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Containers Corporation Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
AppellantContainers Corporation
RespondentCollector of Central Excise
1. this is an appeal against order-in-original no. hr/2/83 dated 19.2.1983 of the collector of central excise, baroda. in this order the collector had imposed a penalty of rs. 50,000 on the appellants. he had confiscated metal containers valued at rs. 50,977 seized from them, with the option to pay a fine of rs. 10,000 in lieu of confiscation, and ordered them to pay excise duty on metal containers valued at rs. 27,29,098 held to have been manufactured by them with the aid of power and removed illicitly between 1.5.1979 and 26.11.1980.2. the department's case is that the appellants were using electric power in the manufacture of metal containers falling under item 46 of the central excise tariff schedule and were therefore not eligible for the benefit of exemption notification no......
1. This is an appeal against Order-in-Original No. HR/2/83 dated 19.2.1983 of the Collector of Central Excise, Baroda. In this order the Collector had imposed a penalty of Rs. 50,000 on the appellants. He had confiscated metal containers valued at Rs. 50,977 seized from them, with the option to pay a fine of Rs. 10,000 in lieu of confiscation, and ordered them to pay excise duty on metal containers valued at Rs. 27,29,098 held to have been manufactured by them with the aid of power and removed illicitly between 1.5.1979 and 26.11.1980.

2. The Department's case is that the appellants were using electric power in the manufacture of metal containers falling under Item 46 of the Central Excise Tariff Schedule and were therefore not eligible for the benefit of exemption notification No. 94/70-C.E. dated 1.5.1970, which was in force at the relevant time. That notification exempted only those metal containers in or in relation to the manufacture of which no process was ordinarily carried on with the aid of power.

3. It is not in dispute that the appellants had originally taken out a Central Excise licence with reference to Item 46 CET. On or about 30.12.1976theTippellants surrendered their Central Excise licence on the ground that they were giving up the use of power. Thereafter they were not subjected to Central Excise control nor were they paying duty.

On 27.11.1980 the Central Excise officers visited the premises of the firm and found that the machinery installed therein included certain items which were connected to an electric power source (there is a dispute on the question whether these machines were actually being worked by electric power at that time). A panchanama was drawn up, statements were recorded, a quantity of containers lying in the factory seized, and adjudication proceedings initiated, which resulted in the Collector's order referred to earlier.

4. The appellants case was presented before us in great detail by their learned Counsel Shri R.R. Gupta. His arguments were spread out over 3 days. Shri Gupta set out the basic contentions of the appellants as follows: (1) The Collector had relied on certain figures of electric consumption furnished by the Gujarat Electricity Board. The supply was in the name of an allied unit, M/s P.G. Orchem situated in the same premises. Accordingly, it was not for the appellants to account for this electric consumption nor could any adverse inference be drawn against them on the basis of the said electric consumption; (2) Assuming, without admitting, that the appellants were required to account for the electric consumption, the explanation was that the electricity was consumed by the allied firm and not by them; (3) Assuming, without admitting, that the electric consumption was by the appellants, and that the power was used in the process of seaming, it should be taken into account that they possessed two seaming machines, of which one could be Worked only by hand.

Therefore the entire production of containers could not be said to be with the use of power; (4) Assuming, without admitting, that the appellants did use power, it could still not be said that some process in relation to the manufacture was "ordinarily" carried on with the aid of power; (5) In any event, the production for the period May-June 1979 should be held to be without the use of power and excluded, and the consequential benefit extended to them; (6) If all the above contentions were rejected, they should still be given relief in the matter of penalty and fine.

It will be convenient to discuss the case with reference to the above statement of the appellants' contentions.

5. Taking the first two contentions, it has been argued that the electric connection was in the name of M/s P.G. Orchem, described as an allied firm or sister concern of the appellants, The appellants have submitted that in the shed in which the appellants' factory is located, there is their own factory and the factory of M/s P.G. Orchem. There was a power line connected to the latter factory only, and no electric power line was connected to the factory of the appellants. The electric bills were paid by M/s P.G. Orchem and not by the appellants.

Therefore, according to them, the consumption of electricity as evidenced by bills in the name of M/s P.G. Orchem should not be connected with the appellants themselves.

6. There is no dispute on the fact that the power connection was in the name of M/s P.G. Orchem. Nor are the figures of electric consumption disputed, since these have been furnished by the Deputy Engineer, Gujarat Electricity Board, Naroda. (This statement shows the monthwise consumption of electricity for the period 1976 to 1980, in the name of M/s P.G. Orchem, apparently on the basis of bills addressed to them).

