[Order per : G.P. Agarwal, Member (J)]. - 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 book 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-1 Register were much more than 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 authorities 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 paragraphs 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; that Shri Mahavir Parshad who was present in the factory and who is said to have written the diary was allowed to slip away from the factory. This is clear from the fact that no statement of Shri Mahavir Parshad was recorded on the spot or immediately thereafter and it was only on 1-9-1989, that is to say, after the lapse of about ten days, his statement was recorded and that under coercion and threat the statement of Shri Surinder Singh was recorded of which complaints were lodged to the concerned Collector of Central Excise, Chandigarh  on 24-8-1989 and 18-10-1989. He stressed that even otherwise the entries made in the diary cannot be relied upon as, admittedly, on certain dates the production figures shown in the RG-1 Register was much more than that of shown in the diary. This could not have happened if the appellants have intended to remove the goods clandestinely or intended to evade the payment of excise duty. He further submitted that, at the time of search no discrepancy was found in the raw material and no account of purchase of raw material in excess of that entered in the statutory records was found by the Excise Officers. He further stressed that the factory of the appellants did not have the capacity to produce the number of tyres and tubes shown in the diary during the period in question as could be appreciated from the report of the expert given by Shri Issar. In this premises, he also submitted that the burden to prove the clandestine removal was on the Department which it has failed to discharge and cited the case of Sarwan Singh v. State of Punjab, AIR  1957 (SC) 637, to show that the confession must not only be voluntary but must be true as well and that retracted confession should not be relied upon. To substantiate his contention that charge of clandestine removal in the absence of any solid and acceptable evidence on the record cannot be sustained on the basis of  the entries made in the private note book, he cited the following cases :Ganga Rubber Industries v. Collector of Central Excise - ; Kashmir Vanaspati (P) Ltd. v. Collector of Central Excise, ; Ebensezer Rubbers Ltd. v. Collector of Central Excise, Ahmedabad - (Tri.) = 1987 (9) ETR 124; and Shakti Chemical Industries v. Collector of Central Excise, Baroda - (Tri.) = 1995 (57) ECR 329.

4.  In reply, the learned Departmental Representative supported the impugned Order by reiterating the findings recorded therein and cited the case of Kishan Chand & Others v. Collector of Central Excise, Chandigarh - ; and Marcelin Sabestain Carvello v. State of Maharashtra -

5. We have considered the submissions.

6. From the impugned order we find that the shortage of 81 tyres of Moped which was found on the physical verification of the finished goods at the time of visit was not disputed by the appellants before the Collector. This was also not seriously disputed before us. Therefore, we confirm the demand of duty of Rs. 1,275.75.

