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Shree Shankar Industries Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(17)ELT402TriDel
AppellantShree Shankar Industries
RespondentCollector of Central Excise
Excerpt:
1. this is an appeal filed by m/s. shree shankar industries, bombay (hereinafter called the appellants) against the order of the collector of central excise, bombay order-in-original no. v-adj (68) 15-11/79, dated 27-9-1982 before the west regional bench of customs, excise & gold (control) appellate tribunal at bombay which was later on transferred to the special bench at delhi by the order of the president, cegat dated 13-4-1983.2. m/s. shree shankar industries, bombay, the appellants are manufacturers of g.i. buckets, ghamellas, agricultural implements, stainless steel utensils, kitchen sinks, bright bars, shafting etc.they did not obtain l 4 licence for manufacturing the excisable items and on enquiries made by the officers of the directorate of revenue intelligence anti-evasion,.....
Judgment:
1. This is an appeal filed by M/s. Shree Shankar Industries, Bombay (hereinafter called the appellants) against the order of the Collector of Central Excise, Bombay Order-in-Original No. V-Adj (68) 15-11/79, dated 27-9-1982 before the West Regional Bench of Customs, Excise & Gold (Control) Appellate Tribunal at Bombay which was later on transferred to the Special Bench at Delhi by the order of the President, CEGAT dated 13-4-1983.

2. M/s. Shree Shankar Industries, Bombay, the appellants are manufacturers of G.I. Buckets, Ghamellas, Agricultural implements, Stainless Steel Utensils, Kitchen Sinks, Bright Bars, Shafting etc.

They did not obtain L 4 licence for manufacturing the excisable items and on enquiries made by the Officers of the Directorate of Revenue Intelligence Anti-Evasion, Central Excise Wing, Bombay, it was found that the company was allotted a quota of Stainless Steel Sheets by M.M.T.C. to the extent of 55 M.T. of Stainless Steel Sheets, the cost of which exceeded Rs. 30 lakhs. On or about 21st February, 1979 the office premises as well as the factory premises of the appellants were searched an J the relevant records were seized and goods were detained under a reasonable belief that the company had manufactured and cleared excisable goods exceeding Rs 30 lakhs in value without obtaining Central Excise licence and without payment of central excise duty.

During the course of enquiry it was found that the appellants had another unit at Calcutta engaged in the manufacture of G.I. Buckets, C.I. Pipes, C.I. Fittings and C.T. Fittings and C.I. Manhole covers.

The sum total of the value of the capital investment made from time to time on plant and machinery in both the units of the appellants together were found to have exceeded by Rs. 10 lakhs. It was also found that the total value of clearances of all excisable goods, individually as well as collectively from the said two units of the appellants firm exceeded Rs. 30 lakhs during the financial years 1976-77, 1977-78, 1978-79 and also during the period from 18-6-1977 to 31-3-1978. A show cause notice No. V-Adj(68)/15-11/79, dated 17-8-1979 was therefore issued by the Supdt. of Central Excise, Bombay asking them to show cause to the Collector as to why (a) the appropriate duty leviable on the goods manufactured and cleared without payment of duty of Rs. 3,74,922.79 should not be demanded and recovered under Rule 9(2) of the Central Excise Rules, 1944, (b) a penalty should not be imposed on them under the provisions of each of the Rules 9(2), 210 and 173Q of the Central Excise Rules, 1944, (c) the excisable goods under seizure valued at Rs. 1,00,000 should not be confiscated under Rule 173Q of the Central Excise Rules, 1944, and (d) the land building, plant and machinery used in connection with the manufacture, production, storage, removal and disposal of such goods should not be confiscated under Rule 173Q(2)(b) of the said Rules.

3. On 29th December, 1979, the appellants replied to the said show cause notice and inter alia stated that they were entitled to the benefit of the exemption Notification No. 176/77, dated 18-6-1977.

Regarding the production of the G.I. Buckets, it was stated that the same were manufactured without the aid of power and it was exempt under Notification No. 179/77, dated 18-6-1977. It was also stated that on account of that reason the Excise authorities did not collect any excise duty in respect of the manufacture of G.I. Buckets at their Calcutta unit. No power was used at any stage for the manufacture of the goods for which exemption of duty has been claimed.

