[Order per : V.P. Gulati, Member (T)]. - This is an appeal against the order of the Addl. Collector of Central Excise, Bangalore. Under the impugned order a penalty of Rs. 10,000 has been imposed on the appellants under Rule 173Q(1) for the reason that they had manufactured and cleared tread rubber clandestinely and a duty of Rs. 1,05,369.95 has been demanded under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excises and Salt Act, 1944.

2.  The learned Advocate for the appellants pleaded that the charges against the appellants have been framed on the basis of the entries regarding the purchase of carbon black in the name of the appellants in the ledger of M/s. Chemtech Industries, dealers in carbon black. He pleaded that there is no other corroborative evidence to establish the clandestinely manufacture or removal of the tread rubber. The authorities also, he pleaded, have not alleged that there was excess of any other raw material in the factory nor there is any statement from anybody or evidence to show that in effect any unaccounted quantities of tread rubber had been clandestinely manufactured or removed from the appellants’ factory. He pleaded that a statement was recorded from the proprietor of M/s. Chemtech Industries, and he has merely stated that the entries shown against the appellants’ name in his ledger pertain to the purchases made for M/s. Rhino Rubbers Pvt. Ltd. and has stated that one Shri Augustin used to come and make purchases on behalf of M/s. Rhino Rubbers Pvt. Ltd. He has pleaded that no statement was recorded from the said Augustin nor he was produced for cross-examination and the appellants did not have any employee by the name of Augustin in their roster. The carbon black is not a controlled commodity and anybody could purchase the same in anybody’s name and he, therefore, pleaded that before raising any demand against the appellants the authorities should have considered other parameters like electricity consumption and appellants’ capacity to produce before coming to any conclusion in the matter. He further pleaded that the authorities had also done the verification in regard to purchases of carbon black made by some other parties from the said M/s. Chemtech Industries and pointed out that some of these purchases had not been owned up by the parties while in others the quantity brought on record by the purchasers is much less than the actual shown in the records of M/s. Chemtech. He further pleaded that none of the Directors from whom statements have been recorded have owned up the purchase of carbon black as alleged and all that they stated is that in case the position regarding carbon black is not explained they will pay the duty. He pleaded that the learned lower authority also in Para 12 of his order in this regard has observed as under :

“The fact that Mr. Ashok Kumar has so far not been able to obtain any evidence to the contrary nor even made an attempt to do so goes to show that he is not in a position to prove that he did not make these purchases. I therefore hold that 25082.800 Kgs. of tread rubber manufactured from unaccounted carbon black (applying the ratio of 1:3) has in fact been manufactured by M/s. Rhino Rubber and cleared by them without payment of duty.”

He has pleaded that the burden for proving that in fact there was clandestine manufacture and removal from the factory is on the Department and in the absence of any acceptable evidence in regard to the purchase of the carbon black, the learned lower authority was in error in having proceeded to penalise the appellants. The appellants could not be expected to prove the negative.

3.  The learned DR for the Department pleaded that the proprietor of M/s. Chemtech Industries has clearly stated that the entries shown in his records regarding the purchase of carbon black in the name of the appellants pertain to them and that one Shri Augustin used to make the purchases from them. He pleaded that the Director of the appellants’ firm was shown this ledger of M/s. Chemtech Industries in which the entries in regard to the purchases of carbon black by M/s. Rhino Rubber Works figure and also the relevant invoices and he has admitted that if the entries are not explained properly they will pay the duty. He pleaded the evidence produced in a case like this where clandestine manufacture and removal was involved should be taken to be sufficient for holding against the appellants.

4.  We have considered the pleas made by both the sides. We observe that the basis for making a duty demand against the appellants is the record of the purchase of carbon black from M/s. Chemtech where the entries regarding the purchase of the carbon black in the name of the appellants are there. The entries regarding the purchase of the carbon black in the name of the appellants in the records of M/s. Chemtech are borne out by invoices relating to these entries and these invoices also carry the sales-tax numbers of the appellants. One Augustin was stated to be making purchases for the appellants. This Augustin unfortunately has not been traced by the authorities nor he has been identified by anybody. The appellants’ plea is that anybody could make the purchase of carbon black in anybody’s name and that, therefore, the evidence cited is not reliable. The appellants have cited before us the record of the purchases in the name of the others and the said purchases have not been owned up by those purchasers. This lends credence to the appellants’ plea that the purchases could be made in anybody’s name. In any case it has not been shown before us that the Departmental authorities have drawn any proceedings against other such purchasers who have not owned up the purchases of the carbon black. There is also no inculpatory statement from the appellants in regard to the purchase of the carbon black. We observe that the learned lower authority in his order in para 3 has stated as under :

“He further accepted the unaccounted purchase of 7,750 Kgs. of Carbon black for the year 1987-88 and 2275 Kg. for the year 1988-89; that the cash payment against purchase of Carbon black was made by Shri Kasinath and another Director of their company; that he was not available during the year 1987-88 to look after the affairs of the firm and from April 1988 Shri Kashinath was looking after the factory work; prior to April 1988 Shri Mirza was looking after the factory.”

Shri Ashok Kumar, a Director, who has given a statement, was himself not looking after the affairs of the company and regarding the payments stated to have been made by Shri Kashinath, another Director, no information has been elicited from Shri Kashinath regarding the payments. On going through the copy of the statement filed before us, we observe that Shri Ashok Kumar has stated as under :

“According to the invoices, delivery challans and ledger shown to me today, I have not accounted 7750 Kgs. of Carbon Black purchased during 1987-88 and 2275 Kg. purchased during 1988-89 from M/s. Chemtech Industries, Bangalore. I agree that I have seen today these invoices, delivery challans and ledger. The K.S.T. No. indicated in the invoices belongs to my factory and the payment have been indicated in cash. I know the number to I.T. Rules, payment should be made either by cheque or D.D. for purchases of goods valued more than Rs. 2,500. The cash payment against purchase of C/B was made by Shri Kashinath another Director of our company. I will produce Shri Kashinath before you on 22-8-1989 at 4 p.m. As far as I know, I have not purch- ased any carbon black as per the above mentioned unaccounted invoices. ”

The above does not go to show that there was any acceptance by him that he had purchased the quantity of carbon black as has been stated in the order of the learned lower authority. He is referring only to the entries made in his name in the ledger of M/s. Chemtech Industries and has clearly stated that he has not purchased any carbon black as per the abovementioned unaccounted invoices and has pointed out to Shri Kashinath, as the Director who was in the know of things. There was no admission as such from Shri Kashinath. We observe that it is not safe to rely only on the third party’s evidence, when no direct link has been established between the appellants and M/s. Chemtech Industries through cash transactions  or  any person. There is nothing on Record to show that M/s. Chemtech Industries had received any instructions over the phone etc., for supply of the carbon black from the appellants. In the absence of the linkman Augustin, it is therefore, not safe to go only by the evidence in the records of M/s. Chemtech. The learned lower authority, therefore, as pleaded by the learned Advocate, should have gone by other parameters like electricity consumption and even done some experiment to find out as to how much tread rubber could be produced by the consumption of unit of electricity. He admitted before us the consumption of 7,788 units of electricity during the period from May 1987 to 28-7-1988. In view of the above we hold that it was necessary in the present case for the lower authority to have gone into other parameters having a bearing on the production of tread rubber and we are of the view that in the facts of this case the authorities should have examined the production of appellants in the light of the electricity consumption in the unit for corroboration after verification regarding the units consumed. We, therefore, set aside the impugned order of the learned lower authority and remand the matter to the learned lower authority for de novo decision in the light of our observations above. The appeal is, therefore, allowed by remand.