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Triveni Rubber And Plastics, Tiruvalla, Kerala v. Collector Of Central Excise, Cochin .
Factual and Procedural Background
The appellant, Triveni Rubber and Plastics, is a partnership firm that began manufacturing tread-rubber on 8 October 1979. During the relevant period tread-rubber was dutiable under Tariff Item 16-A(2) of the Central Excises and Salt Act, 1944, but units with annual clearances below specified monetary limits enjoyed exemption. On 30 September 1981 central excise officers searched the appellant’s premises and discovered 5,807 kg of tread-rubber that had been removed without being entered in statutory records. The managing partner admitted both the clandestine removal and manipulation of accounts to remain within the exemption slabs.
Relying on the seized material and the partner’s statement, the Department issued a show-cause notice proposing to determine higher production figures for 1980-81 and 1981-82, demand duty, and impose penalties. The Collector of Central Excise confirmed the notice by order dated 13 May 1983. The Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) dismissed the appellant’s appeal. The present appeal was filed in the Supreme Court under Section 35-L of the Act.
Legal Issues Presented
- Whether the Collector’s estimation of the appellant’s production—based principally on electricity consumption data—was arbitrary or unsupported by relevant material.
- Whether, under Rule 173-E of the Central Excise Rules, 1944, production can be determined solely on the basis of power consumption without simultaneously evaluating all other factors listed in the rule.
- Whether the estimated production figures were legally untenable because they allegedly exceeded the installed capacity of the factory.
Arguments of the Parties
Appellant's Arguments
- The production estimate was a “wild guess” lacking evidentiary foundation; the matter should be remitted for fresh inquiry.
- The electricity meter during the base period (October 1979–May 1980) was defective and even recorded in reverse, rendering power-consumption data unreliable.
- The estimated output exceeded the factory’s installed capacity.
- Rule 173-E mandates consideration of multiple factors (installed capacity, raw-material use, labour, power, etc.); reliance on power consumption alone is impermissible.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Supreme Court treated the quantity of tread-rubber produced as a pure question of fact. Under Article 136 it would not interfere with concurrent factual findings unless they were based on no evidence or were perverse—neither situation was present. Key points in the Court’s analysis included:
- Electricity-consumption methodology: The Collector had chosen October 1979–May 1980 as a base period, calculated the ratio of electricity consumed to tread-rubber produced, and applied that ratio to the disputed period. The Court found this rational and supported by materials on record.
- Defective-meter allegation: The claim that the meter ran backwards was inconsistent with recorded consumption figures. A letter from the electricity department dated 16 November 1985 was obtained long after the Collector’s order and lacked probative value.
- Installed-capacity objection: Production figures supplied by the appellant itself undermined the argument that the estimate exceeded installed capacity; both the Collector and Tribunal had already rejected this contention.
- Interpretation of Rule 173-E: The rule empowers the officer to fix normal production having regard to several listed factors but does not require that each factor be present or given equal weight. In circumstances where the assessee’s accounts were fabricated, reliance on available power-consumption data alone was permissible.
Holding and Implications
DISMISSED – The Supreme Court affirmed the orders of the Collector and the CEGAT, upholding the demand for duty and the imposition of penalty.
Implications: The appellant remains liable for duty and penalty as assessed. The decision confirms that, in cases of fabricated records, excise authorities may legitimately estimate production using electricity-consumption data alone when other reliable inputs are unavailable. No new legal precedent of broader application was expressly articulated.
Order
1. This appeal is preferred under Section 35-L of the Central Excises and Salt Act, 1944 against the judgment and order of the Customs, Excise and Gold (Control) Appellate Tribunal. The appellant — Triveni Rubber and Plastics — is a partnership firm. It established a factory for manufacturing tread-rubber. Production was started on 8-10-1979. Tread-rubber was dutiable under Tariff Item 16-A(2) of the Schedule to the Act. At that time certain exemption notifications were in operation. According to the notification applicable to the year 1980-81, it is stated, a unit producing goods of a value of less than Rs 5 lakhs was exempt from the provisions of the Act. The said exemption limit was raised to Rs 15 lakhs for the year 1981-82.
