I.J. Rao, Member (T)

1. Central Excise Officers visited the Appellants' factory on 12.11.1975. As a result of the checks conducted they discovered certain alleged irregularities which were as follows:

(i) RG-1 Register was not filled from 7.11.1975 to 11.11.1975 due to the negligence of their clerk,

(ii) One Roll of rubber transmission belt valued at Rs. 902/- was not available in the store room,

(iii) The following beltings of value of Rs. 18,772.92 p. were found in the factory in excess of the balance in RG-1.

(a) 11 Rolls 1,214 metres belting

(b) 30 Pieces 195.5 "

(c) 34 Pieces 1,760 " " Semi-used belting.

(iv) Belting of the value of Rs. 28,834/- had been cleared from the factory without accounting in Excise records and without payment of duty, as evidenced from Bill Book Nos. 4 5 recovered from the factory premises.

(v) 325 pieces of V-Belts of the value of Rs. 23,984.50 p. had been manufactured by the factory without accounting them in excise records and without submission of classification and price-list.

(vi) As per the Sales Book (V-Belts) and V-Belts-Bill Book recovered from the factory, V-Belts of the value of Rs. 65,117/- appeared to have been manufactured by the factory and cleared without payment of duty.

2. The belting at (iii) above and the V-Belts at (v) above were seized by the Central Excise Officers for contravention of the C.E. Rules, 1944.

A show cause notice was issued on 12.3.1976 by the Deputy Collector of Central Excise threatening action under the Central Excise Law. After considering the reply to the show cause notice and after due process the Collector Central Excise, Kanpur adjudicated the case. He imposed penalty of Rs. 20,000/- on the Appellants and confiscated the 75 pieces of belting and 325 of V-Belts without payment of C.E. duty.

3. The Appellants filed an appeal before the Central Board of Excise and Customs. The Board by the impugned order confirmed Collector's orders but reduced the penalty from Rs. 20,000/- to Rs. 5,000/-. Thereafter, the Appellants filed a Revision Application before the Central Government. This Application on statutory transfer to the Tribunal is now an Appeal before us.

4. We heard Shri H.P. Arora Advocate for the Appellants and Shri S. Krishnamurthy, Learned SDR for the Respondents. The Learned Advocate submitted that the Belts in question were unfinished and referred to a statement given by Shri Narender, be partner of the Appellants' firm. He emphasised that as the goods were not fully manufactured they need not be entered in R.G.I, account. With reference to recovery of documents, he stated that the Department relied on these documents for its allegation that over Rs. 65,000/- worth of goods were illicitly removed from the factory. All these documents were not reliable for the reasons mentioned by the appellants before the Collector and later before the Board. He submitted that the Appellants filed affidavits before the Collector in connection with the alleged documents but the Collector did not rebut these affidavits nor did he accept them.

5. The Learned Advocate further submitted that the seizure was made without reasonable belief and therefore offended the provisions of Section 110 of the Customs Act which were made applicable to Central Excise Law. He further submitted that even in the show cause notice it was not stated that the seizure took place under reasonable belief.

6. The Learned Advocate referred to an enquiry report, copy of which was supplied by the Collector to the Appellants. He submitted that the Collector partly accepted the enquiry report and partly rejected it without giving reasons for such an action. Citing the judgment of the CEGAT Dwarka Prasad Lulla v. Collector of Customs (Appeals) [MANU/CE/0050/1986 : 1986 (24) ELT 620] the Learned Advocate argued that the Collector should have accepted the enquiry report in full or rejected it-in full giving reasons for his action. This was not done. Further he argued that according to the 'Recovery Memo' acc