4. Not satisfied with the reply given by the appellants, the Collector of Central Excise, Bombay-I ordered that the appellants should pay the Central Excise duty of Rs. 1,83,074.35 and that the G.I. Buckets valuing Rs. 42,600 shall be confiscated, goods may be released on payment of redemption fine of Rs. 5,000. He also imposed a penalty of Rs. 2 lakhs under Rule 173Q of the said Rules and a further penalty of Rs. 1,000 was also imposed under Rule 9(2) and 210 of the Central Excise Rules, 1944. Further the Collector of Central Excise also directed and ordered the confiscation of the land, machinery, building etc. used in connection with the manufacture of excisable goods involved in this case without licence with an option to the appellants to redeem the same on payment of fine of Rs. 2 lakhs. That option to redeem was to be exercised within three months.

5. Being aggrieved by the said order dated 29-9-82 of the Collector of Central Excise, Bombay, the appellants preferred an appeal before the Appellate Tribunal, Bombay as per the provisions of the Central Excises and Salt. Act, 1944 which was transferred to the Special Bench at Delhi by the order of the President of the C.E.G.A.T.6. We have heard Shri E.R. Srikantiah, consultant for the appellants and Shri A.K. Jain, S.D.R., for the Department and have gone through the record. Shri Srikantiah, the learned consultant of the appellants submitted that by virtue of Notification No. 176/77-C.E., dated 18-6-1977, the Central Government had exempted the goods falling under Item No. 68 of the First Schedule of the Central Excises and Salt Act, 1944 and cleared for home consumption on or after 1 st April in any financial year by or on behalf of the manufacturers from one or more factories from the whole of duty of excise leviable thereon subject to certain conditions as set out therein. The provision under the said notification provides that the exemption would be available to the manufacturer if the total value of whole excisable goods cleared by him in the preceding financial year has not exceeded Rs. 30 lakhs. It is also provided that the capital investment shall not exceed Rs. 10 lakhs. According to Shri Srikantiah, the appellants had complied with all the requisite conditions as are set out therein and were entitled to the exemption benefits. For the purpose of securing the said limit of Rs. 30 lakhs, the goods which were not excisable within the meaning of Section 2(d) of the said Act, could not be taken into consideration or clubbed together. According to him, their clearances in the preceding financial year had not exceeded the prescribed limit upon true and proper valuation of the legal proposition. He submitted that to be considered as "Excisable goods", the goods should qualify in all respects as per Section 2(d) of the Act. The first qualification is that the goods must be mentioned in the First Schedule to the Act, the second criterion is that it must be subject to a duty of excise. It has been argued that when Notification No. 176/77, dated 18-6-1977 was issued, simultaneously there was another Exemption Notification exempting goods, falling under Item 68, produced without the aid of power from the whole of the duty of excise (Notification No. 179/77, dated 18-6-1977 referred). He also pointed out that earlier to that there was a Notification No. 55/75-C.E., dated 1-3-1975 exempting agricultural implements from duty under Item No. 68 of the Central Excise Tariff. It was, therefore, submitted that the value of these exempted items should not be taken into consideration to compute the aggregate value of the clearances from these units during the financial year.

7. For the proposition that excisable goods will not cover exempted goods, reliance was placed on the judgment of the Delhi High Court in Civil Writ No. 1310 of 1970 (Sulekh Ram and Sons v. Union of India and Ors.) decided on 25-8-1971 (1978 E.L.T. J 525). He pointed out that the contrary view of the Madras High Court in Tamil Nadu (Madras State) Hand-loom Weavers Co-operative Society Ltd. v. Asstt. Collector of Central Excise, Erode (1978 E.L.T. J 57) cannot be taken benefit by the department in as much as the judgment of the Delhi High Court in Sulekh Ram and Son's case was not brought to the notice of their Lordships of Madras High Court. The Collector in his decision has not given any reason as to why he opted for the contrary decision of the Madras High Court in preference to two other decisions of Delhi and Allahabad High Courts reported in 1978 E.L.T. J 525 and 1978 E L.T. J 39.

