber even when there was no manufacture of dry rubber goods as per their own admission. Hence the learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation 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 right from 1971 was only between Rs. 4 lakhs to Rs. 10 lakhs. They have also filed details of clearances and state that even upto 81-82 the value of clearances of rubber foam goods was of the order of only Rs. 4 lakhs to Rs. 10 lakhs and it cannot suddenly jump to Rs. 35 lakhs to Rs. 40 lakhs from 1983-84 onwards. They state that the correspondence with the Department at the time of surrendering the excise licence would prove that the Department was satisfied with the value of clearances. The officer did not insist for showing the clearances of MC sheets in the declaration. They state that MC sheets were wholly exempt from duty in terms of Notification 71/78. They state that as the goods were wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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 Hawai chappals should be deemed to be the value of clearances of rubber foam-goods. They rely on the register called "latex rubber (coagulated)" manufactured by them which indicated the utilisation of dry rubber latex in the rubber section, to prove their point that dried rubber latex was being used in the dry rubber section for the manufacture of MC sheets and Hawai chappals and rubber compound etc. 14(iv). As regards these findings of the Collector: "On examining the defence plea taken by the Counsel for the party, I find that he is placing reliance on the very same documents of sale to prove manufacture of MC sheets and hawai chappals which have been questioned by the Department as to thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate 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 per invoices seized by the Department discloses that the manufacture of MC sheets were only of the size of 32x36 and 16x16 with 3mm/4mm thickness. This was shown to the Principal Collector and the Principal Collector, Shri T. Roy had also visited the factory and had verified the facts. Hence they state that question of using 6 kg. of rubber compound to produce 2.5 kgs. MC sheet does not arise. They state that they were selling a number of mini sheets of smaller size and smaller thickness. Out of 57810 pieces sold in the year 1983, 32576 pieces were of size 16"xl6"x3 mm and they were mini sheets, their weight was less than 2.5 kg. Hence the inference of the Collector to reject their manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sheets was stopped for three months but wrongly written as three years. As regards Jagdish Chand, it is explained that he had been employed only for 10 days prior to the visit of the officers and his statement that MC sheet was not produced for the last three years is not a correct statement, as he could not have been in a position to verify the facts. It is stated that affidavits of both these workers had been filed before the Collector. Shri S.P. Sharma had been cross-examined by Department's advocate and during the cross-examination he had confirmed that MC sheet production had been stopped only for three months. Therefore, they contend that the Collector was not justified in rejecting the testimony ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 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 rubber and paid ST in form 1 for use as a raw material in the manufacture of MC sheets and chappals. The learned Collector had failed to appreciate these evidences referred at pages 389 to 413 regarding rubber licence, licence to acquire rubber and of payment of rubber cess, certificate issued by CA for consumption of raw rubber. They had produced the chart of total transaction between KFI and KRC annexed at page 910 of the Paper Book but for the entire period of 1982-87, the learned Collector had ignored it and not given any finding thereto. The extract of sales register at page 910 of Paper Book is also not commented by learned Collector. There is proof of payment for purchase by KRI to KRC and they were ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 basis to work out input/output ratio, it is difficult to accept the party's plea. The other grounds have already been noted supra and they need not be repeated here. With all due regard to the learned Collector, this line of reasoning does not appeal to us. There is certainly some laches on the part of the appellant in not maintaining the production records and their explanation also is too flimsy and unacceptable. But, there are several other clinching records and factors, which cannot be rejected and require due consideration. The evidence, which in our opinion, cannot be rejected and requires acceptance are noted below. The appellants have relied on the delivery challans, invoices, sale registers, ledg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir 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 cut into chappals from M/s. Rub Plast, the rejection done by learned Collector is also not proper for the single reason that the Department had recorded the statement of Proprietor of M/s. Rub Plast and he had confirmed about the job work done by him. There is on record charges paid for transportation of rubber sheets. The party has admitted having not paid any cutting charges but has explained that the party was giving the waste towards the charges. Although, this version raises suspicion but as is well-settled that suspicion however grave it might be, it cannot take the place of proof. Moreover the Department has not chosen to cross-examine the statement of proprietor of M/s. Rub Plast. The statement of par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 state that KRC was purchasing rubber foam goods from the following suppliers/manufacturers, for which evidence has been placed both before the lower authorities and before us: (i) Thomson Rubber Industries (ii) Mahavir Enterprises (iii) Paradise Foam Industries (iv) Venus Rubber Industries (v) En Kay Foam Udyog (vi) Harmilap Foam Industries (vii) Jay Fee Foam Industries (viii) United Enterprises On the basis of evidence produced, it is contended that the Collector should have accepted the same and should have held that the charges were unsustainable. The Department had relied on the statement of Thomas Kuruvilla of M/s. Thomson Rubber Industries, who had stated that they had not supplied rubber foam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Industries and that of TRI, the learned SDR reiterated the findings of learned Collector on this point. 