S.L. Peeran, Member (J)

1. Both the appeals raise common question of facts of law and hence they are taken up together for its disposal as per law.

E/3139-3141/90-D

These appeals arise from Order-in-Original No. 28/90 dtd. 12-6-1990 passed by C.C.E., New Delhi.

2. The appellants M/s. Kanam Foam Industries (hereinafter referred to as KFI) are manufacturers of rubber foam goods namely Micro Cellular (M.C.) sheets Hawai Chappals. The department claims that these goods fall under Heading 16A(1) of the First Schedule of the erstwhile tariff of the CESA, 1944 and after the introduction of new Tariff under Tariff Heading 9404.00 of CET Act, 1985.

3. The department officials raided the premises of the appellants and also the residences of the proprietor of the appellant industry Shri. P.V. Varghese and that of Shri AVM 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 dtd. 18-12-1987 alongwith detailed annexures 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 operandi 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. KFI had shown less value of the said goods in the bills/invoices issued for the sale of said goods with an intention to keep the total value of said goods cleared in each financial year during 1982-83 to 1987-88 within the limit stipulated in the exemption notification for small scale units.

(iii) M/s. KFI have wrongly shown the said sale of Hawai chappals and MC sheets in their account books with a view to suppress the production and clandestine removal of foam rubber products.

(iv) M/s. KFI did not declare the total value of Rubber Foam goods manufactured and cleared from their factory during each financial year in the declaration which they had filed in terms of Notification No. 111/78 dtd. 1-3-1978 as amended for the financial years 1982-83, 1983-84, 1984-85, 1985-86, 1986-87 and 1987-88."

3.1. Para 21 (a)states:

"From the accounts maintained by M/s. KRC it appears that they have been passing on huge amount to M/s. KFI without any purchase of goods on record. As per ledgers maintained by M/s. KFI/M/s. KRC, the following amounts were received by M/s. KFI during the years as noted against each:

Photo copy of the statement of Shri. O.P. Punnoose dtd. 23-9-1987 admitting the receipt of these amounts is enclosed as Annexure XIV. It appeared that the amount pertains to the value of the goods which M/s. KFI had transferred to M/s. KRC after clearing the same from factory clandestinely".

3.2 21(e)

"No records have been found in the factory premises or in the premises of M/s. KRC which could show that the chappals were being manufactured in the factory as declared by M/s. KFI in their balancesheets and ledgers.

In respect of sale of chappals, it has 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 m