8. It was pointed out by the learned consultant of the appellant that though the issuance of the Exemption Notification will justify the inference that the goods were excisable goods, it was submitted that from the moment the notification is issued under Rule 8(1) of the Central Excise Rules, 1944, exempting the goods from the whole of the duty of excise leviable, the goods cease to be excisable goods under the strict meaning of the definition of excisable goods as mentioned in Section 2(d) of the Central Excises and Salt Act, 1944. Reliance was also placed on the facts that the legislature amended Section 6 and Section 8 of the Central Excises and Salt Act, 1944 as it then stood in 1956 by substituting the words "excisable goods" with the words "any specified goods" included in the First Schedule. The Statement of Objects and Reasons appended to the Amending Bill with reference to the said clause was also referred to. In the absence of such an amendment, the Government had doubts whether it could have any control over the manufacturing activity through the licencing procedure in respect of the wholly exempted goods. In as much as the definition under Section 2(d) was not amended, it goes to show that the intention of the legislature has all along been that the words "excisable goods" should satisfy dual criteria, namely, of there being not only mentioned in the First Schedule but also subject to a duty of excise. According to the learned consultant, if this interpretation is accepted, the appellants qualify for complete exemption in. terms of Notification No.176/77-C.E. dated 18-6-1977 and the question of levying of any duty on their production and clearance does not at all arise.

9. In the alternative the learned consultant argued that if the Tribunal is not inclined to accept this argument, the value of the exempted goods should not be included for the purpose of determining the turnover during the financial year. For this proposition reliance was placed on the decision of the Patna High Court Division Bench in Madhav Mills Pvt. Ltd. v. Collector of Central Excise and Ors. (1982 ECR 218D) (Pat.) where it has been held that the value of the exempted goods should not be included for the purpose of determining the turnover of Rs. 30 lakhs. If this proposition is accepted then also the appellants will fully qualify for exemption from duty throughout the period under consideration. Additional support was sought for this proposition by pointing out that Notification No. 176/77 relating to Item No. 68 went through several amendments and at one point of time the Explanation was added to the effect that in computing the aggregate value of clearance, goods exempted under any other notification issued by the Government of India should not be included. It was argued that an Explanation does not alter the law but only clarifies. Though the Explanation was specifically introduced on a particular date, it has to be deemed that the law has always been as what has been clarified by the Explanation. On this ground also the value of wholly exempted goods should not be taken into consideration for determining the whole turnover.

10. Referring to the impugned order of the Collector of Central Excise, the learned consultant pointed out that the learned Collector had not correctly arrived at the conclusion that G.I. Buckets had been manufactured with the aid of power. The affidavit of Shri Satyanarayan Singh who was the person in-charge of the Bucket department of the appellant firm was not duly considered. To reject an affidavit arbitrarily is improper and incorrect. Our attention has been drawn towards an affidavit of Shri R.K. Agarwal dated 6-1-1983 who stated that he had found that the manufacture of G.I. Buckets was by hand and no power was used. According to the learned consultant, the affidavit of Shri Satyanarayan Singh coupled with the affidavit of Shri R.K.Agarwal, Consulting Mechanical Engineer, who visited the factory, show and prove that G.I. Buckets had been manufactured without the aid of power. The department has not established or proved by any piece of evidence that G.I. Buckets in the units were being manufactured with the aid of power. The G.I. Buckets in the appellants unit are manufactured without the aid of power and are not to be charged to duty at all as they are eligible for the exemption under Notification No.179/77.

11. Regarding the imposition of penalty by the Collector, it was submitted that the penalty of Rs. 2 lakhs has been imposed under Rule 173Q and another penalty of Rs. 1,000 has been imposed under Rules 9(2) and 210 of the Central Excise Rules, 1944, yet the Collector has further invoked the legal provisions of Rule 173Q(2)(b) to confiscate the machinery, building etc. used in connection with the manufacture of excisable goods and has imposed a redemption fine of Rs. 2 lakhs.

According to him, this provision is not normally invoked unless a party is a habitual offender and a delinquent. The Collector has attributed mala fide intentions to the company without any evidence whatsoever to come to that conclusion. The prosecution has not discharged the burden of proving the mala fides and the intention to evade payment of duty.

He drew our attention towards the classic case of Hindustan Steel Ltd, v. State of Orissa (1978 E.L.T. SC J 159) in support of his contention that no penalty should be imposed for technical or venial breach of legal provisions or where the breach flows from the bona fide belief that the offender is not liable to act in the manner prescribed by the statute.

