Per Jyoti Balasundaram :

The above appeals arise out of the order dated 26th March, 1990 passed by the Assistant Collector of Central Excise, Chandigarh confirming a demand of Central Excise duty of Rs. 4,70,400/- on 16,000 tyres manufactured by the appellants during the period 10.5.88 to 16.6.88 on the ground that they were tyres of a kind used in two-wheeled vehicles viz. Mopeds classifiable under Heading 4011.30 attracting duty at the rate of Rs. 28/- per tyre and not cycle tyres of a kind used in cycles as claimed by the appellants and claimed to be falling under heading 4011.20 attracting nil rate of duty, imposing a penalty of Rs. 1,50,000/- on M/s. Poddar Tyres Pvt. Ltd. and penalty of Rs. 10,000/- on various branches of Poddar Sales Corporation. The Adjudicating authority has also confiscated tyres from various depots with option to redeem the same with varying fines.

2. We have heard Shri V. Sridharan, learned Counsel for the appellants and Shri A.K. Agarwal, learned DR for the Revenue and our findings are recorded as under:-

On 22.6.88, the Central Excise Staff of Ludhiana, visited the factory premises of M/s. Poddar Tyres Pvt. Ltd., who are engaged in the manufacture of tyres of different sizes and specifications bearing the trade mark "Bedrock". During the period May to June 1988, they had manufactured and cleared 16,000 tyres marked as BMX cycle tyres in the following two sizes:

1. 20" x 2.125"

2. 24" x 2.125"

Since the tyre did not appear to be an ordinary cycle tyre and since the price was higher than that of cycle tyre and almost equal to Moped tyre, the Central Excise Inspector required the appellants to demonstrate by fitting a tyre to a cycle and this demonstration was carried out. Apart from this, tyres of same sizes were being marketed as BMX by other local manufacturers namely Ralson Cycles and Pawan Tyres Ltd. Clearances of these tyres on nil rate of duty as applicable to cycle tyres was permitted. The appellants removed several consignments of BMX cycle tyres during the above mentioned period on stock transfer basis to their selling agents M/s. Poddar Sales Corporation having sales depots in different parts of the country. Enquiries from manufacturers of BMX bi-cycles namely M/s. Avon Cycles Pvt. Ltd., Ludhiana revealed that price of BMX tyre 20" x 2.125" was Rs. 18/-. Enquiries from M/s. Ralson Cycles and M/s. Pawan Tyres revealed that cycle tyres of BMX 20" x 2.125" sold at Rs. 20/- and Rs. 18/- while the appellants were selling their tyre at Rs. 70/- per tyre. Enquiries were also conducted from various places where the appellants had sold the above mentioned brand of tyres and the appellants dealers had deposed that tyres of size 20" x 2.125" were for use in mopeds. Based on the above, the department alleged in the show cause notice dated 11.8.88 that during the period 10.5.88 to 16.6.88, the appellants manufactured 1125 moped tyres of size 16" x 2.25" and 479 Moped tyres of size 23" x 2.00" classifiable under heading 4011.30 attracting duty at the rate of Rs. 28/- per tyre but wilfully mis-declaring and clearing the same as tyres of a kind used in cycles attracting nil rate of duty under sub-heading 4011.20 of the Central Excises Tariff Act, 1985 and the Adjudicating authority upheld the charges and confirmed the demand of duty on these tyres and also imposed penalty.

3. We find that the department has relied mainly on statements of dealers who have purchased tyres from the appellants. Cross examination of these dealers was not permitted by the Adjudicating authority even though specific request had been made. The cross examination of Shri Gurcharan Singh and Shri Ram Prakash was permitted - these two persons had not bought any tyres manufactured by the appellants herein on the other hand, the Central Excise officers had gone to these two persons and demonstrated fitting of the tyres manufactured by the appellants on the rim of a moped on the basis of which these two persons had said that the tyres co