7. As regards the charge of clandestine removal of the tyres and tubes, the learned Collector has himself admitted in paragraphs 3 and 3.1 that it is based mainly and solely on the private diary which was written by Shri Mahavir Parshad. The learned Collector has confirmed the demand on the basis of the entries made in the said diary after referring to the confessional statement of Shri Surinder Singh and the statement made by Shri Mahavir Parshad discarding the evidence of the defence witnesses. While relying upon the confessional statement of Shri Surinder Singh, he has not taken into consideration the retraction made by him at all nor he has considered the discrepancies and material contradictions appearing in the statement of the said Mahavir Parshad. To take the alleged confessional statement of Shri Surinder Singh, First it may be stated at the outset that the learned Collector has not taken into consideration the retraction at all while using it for the purpose of  considering the evidentiary value of the diary. In the case of Kali Charan Basant Lal v. Collector of Central Excise, , it was held that it is a trite law that whenever a confessional statement is retracted, it is the duty of the authority deciding the case, to take into consideration the said confession while coming to a particular conclusion. For, retraction does affect the voluntary nature and truthfulness of the confessional statement and, therefore, no importance can be attached to that part of the confessional statement which incriminates him as it was immediately retracted. On this score alone the said confessional statement cannot be relied upon for the purpose of appreciating the evidentiary value of the note book in question. That apart, in the case of Sarwan Singh v. State of Punjab, supra, it was held that it must not only be established that a confession is voluntary but also it must be established that it is true. For the purpose of establishing the truth, it is necessary to examine the confession and compare it with the rest of the evidence on the record. In the instant case, no evidence relating to the alleged clandestine production and removal of the subject goods is forthcoming on the record. On the other-hand, it is an admitted fact on the record that on certain dates, the production figures shown in the RG-1 Register was much more than that of shown in the said diary. In the case of Raja Textiles Ltd. v. Collector of Central Excise - , it was also found that the entries of production shown in the note book was less than the entries of production shown in RG-1 Register on some of the relevant dates. On these findings, the Tribunal observed that “The note book at best indicates a certain quantity of cotton fabrics produced by the appellants and despatched to the Dyeing House for processing purposes. The note book by itself does not indicate that the goods were removed from the factory. The appellants have also shown and it has not been rebutted by the adjudicating authority, that the entries of production in the note book are less than the entries of said production in the R.G. 1 on some of the relevant dates. With this data staring in the face, one has to reasonably conclude that the production shown in the rough note book has also been duly accounted for in RG 1. It cannot be held that this was not accounted for and later on removed from the factory. As regards the statement of Shri Mahavir Parshad, it may be stated that his statement is not based on any record. During cross-examination, he has admitted that he is doing the business of Rice-Husk on commission basis for the last about five years and he is not on the pay roll as an employee of the appellants’ firm. During cross-examination, he has also admitted that he requested the appellants for making him a permanent employee to which the appellants refused and, therefore, he did feel offended for not being employed on permanent basis despite working on temporary basis for about 2^1/₂ years. On a question being asked by the defence, as to what is the correlation of the entries made in the diary with the production of the tyres, he stated that he only used to make the entries in the diary on the basis of the production slips given to him by Shri Surinder Singh. On a question by the adjudicating authority he admitted that he never asked Shri Surinder Singh about the contents of slips. No such slip was found at the time of the visit or thereafter during  investigation. In the face of it, no credence can be given to such  ipse dixit. Admittedly, in the instant case except the said diary no other evidence, such as, installed capacity of the factory, raw-material utilisation, labour employed, power consumed, goods actually manufactured and packed etc. has been produced by the department to prove the alleged clandestine production and removal of the same. On the other hand, admittedly at the time of the visit of the factory no discrepancy in the raw material account was found. It was the case of the appellants before the adjudicating authority (see reply in written submission) and also before us that the factory of the appellant did not have the capacity to produce the number of tyres and tubes as shown in the alleged diary during the period in question_.

The factory is subject to the [Factories] Act as well as regulations. Appellants were maintaining regular attendence register shift-wise. They have been working only one shift of 8 hours. No over time has ever been paid to any worker and no deduction on account for the E.S.I. have ever been made on account of overtime. The officer of the Labour Department have been visiting the factory. No discrepancies in the working hours or overtime was ever pointed out. (Copy of the attendence register was also produced before the adjudicating authority.) It was also the case of the appellants that the alleged huge production of tyres and tubes could not have been made by the appellants without corresponding availability of the raw-material including raw-rubber in respect of which the stock position was required to be intimated to the Rubber Board every month and the supply of raw-material is regulated. The appellants never purchased any quantity of raw-material than what has been shown in the raw-material account. It was also stated by the appellants that the factory had a baby boiler of 3’x6" size which could have cured no more than the number of tyres and tubes shown in the R.G. 1. Thus, it was, therefore, beyond the capacity of the appellants with this limited steam producing capacity of the said boiler to produce more than three times the number of tyres and tubes shown in the R.G. 1. All these facts have not been disputed by the Revenue. Besides, the appellants had also produced the expert opinion of Shri Issar to prove that the appellants’ industry could not have produced more tyres and tubes than those accounted for in the RG-1 Register and this expert opinion is based on the study of the compounding capacity, curing capacity and steam generation and consumption. The learned Collector has commented upon the said report on the ground that the said report is based on the assumption that the appellants’ factory work for one shift forgetting that the department has not produced any evidence to show that the factory worked for more than one shift of 8 hours and the burden to prove the charge of clandestine removal is on the Department and the assessee has to probablise his defence. No evidence worth the salt is forthcoming on the record to discredit the fact stated in the report given by the said expert.