12. In the last the learned consultant of the appellants submitted that invoking of Rule 9(2) in the instant case for demanding duty is not legally correct. According to him Rule 9(1) stipulates that no excisable goods shall be removed from any place where they are produced, cured or manufactured or from any premises appurtenent thereto until excisable duty leviable thereon has been paid. Rule 9(2) will apply only in a case where sub-rule (1) of Rule 9 has been contravened. This rule cannot be invoked unless there is deliberate evasion of duty with the prior knowledge of the fact that duty was payable as laid down by the Supreme Court in J.K. Steel v. Union of India (1978 E.L.T. 355). According to him, the entire demand for the period 1977-78 is barred by limitation as also the bulk of the demand for the financial year 1978-79 because the show cause notice having been issued only on 13-8-1979 the demand can travel backwards for a period of 6 months only from 13-8-1979, i.e. to 13-2 1979.

13. Shrt A.K. Jain, the learned Departmental Representative countered the arguments advanced by Shri Srikantiah, the learned consultant of the appellants. According to him, the appellants were manufacturing excisable articles without obtaining the licence under the Central Excises and Salt Act, 1944. Whether or not the exemption was available had to be examined only on the basis of the Notifications providing that exemption. Without having a licence under the provisions of the Central Excises and Salt Act, 1944, the benefit of the exemption notification could not have been availed of. He cited a case of Madras High Court Metla Paints Works v. Dy. Supdt., Central Excise (Writ Petitions No. 286 and 287 of 1963) decided on 16th December, 1965 in support of his contention. He submitted that as per the law as laid down by Madras High Court in Tamil Nadu (State of Madras) Handloom Weavers Cooperative Society v. Asstt. Collector of Central Excise, Erode (1978 E.L.T. J 57) and Delhi High Court in Vishal Andhra Industries v. Union of India (1983 E.L.T. 2265), once the goods are exempted from excise duty, they do not cease to be excisable goods. The character of a product as excisable goods does not depend on the actual levy of duty but depends on the description as excisable goods in the First Schedule to the Act. He pointed out that the decision given by a single judge of Delhi High Court in Sulekh Ram's case (Supra) stands over-ruled by the Division Bench judgment of Delhi High Court in Vishal Andhra Industries case (Supra).

14. He drew our attention towards the statement of Shri Rajesh Kumar Dalmia, Manager, and the holder of General Power of Attorney from the Partners of the appellant firm to show and prove that the appellant firm failed to obtain the central excise licence w.e.f. 18-6-1977 i.e.

from the date of the issue of the Notification No. 176/77 and as such they have contravened Section 6 of the Central Excises and Salt Act, 1944 read with Rule 174 and Rule 9(2) of the Central Excises and Salt Act, 1944. He also pointed out that from the statements of Shri Rajesh Kumar Dalmia it is established that the sum total of the value of capital investment made from time to time on plant and machinery installed in both the factories of M/s. Shree Shanker Industries, Bombay, together exceeded Rs. 10 lakhs and the appellant's company thus came within the purview of the excise control and none of the conditions of this Notification No. 176/77, dated 18-6-1977 were satisfied. It is also established from the record that individually as well as collectively the total value of the clearances of all excisable goods effected by the factories of the appellants at Calcutta and Bombay had crossed the limit of Rs. 30 lakhs as prescribed in Notification No. 176/77.

15. Regarding the availability of the benefit of Notification No.179/77, dated 18 6-1977, the learned Departmental Representative pointed out that it was incumbent upon the appellant firm to establish that they were manufac-tuiing G.I. Buckets without the aid of power and as such were entitled to take benefit of that notification, but in this case they have failed to do so. The affidavit of Shri Satyanarayan Singh was rightly rejected by the authority below inasmuch as he was an interested party and its contents were against the admitted facts and circumstances. Admittedly in that very unit in which the appellants were manufacturing G I. Buckets the power connection was installed and it was being used for manufacturing processes. It cannot be presumed that in that very unit where the workers are common, a part of the manufacture is being done by the aid of the power and the rest without the aid of power. He also pointed out that as per the production record, on an average 225 G.I. Buckets were being manufactured by the appellants every day and according to the appellants only 6 or 7 workers were doing that work. It is impossible for 6 or 7 workers to manufacture 225 G.I. Buckets a day without the aid of power. He also pointed out that as per the list of the machinery submitted by the appellants there are machineries which are to be used for the manufacture of G.I. Buckets and these machineries can only be operated by the aid of power. Admittedly the appellant's factory at Bombay is registered under the Factories Act as well as with the D.G.T.D. but the appellants have never pointed out nor supplied any information to these authorities that the G.I. Buckets were being manufactured without the aid of power. He submitted that the order passed by Shri B N. Rangwani, the then Collector of Central Excise, Calcutta dated 18-3-1980 does not help the appellants in the present case. In that order, the learned Collector only held that the Bucket factory of the appellants at Calcutta could not be treated as a factory as defined in the Factories Act, 1948 and as such the G.I. Buckets produced in that factory could not be charged to duty under Item 68 of the said Schedule even though their total clearance value had exceeded Rs. 30 lakhs in certain years.

