Per G.P. Agarwal:

This appeal is directed against the impugned Order-in-Original passed by the Collector of Customs & Central Excise, Chandigarh.

2. Brief facts of the case are that, the appellants at the material time were engaged in the manufacture of pneumatic tyres of rubber and inner tubes of tyres of various motor vehicles. It was the case of the Department that on 22.8.1989 the Preventive Staff of Central Excise Collectorate, Chandigarh, visited the factory of the appellants and shortage of 81 tyres valued Rs. 4050/- involving Central Excise Duty of Rs. 1275.75 was found. It was further the case of the Department that a diary was found lying on the table of Shri Surinder Singh, one of the partners of the appellants' firm, and on enquiry he (Shri Surinder Singh) told that the, diary contained the details of tyres and tubes manufactured by them during 13.2.1989 to 21.8.1989. The same was taken into possession by the officers. Statement of Shri Surinder Singh was recorded. During further investigation, statement of Shri Mahavir Parshad, who was said to be the honorary worker in the appellants' firm, was also recorded and it was found that the said diary was written by the said Shri Mahavir Parshad on behalf of the appellants' firm. On comparing the entries made in the RG-1 with those recorded in the private note book (diary) it was revealed that during the period 13.2.1989 to 21.8.1989 the appellants have not accounted for the production of 21,298 tyres and 8,174 tubes in the statutory Central Excise records. As a sequel thereof, a Show Cause Notice dated 19.2.1990 was issued to the appellants to show cause as to why the duty amounting to Rs. 1,275.75 be not demanded from them on 81 tyres of moped found short and duty amounting to Rs. 7,17,109.88 be not demanded on the said quantity of the tyres and tubes which were found to have not been recorded in the RG-1 Register when compared with the entries made in the private note bock and also to show cause as to why the penalty be not imposed. The appellants contested the said show cause notice inter alia on the ground that they have no connection with the alleged diary or with the entries made therein and further that the diary written by Shri Mahavir Parshad does not have any relation with the production of tyres by the appellants and further that on certain dates, according to the Department itself, the production figures shown in the RG-I Register were much more that that of shown in the diary. It was also pleaded that Shri Surinder Singh was not present in the factory at the time of the visit; that the alleged confession was retracted immediately in writing by lodging two complaints to the authorites concerned; and that the said Shri Mahavir Parshad was a casual worker in the appellants' factory and his demand to take him as a regular worker was not agreed upon by the appellants. He had animosity with the appellants and, therefore, he has falsely implicated the appellants. However, the learned Collector confirmed the demand and imposed the penalty of Rs. 1,00,000/- upon the appellants. Hence the present appeal.

3. Appearing on behalf of the appellants the learned counsel, at the outset, submitted that so far as the demand of duty of Rs. 1,275.75 on 81 tyres of Moped which were found short at the time of physical verification is concerned, he would not seriously dispute the same. However, he challenged the case of the Department regarding the alleged clandestine removal of the tyres and tubes and submitted that the said allegation is based mainly and solely on the private note book (diary) which was written by Shri Mahavir Parshad, as could be seen from paragraph 3 and 3.1 of the impugned order. Elaborating on his arguments, he contended that at the time of arrival of the Central Excise Officers Shri Surinder Singh was not present in the factory; that he was called only later after the records had already been taken out from the Almirah and inspection thereof had started;