7. Shri Sachar, who represented the Department before us, pointed out that no doubt the power connection was in the name of M/s P.G. Orchem.

However, this firm had stopped manufacture long back (from 1.9.1974, according to the appellants). Further, Shri M.S. Parikh, who was the proprietor of M/s P.G. Orchem was also a partner of the appellant firm.

At the time of the visit by the Central Excise officers, it was found that there was actually a connection from the main power connection of M/s P.G. Orchem to certain machines comprising the machinery of the appellants. In these circumstances the burden was clearly on the appellants to show that they had not used power in their manufacturing operations. On the question of the burden of proof on the Department in such case, Shri Sachar cited the judgment of the Supreme Court in the case of Collector of Customs, Madras and Ors. v. D. Bhoormull . That case related to adjudication proceedings under the Sea Customs Act, 1878, in a case where the burden of proof was not on the person from whom goods were seized. The Supreme Court observed that in such a case the burden of proving that the goods were smuggled goods was on the Department. However, the Honourable Court went on to observe that one must pay due regard to other fundamental and universal principles. One of these was that the prosecution or the Department was not required to prove its case with mathematical precision to a demonstrable degree. It observed that the law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the facts in issue, Shri Sachar submitted that these principles were equally applicable to adjudication proceedings under the Central Excises and Salt Act.

8. Shri Sachar also relied on the observations of the Supreme Court in its judgment in the case of Syad Akbar v. State of Karnataka . That judgment related to a criminal appeal. In dealing with the degree of proof required, the Supreme Court pointed out that in criminal proceedings guilt must be proved beyond reasonable doubt, whereas in civil proceedings a mere preponderance of probability was sufficient, Shri Sachar submitted that adjudication proceedings not being criminal prosecutions, a mere preponderance of probability was sufficient to establish an offence in such proceedings. (However, Shri Gupta submitted that there were authorities to the effect that such proceedings should be regarded as quasi-criminal proceedings).

9. We find force in the submissions of Shri Sachar on this point. It was submitted by Shri Gupta that although the factory of M/s P.G.Orchem had stopped production in 1974, they had nevertheless carried out some experiments on a small scale on certain chemicals, as could be seen from the fact that some chemicals were found in that factory at the time of the visit of the officers. We do not find this a convincing explanation. Both the firms were quite small ones and not such as could be expected to carry on research even when they were in production. It is all the more strange that M/s P.G. Orchem, who did not find it worth while to carry on production, should nevertheless have carried out experiments. No evidence has been led to show the nature of these experiments or the qualifications of the persons claimed to have carried them out. It is not unnatural that in a factory which was manufacturing chemicals in the past some quantity of chemicals would be found, but this does not prove that experiments were being carried out.

The explanation that this practically defunct factory was using electric power, whether for carrying out experiments or for any other purpose, is quite unconvincing. What is far more likely is that, since they were allied or sister concerns, with Shri M.S. Parikh having an interest in both, the power connection to M/s P.G. Orchem was being utilised by the appellants. Taking into account of the fact that there was actually a line making a connection from the part of the shed allocated to Shri P.G. Orchem to the machinery used by the appellants, the presumption that the electric power was being used by the appellants is so strong that it is clearly for the appellants to rebut it.

10. Shri Gupta argued at great length on the question whether at the time of the officers' visit, any machines of the appellants were actually found working with the aid of power. He devoted considerable time to the panchanama and the statements recorded.

11. Considerable argument centred round the panchanama which was drawn up at the time of the visit of the officers. It is signed by two witnesses, Sarvashri Yodha (or Joddha) and Solanki. The occupation of Shri Yodha is given as "Service (Electrician)" and that of Shri Solanki as "Service". The panchanama states that they being called as panchas by the Superintendent presented themselves at shed No. 38 (occupied by the appellants). The panchanama lists 12 items of machinery which are stated to be used for manufacturing tin containers. 10 out of these items are described as "hand operated". The remaining two are described as under:1.

Seaming Machine of Two Horse power For fixing Top and Electric Motor fixed with the Electric botam of the Tin connection in working condition (Electric Container body.

powers operates)12.

Two power presare and 1 horse powers For pressing the sheet of motor with electric wiring connection in the containers and for working condition.

making designs.

