Per Shri T.P. Nambiar

These are appeals filed by the appellants against the orders passed by the Collector of Central Excise, Cochin in order No. 74/88 dt. 22.12.88. In terms of that order, the Collector demanded a duty of Rs. 11,94,807.56. He ordered confiscation of 210 Kgs of Tread Rubber seized from the Car No. KLH 6152 under rule 173Q, 52A (5). Thereafter, under rule 173Q and 226 of Central Excise Rules, 226 and 278 Kgs of Tread Rubber which were kept unaccounted in the factory were also confiscated and he allowed the appellants to redeem the same on payment of redemption fine of Rs. 2,500/-. A penalty of Rs. 2,00,000/- was imposed on Shri P.V. Varghese and Rs. 10,000/- each on Shri P.V. Jose and P.V. Davis under rule 173Q. He also confiscated 106 Kgs of Tread Rubber seized from M/s. Modern Hi Millers Tyres.

2. The facts of the case are that on 23.6.1987, Central Excise Officers Trichur intercepted an Ambassador Car No. KLH 6152. The driver of the car Shri Antony informed that he was taking tread rubber in the car from the appellants factory to Kunnamkulam. He produced invoice No. 16 dt. 23.6.87. He informed that no Gate Pass was given to him from the factory. Shri Paul, Manager of the factory, informed the officers that these rolls were loaded in the car on that day morning from the factory premises. On search of the premises of the appellants factory, a total quantity of 278 Kgs of tread rubber was found unaccounted in the RG.1 Register and the same was seized. The car alongwith tread rubber were also seized. Thereafter, the statements of Shri A.C. Paul, Manager, Shri K.J. Antony, Shri T.I. Ullas, Shri M.R. Davis, Shri Balakrishnan Nair, Shri P.V. Varghese, Shri C.L. Kunjappan, Shri K.L. John and others were taken by the Central Excise Officers under rule 14 of Central Excises and Salt Act 1944. From the statements of these persons, it appeared to the department that the appellants were purchasing the Carbon Black on the fictitious names of M/s. Suguna Rubber Industries, M/s. Suganath Carbon Ltd. and M/s. Kerala Rubbers. The Manager of M/s. GEM Chemicals also identified the invoices under which the carbon black was purchased by the appellants in 60 invoices. Those invoices are also mentioned as annexure to the statement. Thereafter, a show cause notice was issued to the appellants as to why the duty should not be demanded on them for the manufacture of tread rubber and the duty amount was calculated on the basis of use of carbon block and it was determined as Rs. 11,95,919.50. After the show cause notice was issued, the appellants denied the charges and stated that the statements of those persons were taken under duress, coercion and no reliance can be placed on the same. It was also pointed out in the reply to the SCN as follows :-

"For the sake of argument, it may be stated that the purchase of carbon black alone does not prove the case of manufacture of tread rubber unless the purchase of sufficient quantity of the most important raw material viz. raw rubber is established."

Thereafter, a personal hearing was granted to the appellants and the impugned order is passed.

3. The learned advocate Shri Joshi N. Thomas appearing for the appellants contended before us that the statements taken from Shri K.L. John and Shri Balakrishnan Nair cannot be relied upon. In this connection, he pointed out that in reply to the SCN, the appellants has contested about the veracity of these statements. He drew our attention to the reply wherein it was stated that these statements are taken forcibly. In this connection, he pointed out that these two persons were cross examined by the appellants. In the cross examination, they stated that these statements were taken forcibly. The learned advocate therefore contended before us that these statements are not voluntary statements and cannot be relied upon. On a query from the bench as to whether these two persons have retracted their statements at any time, prior to their cross examination, he