According to him the case before us is regarding the factory at Bombay which is admittedly registered under the Factories Act as well as with D.G T.D.16. Regarding the affidavit of Shri R.K. Agarwal, Consultant Engineer, the learned Departmental Representative submitted that this affidavit was never filed before the Collector of Central Excise, Bombay. It was filed much after the decision of the matter by the Collector, Bombay and this affidavit is of no relevance for the decision of this matter.

17. On the point of imposition of the penalty the learned Departmental Representative pointed out that the appellants are the habitual defaulters in the matter of evading the excise duty inasmuch as they were punished several times for violation of excise rules on the earlier occasions and therefore the Collector of Central Excise, Bombay after considering the entire matter had correctly imposed the penalty upon the appellants.

18. Three issues arise for determination in this case before us which are as under:- (1) Whether the term "excisable goods" will not cover exempted goods (2) Whether the value of the exempted goods cannot be included for the purpose of determining the annual turnover of Rupees Thirty lakhs.

(3) Whether the appellants manufactured the G I. Buckets without the aid of power and are entitled to the benefit of Exemption Notification No 179/77, dated 18-7-1977.

19. Regarding issue No. (1), Section 2(d) of the Central Excises and Salt Act, 1944 defines "excisable goods" as under:- "Excisable goods means goods specified under First Schedule as being subject to duty of excise and includes Salt." 20. Analysing the said definition of the term "Excisable goods", we find that to become goods excisable goods, two conditions are to be satisfied. The first is that the goods must be mentioned in the First Schedule to the Act and the second criterion is that it must be subject to a duty of excise. In this case there is no dispute about the fact that the goods in dispute were excisable goods as defined in Section 2(d) of the Central Excises and Salt Act, 1944 but what the appellants want to press is that excisable goods will not cover exempted goods.

When Notification No. 176/77, dated 18-6-1977 was issued simultaneously there was an Exemption Notification exempting goods falling under Item No. 68 produced without the aid of power from the whole of duty of excise (Notification No. 179/77, dated 18-6-1977). Earlier to that there was a Notification No. 55/75-C.E., dated 1-3-1975 exempting agriculture implements from duty under Item 68 of the Central Excise Tariff. This contention of the appellants cannot be accepted in view of the definition of the word 'Excisable goods' as given in Section 2(d) of the Central Excises and Salt Act, 1944. The disputed goods fulfill both the qualifications i.e. the goods have been mentioned in the First Schedule to the Act and they are subject to a duty of excise. By issuing Exemption Notifications these goods do not cease to be excisable goods. Hon'ble Judges of the Madras High Court in a Division Bench decision Tamil Nadu (Madras State) Handloom Weavers Co-operative Society Ltd. v. Asstt. Collector of Central Excise, Erode (1978 E.L.T.J 57) laid down : "Once the goods are exempted from excise duty, they do not cease to be excisable goods. The character of a product as exciseable goods does not depend on the actual levy of duty but depends on the description as excisable goods in the First Schedule to the Act." 21. In Vishal Andhra Industries v. Union of India (1983 E.L.T. 2265) Division Bench of Delhi High Court over-ruling the earlier decision in Sulekh Ram's case (Supra) also held:- "Once the goods are exempted from excise duty, they do not cease to be excisable goods." Decision of Allahabad High Court in Nagrat Paints v. Union of India (1978 E.L.T. J 39) does not help the appellants in the present circumstances of the case. The facts in that case were quite different from the facts of the case, before us. In that case there was an interpretation of Section 2(0 of the Act whereas in the case before us Section 2(d) has been interpreted, 22. Madras High Court in another case Mehta Paints Works v. Dy. Supdt.

Excise (Writ Petitions No. 286 and 287 of 1963) decided on 16th Dec., 1965 also laid down that even in cases of goods which have been exempted for the levy of excise duty though they are excisable goods, the excise licence has to be obtained. According to their Lordships, whether or not the exemption is available has to be examined only on the basis of the Notification providing for the exemption. Exemption has to be strictly construed and person seeking exemption must bring himself within the provisions of granting the exemption.