21. On a careful consideration of this charge, it has to be noted that learned Collector has upheld this charge solely on the basis of the statement of Thomas Kuruvilla, Proprietor of M/s. Thomas Rubber Industries. The effect is that the aggregate value of all the purchases of the rubber foam goods made by KRC from manufacturers other than KFI are included in the aggregate value of clearances of rubber foam goods of KFI. It follows that the learned Collector is treating both the units as one and the same in so far as this item is questioned. The learned Collector has observed that Thomas Kuruvilla had admitted on 24-9- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 the appellants is that the KRC had purchases of foam rubber goods from several other manufacturers also. M/s. KRC has maintained separate accounts, filed separate Sales Tax/Income Tax returns and made payments towards taxes and had been carrying on business in other goods, which amounted to 80% of their transactions. The learned Collector has not given any findings on these pleas. The learned Collector has accepted the plea on independent purchases of KRC in respect of Mahavir Industrial Enterprises, thereby admitting KRC to be having independent transactions also. Therefore, a solitary tainted evidence of Thomas Rubber Industries is not sufficient to uphold this serious charge and we are constrained to set aside the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned 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 preparing their own balance sheets. 23.2 (E) Grounds relating to allegation of purchase of rubber foam goods by TRI to be treated as rubber goods manufactured by KFI: (i) They give the following grounds to deny the charges: (i) At the time of inception of TRI's manufacturing activity a conscious decision was taken by TRI not to manufacture rubber foam goods lest there could be an allegation that the clearance of rubber foam goods manufactured by TRI were to be treated as clearance of rubber foam goods by KFI. (ii) Simultaneously another conscious decision was taken not to purchase rubber foam goods from KFI lest there could be an allegation that the price charged was not genuine. Accordingly all the rubber foam goods sold by TRI were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of Varghese, that TRI did not own any plant and machinery and utilised the plant and machinery installed in the premises of KFI. The learned Collector has held that dry rubber goods like MC sheets claimed to have been manufactured by TRI and the purchases of foam rubber goods made by TRI, from other manufacturers/traders were nothing but foam rubber goods manufactured and cleared from the factory of KFI. Hence, he has held that the value of dry rubber goods claimed to have been manufactured by TRI and the value of foam rubber goods claimed to have been purchased from other manufacturer/traders is liable to be included in the aggregate value of foam rubber goods manufactured and cleared by KFI. In this context, the appellants are relying on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 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 different activities, the learned Collector not upholding their contention was not justified; moresoever when fully covered citations on this point had been relied by them (The Collector of Central Excise v. Vikrama Engineering Co., 1989 (39) E.L.T. 143; Bajaj Electronics v. Collector of Central Excise, 1990 (47) E.L.T. 462; and Order No. 55/89A). 25.2 They also relied on the invoices of other rubber foam manufacturers which were in the Department's premises to show that the price of rubber foam goods by those manufacturers were comparable with the rubber foam goods manufactured by KFI, but the learned Collector had not taken these evidences into consideration at all, which was not justified. They state that the learned Collector had adopted the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of rulings given in the case of Bajaj Electronics; Vikram Engr. Co. 's case; CCE v. Babul Products, Cosmos Rubber Works v. UOI and Kantilal v. Union of India (supra). In view of this case law, the matter requires to be reconsidered by the learned Collector and we direct him to re-consider de novo on the question of undervaluation in the light of these citations, and our finding that KRC and KRI clearances cannot be clubbed and we direct the ld. Collector to take into consideration the submissions of the appellants in this regard before passing a fresh order. 29. (G) Grounds regarding quantum of duty adopted by Department: (i) They state that the calculation of duty has been wrongly arrived at. They state that the total sales value of rubber foam go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 (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 : 1-2-1982 to 31-3-1983 Rs. 1,56,070.00 1-4-1983 to 31-3-1984 Rs. 2,02,855.00 1-4-1984 to 31-3-1985 Rs. 5,52,290.00 1-4-1985 to 31-3-1986 Rs. 4,54,300.00 1-4-1986 to 31-3-1987 Rs. 5,07,765.00 They state that if correct duty valuation is taken even as per the Department's case, the duty liability would be only Rs. 19,79,137.30 and that no duty would be payable, if their contentions are accepted. In view of our findings given on the above charges, this issue requires to be redetermined and we remand this issue for reconsideration in the light of our findings and the defence taken by the appellants. 30. (H) Grounds pertaining to confiscation of goods in the premises of KRC: (i) It is contended by the appellants that goods were seized from the premises of KRC vide panchnama, dated 10-9-1987 on the reasonable belief that these goods cleared from KFI were not accounted for by KRC and that John Sebast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 se illegal and not maintainable at all and hence even penalty is not imposable. 34. We do not find any substance in the plea of the appellants on the time bar. The appellants having surrendered the licence have given an impression that they were not going to manufacture MC sheets and chappals, but had been clearing it on manufacture. They should have obtained clarification from the Department on the changed classification, in which they thought, the goods fell in. Therefore, the findings given by the learned Collector on this aspect is maintainable and has to be upheld. However, in the facts and circumstances of the case, the penalty imposed is set aside and the matter is kept open for the learned Collector to reconsider this aspect. In the result the appeals are allowed by remand for re-determination on the question of under-valuation and quantum of duty in terms of our findings given in this order. E/A. NO. 266/92-D 35. In this appeal, the learned Collector has con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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