The list of the machinery is preceded by the sentence "the following machines were found working and with the help of workers". At the end of the list it is stated "the above stated machinery are in working condition in the above factory for manufacturing 16 Kgs. containers".

12. The panchanama also states that in the last room in the same shed there was a plant for manufacturing fluorescent chemicals which was found closed and there was a connection by wire to the above three machines in the premises of the appellants which were found "in working condition".

13. In the proceedings before the Collector the appellants contended that Sarvashri Yodha and Solanki had come to the factory to attend to a seaming machine of the appellants which was being operated by hand, although it could be operated by a motor. According to them the machine had got jammed and they had called Shri Yodha who was a Supervisor with another firm and was conversant with electrical working. He had been called on 27.11.1980 between 12 and 12.30 hours, and was told that the hand operated seaming machine was jammed. He advised that by giving a jerk with an electric motor the jamming could be removed. He advised that an electric motor should be fitted and that he should be called after half an hour. At 3.30 hours he again went to the factory and was told that as per his instructions the appellants had fitted the electric motor. Shri Yodha along with his assistant Shri Solanki went to the appellants1 factory and inspected the machine which was still jammed. On starting the motor only the motor revolved. He instructed the appellants to put on a belt on a pulley and went away. Thereafter an officer from" the Central Excise department visited the appellants and he was called back. Shri Yodha affirmed that since the seaming machine was jammed the electric motor was connected to release the jam and the electric motor was connected only on his advice. The affidavit of Shri Solanki is to the same effect.

14. These affidavits were filed in connection with the proceedings before the Collector. Shri Yodha and Shri Solanki were summoned in the capacity of Panch witnesses but according to the Collector they did not appear either on 25.2.1982 or on 27.4.1982, though the latter date was specifically fixed for examining the Panch witnesses. On 26.4.1982 Collector received from the advocate of the appellants a letter dated 20,4.1982, enclosing copies of letters dated 21.4.1982 addressed by Sarvashri Yodha and Solanki, and containing inter alia photostat copies of the affidavits sworn by them on 19.4.1982. Letters dated 21.4.1982 from Sarvashri Yodha and Solanki, enclosing their original affidavits were received separately.

15. Shri Gupta laid much stress on the fact that Sarvashri Yodha and Solanki were not examined. According to him they had duly attended at the Collector's office in reply to the summons on 25.2.1982 and 27.4.1982 but they were sent away by the Central Excise officers without being examined. He, therefore, citing a number of authorities, submitted that since the persons who had furnished the affidavits were not examined and what were stated in their statements was not controverted, it stood unchallenged and must be taken to be correct. As against this, Shri Sachar submitted that the two witnesses were under the influence of the appellants, and had been deliberately kept out of the way. He took us through the panchanama to which reference has already been made and submitted that it clearly showed that at the time of the visit the machines were actually working with the aid of power.

In a statement recorded 5 months later, Shri Manmohanlal Parikh, another partner of the firm, had admitted that the machines were working with power. The panchanama which was drawn up at the time of seizure clearly showed that Sarvashri Yodha and Solanki were witnesses called from outside. They had not said anything about having been called to start a jammed machine, nor had the partner of the firm, Shri P.S. Parikh, who had also signed on the panchanama, done so. In the circumstances it was clear that the appellants had procured the affidavits of Sarvashri Yodha1 and Solanki, containing a wrong version and had also kept them out of their way to avoid their being examined.

Shri Sachar cited the judgment of the Supreme Court in the case of State of Kerala v. M.N. Mathew, reported in 1978 SCC (4) 65, to the effect that the evidence of public servants must be given due weight, and he submitted that the panchanama, which was recorded by Central Excise officers in the pursuance of their duty should be taken as properly recorded.

16. To further controvert the statement and the panchanama that Shri Yodha had been called in the capacity of an electrician, Shri Sachar drew our attention to the appellants' reply dated 9.6.1981 to the show cause notice in which they put forward the explanation that an electrician had been called to remove the jam. The reply further states "the Panch witnesses had also seen this Electrician in the factory when they carried out the panchanama....". Shri Sachar submitted that this would show that even at that stage the appellants had not contended that Shri Yodha who had signed as a Panch witness, was himself the electrician.

17. Shri Sachar further referred to the examination before the Collector of Shri Erulkar, Superintendent of Central Excise, who had visited the factory of the appellants on 27.11.1980. During his examination-in-chief, Shri Erulkar inter alia stated as follows: It was noticed that the process of manufacturing containers with the aid of different machines installed in their factory, including the seaming machine and the power process heated with motors, was in progress.

