Per Shri T.P. Nambiar :

These appeals are filed by the appellants against the order passed by the CCE, Kochi in order No. 33/88 dated 3.6.88. In terms of that order, demand of duty to the tune of Rs. 48,30,181.23 has been made and penalty of Rs. 10 lacs is also imposed on appellant Jotheendranathan and other penalties were also imposed on the other appellants. The period involved in this case is 12/81 to 4/86. The allegations against the appellants are to the effect that they clandestinely removed tread rubber manufactured from their premises without payment of duty. The department has relied upon the statements of Jotheendranathan, TK Mammen, PC Chathu, and Sachindranath and others. It was also found that the appellants had imported crystex sulphur and they have used the above sulphur for the production of the tread rubber in question and prior to the import of the same, they purchased crystex sulphur manufactured indigenously.

2. Shri V. Lakshmi Kumaran, learned Counsel for the appellants at the outset referred us to para 35 of the impugned order and stated that the whole basis on which the demand is made is not correct. In order to appreciate his contention, we reproduce para 35 of the impugned order which reads as follows :

35. I have gone through the facts of the case, case records, various submissions during the personal hearing and the argument notes submitted by the parties. It has been argued by the party that they were engaged in the manufacture of moulded rubber goods as well as tread rubber. The mixing mill and extruder were used not solely for manufacture of tread rubber but also for manufacture of moulded goods. It was pointed out that they were using indigenously purchased sulphur and imported crystex sulphur at the rate of 325 kg. each in a batch of 45 kg. and prior to that they used 650 kg. of indigenously purchased sulphur per batch. The sulphur was not exclusively used for the manufacture of tread rubber. The party had prepared separate statements for the consumption of sulphur for tread rubber and moulded items. On going through the records I do not find that the sulphur imported or indigenously purchased were used for the manufacture of both tread rubber and moulded items. In fact there had been no records to prove that sulphur had been used for both the items whereas the statements of Sri Jyothindranathan and Sri P.K. Chathu and Sri M.K. Gopinathan clearly showed that the entire quantity of sulphur thus purchased and imported had gone into the production of tread rubber. Had it been otherwise the party could have produced records in support of the contention that sulphur had been used separately for manufacture of tread rubber and imported items. As per the formula of manufacture of tread rubber deposed in the statements, the tread rubber that might have been manufactured for the period 1.7.84 to 18.4.86 based on the consumption of crystex sulphur recorded in the documents of the factory will work out as below :

Now if the quantum of tread rubber manufactured is computed on the basis of calculation given in the show cause notice for the corresponding period it will work out to 252.900 M.T. This coincidence cannot be accidental. Therefore it can be concluded that the entire crytex sulphur as well as sulphur purchased indigenously as accounted by the party had gone into the manufacture of tread rubber. It was also argued that the actual machine hours in respect of only mixing mill and extruder for manufacture of moulded rubber goods were comparatively more. I find that for computation of duty evasion with regard to tread rubber the production of only two shifts a day has been taken into account as deposed by Sri Jyothindranathan and other workers of the factory. The