2. On 30-9-1981, a search was conducted of the premises of the appellant by the officers of the department. They found that a substantial quantity of tread-rubber (5807 kilograms) was removed from the factory without making an entry in the relevant records. They also recorded the statement of the managing partner of the factory in the presence of another partner. In this statement, the managing partner admitted not only that 5807 kgs of tread-rubber was removed from the premises without making an entry but also that they were doctoring their accounts so as to show that their annual production was below the exemption limit. On the basis of the material gathered at the time of the inspection, a show-cause notice was issued to the appellant calling upon him to explain as to why his production during the said years be not estimated at a particular figure and why he should not be called upon to pay the appropriate duty as well as penalty in that behalf. (It is not necessary for the purposes of this appeal to mention the precise figures specified in the show-cause notice; suffice to say that according to the estimated figures the appellant was not entitled to the benefit of exemption notification). The appellant showed cause, whereafter the Collector passed orders on 13-5-1983 confirming the show-cause notice. The appellant preferred an appeal before the CEGAT. The Tribunal considered the various submissions made by the appellant at length but finding that there is no substance therein, dismissed the appeal.
3. In this appeal it is submitted by Mr Anam, learned counsel for the appellant that the estimate made by the Collector is arbitrary, based on no relevant material and is in the nature of a wild guess. He, therefore, requested that the matter may be remitted back to the Collector for further enquiry. We are unable to accede to the said submission. The quantum of tread-rubber produced in the appellant's factory during the said two years is a question of fact. Unless it is found that some relevant evidence has not been considered or that certain inadmissible material has been taken into consideration the concurrent finding of fact cannot be disturbed by us in this appeal under Article 136 of the Constitution. This is not also a case where it can be said that the findings of the authorities are based on no evidence or that they are so perverse that no reasonable person would have arrived at those findings.
4. It is argued by Mr Anam that the only basis of the estimate of the production is the consumption of electricity during the said period. What happened in this case is this: The Collector took the period from October 1979 to May 1980 as the base period. He ascertained the quantity of tread-rubber produced and the quantity of electrical energy consumed. Adopting the ratio between the consumption of electricity and the quantum of tread-rubber produced during the base period he estimated the production of tread-rubber during the disputed period on the basis of the electricity consumed. Mr Anam, submits that during the base period, the electricity meter was not recording properly and that it was running in the reverse direction. We have been unable to appreciate this contention. If the meter was running in a reverse direction during the base period, it would not have recorded any consumption. But evidently that was not what happened. The meter did record the consumption. One could understand the appellant saying that the meter recorded less than the actual consumption, but that was not his case. Nor could he produce any material in support of the said allegation. Mr Anam relies upon a letter dated 16-11-1985 from the Assistant Executive Engineer, Electrical-Major Section, Changanacherry, in support of his contention. Firstly, this letter has been obtained long after the order of the Collector. Secondly, this letter says that the meter was running in reverse direction. This theory is unacceptable in the circumstances of the case, as pointed out hereinbefore.
5. It was then argued that the quantity estimated by the Collector is in excess of the installed capacity of the appellant's factory. Even this aspect has been dealt with and rejected by the Tribunal. It has been shown on the basis of the production figures disclosed by the appellant himself that his argument based upon the installed capacity cannot be accepted.
6. Mr Anam contended that according to Rule 173-E of the Central Excise Rules, the power consumption alone cannot be taken as the basis for estimating the production and that the several factors mentioned in the rule must all be taken into consideration together. Sub-rule (1) of Rule 173-E which alone is relied upon reads as follows:
“Rule 173-E. Determination of Normal Production.— Any officer duly empowered by the Collector in this behalf may fix the quantum and period of time when the production in the assessee's factory was considered normal by such officer having regard to the installed capacity of the factory, raw material utilisation, labour employed, power consumed and such other relevant factors as he may deem appropriate. The normal quantum of production during a given time so determined by such officer shall form the norm. The assessee shall, if so required by the said officer, be called upon to explain any shortfall in production during any time, as compared to the norm. If the shortfall is not accounted for to the satisfaction of the said officer, he may assess the duty due thereon to the best of his judgment, after giving the assessee a reasonable opportunity of being heard.”
7. On a reading of the rule we cannot agree that the officer empowered by the Collector or the Collector cannot determine the normal production unless all the factors mentioned in the rule are present simultaneously. The rule does not say so nor is it capable of being so interpreted. In a case like the present one, where the accounts are found fabricated and untrue, the figures of raw material utilised or the particulars of labour employed may not be available. It is not the case of the appellant that even though acceptable material with respect to these factors was available it was not considered.
8. The appeal accordingly fails and is dismissed. No costs.
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