Shri Erulkar was cross-examined by the advocate for the appellants on various points but not on his specific statement that a process of manufacture using certain machines fitted with motors was in progress.

Accordingly, Shri Sachar submitted this part of his evidence must be taken as admitted.

18. Shri Sachar also drew our attention to a question put on cross-examination to Shri Erulkar and his answer, which ran as follows: Q. As regards the seaming machine, there was handle affixed to the machine by which the machine could be hand operated. Did you see this? A. There was no handle affixed to the seaming machine for the purpose of operating it.

This, according to Shri Sachar, showed clearly that the seaming machine had not been operated by hand and therefore the explanation advanced by the appellants was not correct.

19. As mentioned above, the appellants have devoted considerable effort to establishing that their machines were not in fact being operated by power on the date of the visit of the excise officers. They have not controverted that the machines were connected to the power line.

However, they have sought to contend that the seaming machine was connected only for the purpose of removing a jam. They have advanced the explanation that Sarvashri Yodha and Solanki were in the factory for that purpose. They have also stated that Shri Yodha was a Supervisor (Electrician) and Shri Solanki was a worker. (In passing it is rather strange that a man aged 21 is shown as a Supervisor and a man aged 45 as a worker). They have also contended that these two persons were not examined though they were present against summons, and therefore the affidavits given by them should be taken as uncontroverted. On a careful study of the facts, we do not find these explanations convincing. The Collector's order states that despite being summoned on two occasions, these two persons did not attend. We see no reason to disbelieve this statement. We consider it highly improbable that on two occasions persons who came as witnesses in proceedings before the Collector were sent away by the Central Excise officers without being taken to the Collector. This is not therefore a case where there was an omission to examine the deponent of an affidavit, but where a person who affirmed an affidavit failed to submit himself to cross-examination, though summoned for that purpose.

The authorities cited by Shri Gupta do not apply to such a situation.

20. Apart from this, we find it stated in para 6 of the appellants' reply to the show cause notice that "one electrician who will be produced as the defence witness, who would in (indicate?) to the Collector as to why he was called, when he was called and what did he do to remove the jam which could not have been removed manually". In other words, the appellants announced their intention to produce as their own witness the electrician who was in a position to explain the entire matter. If that was so (and Shri Yodha was presumably that important witness) they could surely have produced him themselves and not rested content with getting him to come to the Collector's office and go away, although two days had been specifically indicated for his examination. It is apparent that rather than expose Shri Yodha to cross-examination they found it more prudent to get his affidavit and submit it in such a manner that he could not be examined on it. There is also some weight in Shri Sachar's submission that Sarvashri Yodha and Solanki were in the control of the appellants, as seen by the fact that copies of their letters dated 21.4.1982, with copies of their affidavits, were made available to the advocate of the appellants in advance and were sent by him to the Collector with a covering letter dated 20.4.1982.

21. Apart from this, there are some inherent improbabilities in the affidavit of Shri Yodha. He claims that he was conversant with all electrical working and he had been called by the appellants, from Arvind Mills where he was working, in order to help them out of their difficulty when their machine jammed. If this was correct, he was evidently called because the appellants and their workers did not have any expert knowledge of electrically operated machines. However, when this expert went to the appellants' factory on first occasion, what he did was to advise the appellants to connect up the machine to the electric power line and try to start it in that manner without doing anything himself. It is difficult to believe that any person who has been called for help in view of his superior knowledge by persons in difficulty would merely come to the spot, give some advice (to persons who evidently were not experts) and then go away without even trying to see whether what he suggested was effective. It is even more surprising that when he came back after about 3 hours and found that the problem was still unsolved, he did not put his own hand to the task and do something useful. Instead, he gave more advice and went away again (although this time he had completed his duty and there was no reason for him to hurry). One can find good mechanics with pride in their work even among comparatively uneducated persons. But he is indeed a strange mechanic who goes about dispensing advice without lifting a finger to help or waiting to see the results of his advice. It is for these reasons that we find the account given to Shri Yodha's affidavit, ingenious as it is, to be lacking in authenticity.