23. We, therefore, reject this contention of the appellants that the term 'Excisable goods' will not cover exempted goods.

24. Regarding issue No. 2, the learned Consultant of the appellants brought to our notice a Division Bench decision of Patna High Court in Madhav Mills (Pvt.) Ltd. v. Collector of Central Excise and Ors. (1982 ECR 218D).

25. The Division Bench decision of Patna High Court also does not help the appellants in view of the authoritative pronouncements of the Division Bench decision of Delhi High Court in Vishal Andhra Industries (Supra) and that of Madras High Court in Tamil Nadu (Madras State) Handloom Weavers Co-operative Society Ltd. (Supra) where it was held that the exempted goods do not become non-excisable and the value of the exempted goods should be included for the purpose of determining the turnover of Rs. 30 lakhs. 'Excisable goods' is defined to mean goods specified in the First Schedule as being subject to duty of excise. Admittedly Item 68 continues to cover the goods in question, they could not obviously cease to be excisable goods, despite the exemption given.

26. To take the benefit of Exemption Notification No. 176/77, dated 18-6-1977 it was to be established by the appellants that the sum total of the value of the capital investment made from time to time on plant and machinery installed in the industrial units in which the goods under reference were manufactured was not more than 10 lakhs and that the total value of all the excisable goods cleared by them or on their behalf in the preceding financial year did not exceed Rs. 30 lakhs.

27. In this case there cannot be any dispute about the fact that taking into account the total value of all excisable goods including the exempted goods cleared by the appellants during the relevant year had exceeded Rs. 30 lakhs and therefore the appellants could not claim exemption of this Notification No. 176/77.

28. On the point of the value of the capital investment made from time to time on plant and machinery in each of the factories of the appellants had also exceeded Rs. 10 lakhs as has been observed by the authority below. The learned consultant has not been able to show and prove even before us that the sum total of the value of the capital investment made from time to time on plant and machinery installed in the industrial units in which the goods under clearance were manufactured was not more than Rs. 10 lakhs during the relevant period.

He also could not prove that the total value of all excisable goods cleared by the appellants in the preceding financial year did not exceed Rs. 30 lakhs and therefore we hold that the appellants are not entitled to take the benefit of Exemption Notification No. 176/77-C.E., dated 18-6-1977.

29. In view of our findings above though it has become unnecessary to decide the third issue i.e. whether the appellants manufactured the G.I. Buckets without the aid of power and are entitled to the benefit of Exemption Notification No. 179/77, dated 18-6-1977, yet we proceed to decide this point also.

30. Much reliance has been placed by the appellant on the affidavits of Shri Satyanarayan Singh, Incharge of Bucket Department of the appellant firm and that of Shri R.K. Agarwal, a consultant Mechanical Engineer to show and prove that the G.I. Buckets were manufactured without the aid of the power. The affidavit of Shri R.K. Agarwal, Consultant Engineer is of much latter date and as per the contents of his affidavit, he visited the factory on 6-1-83 much after the relevant period and as such no reliance can be placed on the affidavit of Shri R.K. Agarwal.

