GEORGE VARGHESE Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) AS directed by this Court by judgment dated 20 -2 -1987 in O.P. No. 2483 of 1986 filed by the assessee, the Customs, Excise and Gold (Control) Appellate Tribunal, South Regional Bench at Madras referred to this Court the following question stated to arise from the decision of the Tribunal in Appeal No. ED (MAS) 318/83, viz.

(2.) AFTER obtaining information regarding unauthorised removal of tread rubber from the factory belonging to the assessee, the officers of the Headquarters Preventive in the Collectorate of Central Excise, Cochin intercepted tempo van KRF 7835 containing excisable goods at about 3.00 a.m. on 14 -10 -1981, found it to contain 63 rolls of tread rubber without the cover of any invoice, gate pass, delivery challan or any valid documents and, therefore, they seized the same. Thereafter, they searched the building from which the goods had been brought out and recovered another 56 rolls of tread rubber. The 119 rolls were found to bear the marks 'Super Tread' and 'Tread'. The tempo van was also seized. The driver of the tempo van who is an employee of the assessee stated that the tread rubber under seizure was transported by him from the factory to the assessee and he was not given any documents when the goods were so removed. He also stated that he was directed to go to the godown of the assessee after 12 midnight and arranged for delivery of part of the quantity to one M/s. Metal Rubbers. It was while he was carrying the confiscated goods, the tempo van was intercepted. One of the partners of M/s. Metal Rubber Agencies who was in the van also substantially confirmed the statement of the driver. The department also examined the raw materials consumption by the assessee with particular reference to sulphur and it was found that 6500 kgs. of sulphur have been used from which 2,18,833 kgs. of tread rubber have been manufactured. This tread rubber was unaccounted for and the Collector of Customs, therefore, held that the assessee was liable to pay duty at the appropriate rate on the tread rubber which was valued at Rs. 15,07,015.80. He also found that the tread rubber seized from the building and from the tempo van KRF 7835 had been illicitly manufactured and cleared by the assessee in contravention of the Rules and the goods are liable to be confiscated under Rule 9(2) and Rule 173Q of the Central Excise Rules, 1944. The tempo van was also determined as liable for confiscation, but the van and the tread rubber had been released on execution of bond. The Collector also imposed a penalty of Rupees two lakhs on the assessee. Duty was also demanded in terms of Rule 9(2) read with Section 11A of the Central Excises and Salt Act, 1944. Aggrieved by the order of the Collector, the assessee filed appeal before the Tribunal and the Tribunal upheld the order of the Collector in regard to demand for payment of duty but reduced the penalty on the assessee to Rupees one lakh. The assessee filed application for reference before the Tribunal which , was rejected. It is, thereafter, as directed by this Court, the question of law hereinbefore mentioned was referred to this Court. The assessee George Varghese, Proprietor died on 14 -3 -1989 and his legal representatives have been impleaded as per order dt. 21 -6 -1989 in C.M.P. No. 15115/1989 as shown in the reference order.

(3.) THE authority came to the conclusion that 2,18,833 kgs. of tread rubber have been manufactured and clandestinely removed without payment of duty. This finding was arrived at on the assumption that 6,500 kgs. of sulphur found short with the assessee was utilised for the manufacture of tread rubber which was disposed of illicitly in contravention of the provisions of Rules 9(1), 52A, 53 and 173G of the Central Excise Rules, 1944. It is found that with the said 6,500 kgs. of sulphur a quantity of 2,18,833 kilograms of tread rubber, at the rate of 3 kilograms sulphur for manufacture of 101 kgs. of tread rubber can be manufactured. In that case it was held that the said quantity viz. 2,18.833. kgs. of tread rubber was removed illicitly during the year 1981 -82. The quantity was arrived at only from the shortfall of the sulphur.