8. In the case of Kashmir Vanaspati (P) Ltd. v. Collector of Central Excise, supra, the charge of clandestine removal on the basis of the entries made in the note book by labourers regarding the production was not found to be proved holding that such note book is not a dependable record to establish clandestine removal unless the same is supported by other evidence, such as, raw material consumed, goods actually manufactured and packed without payment of duty. The same view was expressed in the case of Ganga Rubber Industries v. Collector of Central Excise, supra. For ready reference, the relevant portion may be extracted as follows :

“19. We have considered his arguments. The department could have and should have made enquiries to find out if the entries in the two books were genuine or not. Transport Companies, Octroi Posts, and Consignees to whom the goods were allegedly sent were the sources from which verification of the accounts was possible. No verification was done. Besides, the principle of law is that it is upto the Revenue to prove reliability of the books. The Appellants cannot be asked to establish his pleas especially when there is no evidence that any of the consignments were actually sent from the factory. It does not appear that any attempt has been made to compare the hand-writing in the books with that of any one in the factory. We, therefore, held that the Revenue has not proved that the entries in the accounts in these books represented actual clandestine removals. Besides, it appears odd that the books were kept on the roof of the factory. Taking all the circumstances into consideration, we extend the benefit of doubt and set-aside the Board’s order to the extent that duty was demanded on the basis of these registers.”

In the case of Ebensezer Rubbers Ltd. v. Collector of Central Excise, Ahmedabad, supra, the Central Excise Officers found that the manufacturer was concurrently preparing and issuing two sets of invoices for his goods, some hand-written and some typed. Some of the invoices in one set were in disagreement with corresponding ones of the other set in respect of identity of buyers, quantity and value of the goods etc. and on the basis of this the adjudicating authority held the assessee therein guilty for unaccounted production and clandestine removal. Setting aside the said findings, the Tribunal observed as follows :

“10.......... The only point for us to decide is whether the department is correct in concluding that the invoices in question cover goods other than those accounted for by the manufacturer. For taking a view in the matter, it is necessary for us to go into the question whether there any relative documents or any other evidence to support the view of the department that the goods represented by the set of invoices in question were unaccounted for and surreptitiously removed without payment of duty. The dealers who are named in the invoices have denied receipt of the goods. There is no trace of the goods nor any evidence that they were actually transported to and received by these dealers. The learned Collector states that it is not the department’s case that the goods have gone to the dealers named. On the other hand, the Central Board of Excise & Customs has taken a different view and concluded that the modus operandi suggested —- multiple clearances against single excise gate passes, obviously to the same dealers. There is no evidence on record to justify these different conclusions by the original and appellate authority. We are inclined to the view that either there were inadequate follow up investigations on the so called duplicate set of invoices seized by the Department or that, if such investigations were conducted, they did not make any headway. The fact, however, remains that there are a set of invoices which the manufacturer has said, are meant only for show to the octroi authorities. There is no evidence that the department has made any attempt to check with the octroi authorities whether the payments of the appellants have been as per those invoices. These invoices have not got linked or related to any other documents which would establish the existence of any goods other than those accounted for. We cannot, therefore, comprehend how the department’s charge of clandestine production and removal and clearance without payment of duty can be established. It can, at best be only an idea in the realm of possibility, but on that basis, the appellants cannot be penalised or asked to pay duty in respect of such goods. In this respect the ratio of the decision of the Supreme Court in the case of Oudh Sugar Mills Ltd. (supra) would certainly apply and the benefit of doubt has to Fgo to the appellants.”

In the case of Ambica Metal Works v. Collector of Central Excise, Calcutta-I - 1990 (29) ECR 549, it was held that the charge of clandestine removal must be proved by the Revenue by solid and acceptable evidence and cannot be left to the vagaries of doubt. Since it cannot be based on any inference involving unwarranted assumptions or surmises. Same view was  also expressed in the case of Indian Metals & Ferro Alloys Ltd v. Collector of Central Excise, .

9. In the light of the foregoing, it cannot be concluded that the note book is an authenticative private record of production so as to raise demand based on the figures indicated therein. At the most, it may raise a doubt but that cannot take a place of proof. Even, there may be certain elements of truth in the prosecution story but between ‘may be true’ and ‘must be true’ there is  a long distance to travel and the whole of the distance must be covered by the, legal reliable and  unmatchable evidence before a person can be convicted (see 1976 Criminal Law Journal 1471),

10. In the result, we uphold that part of the impugned order which confirms the  demand of Rs. 1,275.75 payable on 81 tyres of  Moped found short and set aside the remaining part of the impugned order. Thus, the appeal is partly allowed.