31. Moreover, this affidavit was not before the authority below and he could not have considered this affidavit. Regarding the affidavit of Shri Satyanarayan Singh, the authority below has correctly rejected this affidavit inasmuch as the contents of this affidavit are not in conformity with the admitted facts on record. A perusal of the record shows that this unit of the appellant's factory at Bombay was registered under the Factories Act as well as with the D.G.T.D. but at no point of time the appellants informed these authorities that they were manufacturing the G.I. Buckets without the aid of power. It is also on record that on an average 225 G.I. Buckets were being manufactured by the appellants every day and according to the appellants only 6 or 7 workers were doing that work. It is not possible for 6 or 7 workers to manufacture 225 G.I. Buckets every day without the aid of power. There is a list of machineries ins. ailed in the factory premises of the appellants at Bombay. A perusal of this list which is Annexure IV at Page 71 of the Paper-book shows that there are several machines which have been installed in the factory premises of the appellant at Bombay, which could be used for manufacturing G.I.Buckets. These machines are run by the aid of power. When the appellants were not manufacturing the G.I. Buckets with the aid of power then what was the necessity of having these machines meant for manufacturing G.I. Buckets. Admittedly, the appellants have a power connection in their factory premises and they are using the power for running their machines. It does not seem to reason as when the appellants were using power for manufceturing other products in those very premises, why they were not using the power for the manufacture of G.I. Buckets. Even if a part of G.I. Buckets is manufactured with the machines which are being run with the aid of power, then the entire G.I. Buckets would be considered to have been manufactured with the aid of power. In the case of Metro Readywear Company v. Collector of Customs (1978 E.L.T. J 520) decided by the High Court of Kerala it was held that ironing with electric iron amounts to a process of manufacture with the aid of power though the garments had been manufactured without the aid of power. The authority below has rightly rejected the affidavit of Shri Satyanarayan Singh who is definitely an interested person being incharge of Bucket Department of the appellants. The appellants have not proved before the authority below by any independent evidence that they had manufactured G.I. Buckets without the aid of power. Mere alleging a thing without any attempt to substantiate the same cannot take the place of the proof. The onus lay on the appellants to prove that they qualified for exemption. In the absence of such a proof, the department is well entitled to treat as it likes. The appellants also cannot take the help of the order passed by Shri B.N. Rangwani, the then Collector of Central Excise, Calcutta dated 18-3-1980. That order was passed regarding the unit of the appellants at Calcutta. In that order the learned Collector only held that the Bucket factory of the appellants at Calcutta could not be treated as a factory as defined in the Factories Act, 1948 and as such the G.I. Buckets produced in that factory could not be charged to duty under Item 68 of the First Schedule even though their total clearances value had exceeded Rs. 30 lakhs in certain years. This case is regarding the factory at Bombay which is admittedly registered under the Factories Act as well as with the D.G.T.D. In order to have the benefit of the Exemption Notification No. 179/77, dated 18-6-1977, the appellants were to establish that the G.I. Buckets were manufactured by them without the aid of power, but they have failed to prove the same and therefore we hold that the G.I Buckets manufactured by the appellants at their Factory at Bombay were manufactured with the aid of power and the appellants are not entitled to take the benefit of exemption Notification No. 179/77, dated 18-6-1977.

32. Regarding the imposition of the penalty, a penalty of Rs. 2 lakhs has been imposed under Rule 173Q and another penalty of Rs. 1,000 has been imposed under Rules 9(2) and 210 of the Central Excise Rules, 1944. The land, machinery, building etc. used in the manufacture of the excisable goods involved in this case were also ordered to be confiscated but allowed to be redeemed on payment of the fine of Rs. 2 lakhs only under Rule 173Q(2)(b) of the Central Excise Rules, 1944.

33. Invoking the provisions of Rule 173Q(2)(b) confiscating the land, machinery, building, etc. used in connection with the manufacture of the excisable goods is not normally invoked unless a party is a habitual offender and a delinquent. The department has not been able to show and prove that the appellants were habitual offenders and delinquents. The mala fide intentions on the part of the appellants have also not been proved by the department for invoking such provisions and in such circumstances we are unable to agree with this part of the order of the authority below vide which he ordered the confiscation of the land, machinery, building, etc. used in connection with the manufacture of excisable goods involved in this case under Rule 173Q(2) (b) of the Central Excise Rules, 1944 and we set aside the said part of the order. The plea of the appellants that the provisions of Rule 9(2) could not have been invoked legally is not tenable.

Admittedly the appellants were manufacturing excisable goods without obtaining licence under the Central Excise Act and Rules. When no licence is obtained for the manufacture of excisable goods and removal is effected without payment of duty, Rule 9(2) is attracted [N.S. Metal Industries v. Union of India, 1977 T.L.R. (NOC) 31], The entire demand of duty is within time under Rule 9(2) of the Central Excises and Salt Act, 1944.

34. Regarding the imposition of penalty of Rs. 2 lakhs under Rule 173Q, we find that in the show cause notice the demand was for Rs. 3,74,922.79 but this demand has been substantially whittled down by the adjudicating authority to Rs. 1,83,074.35. The impugned order also shows that the authority below had conceded many points made by the appellants showing thereby that the show cause notice contained exaggerated demand and exaggerated allegations. Keeping in view the circumstances of the case and the allegations which have been proved on record against the appellants, we are of the view that the penalty amount be reduced to Rs. 25,000 (Rs. twenty-five thousand only) under Rule 173Q which would be commensurate with the amount of the duty which is little over Rs. 1,83,000.

35. With these modifications in the order of the authority below, we reject the appeal of the appellants.


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