22. We also observe that so far as the other machine is concerned, namely the power press, it was also connected to the power source. In this case there is no explanation that this connection also was for the purpose of removing a jam (if at all such a coincidence could be imagined). It has however been submitted that the power presses were not fitted with dies and therefore not usable. We find no force in this argument since dies in their very nature are of different sizes or shapes and cannot be expected to be permanently fitted in a machine.

23. Our conclusion, after a careful study of the evidence in this regard, is that at the time of the visit of the Central Excise officers, two machines in the appellants' factory were connected to a power source and were actually being operated with electric power. The explanation given for the connection is far fetched and unconvincing and we do not accept it.

24. Having reached the above conclusions, we would nevertheless observe that if the circumstantial evidence such as connection to a power source was otherwise sufficiently strong, it was not necessary that the Central Excise officers or the Panchas should actually have seen the machines working on electric power. The factory was a small one, with only 15 workers. The arrival of Central Excise officers at the factory would certainly have been noticed by them. At least a little time would have been spent in the officers announcing their presence and indicating what they wanted to see. Such an occurrence would naturally attract the attention of the workers and it would not be surprising in the least if they all stopped whatever they were doing and turned their attention to the fresh development. In addition, if the management or the workers were consciously engaged in breaking the law, it was all the more likely that working with electric power would immediately be suspended. If it was clear from the facts and circumstances that the factory had in fact been operating machines with the aid of power, the fact that this was not being done at the precise moment when the officers inspected the machinery would make little difference.

25. We now come to the argument based on the wording of notification No. 94/70, with special reference to the words "no process is ordinarily carried on with the aid of power". At this stage we may mention that, taking into account the monthly figures of electric consumption as furnished by the Electricity Board, the Collector had held that power was used during the period May 1979 to November 1980.

The statement shows that during 1977 there was "Zero" consumption during 10 months and some consumption in 2 months. Again in 1978 there was "Zero" consumption in 8 months and some consumption in 4 months.

Out of the first 4 months of 1979 there was "Zero" consumption in 3 months. However, during the 19 months from May 1979 to November 1980, there was "Zero" consumption only in 5 months and consumption ranging from 2 to 66 units in the remaining 14 months. It is apparent that for the period prior to May 1977, the Collector has treated the months of "Zero" consumption as the norm, and conversely from May 1979 he has treated the months of "Zero" consumption as the exception to the norm.

In other words he has concluded that prior to May 1979 power was not ordinarily used, whereas from May 1979 power was ordinarily used.

26. Shri Gupta argued that the word "ordinarily" in the notification did not justify the Collector's conclusion. In this connection he cited the judgment in wherein it was held that the words "ordinarily resides" in relation to a minor mean the minor's ordinary place of residence and the minor's temporary removal to another place would be ignored. He also cited the judgment in 1974 (1) SSC 128 with reference to the provision in the Representation of the People Act that "ordinarily" a single judge would hear certain matters. He also cited the judgment of the Supreme Court in the case of Kailash Chandra v.Union of India. The question there was the interpretation of the provision "should ordinarily be retained" in Rule 2046(2)(a) of the Railway Establishment Code. We are not dwelling on these citations because although they all relate to the use of the word "ordinarily", the context cannot be said to be comparable. However, Shri Gupta also cited Bombay High Court judgment in the case of Sanghvi Non-Ferrous Metal Industries Ltd. v. Union of India reported in 1979 E.L.T. 543, which was a case relating to Item 27 of the Central Excise Tariff. The matter at issue in that case turned on the words "containers ordinarily intended for packaging of goods for sale...." The High Court had to consider whether the aluminium canisters under consideration were ordinarily intended for packaging of goods for sale, as contended by the Department, or for storing the product and conveying the same in various stages of production. On the basis of evidence produced before the Assistant Collector, the High Court held that the canisters were not ordinarily intended for packaging of goods for sale. Shri Gupta submitted that applying the ratio of the above judgment it could be said in the present case that the goods were not manufactured by a process "ordinarily carried on with the aid of power".

27. Shri Gupta submitted that the appellants possessed two seaming machines, out of which one could be operated only by hand and the other could be operated by power and was in fact being so operated earlier.

However, that had been given up, and at the material time it was being operated by hand. It only happened that on the particular day of the visit of the excise officers the machine had got jammed and power was sought to be used to clear the jam. According to Shri Gupta the machine was ordinarily being operated by hand and not with the aid of power.

28. Shri Gupta also submitted that the present notification was a special one, in that it used the word "ordinarily". He referred to several tariff items where also excisability was attached to the use of power, but the word "ordinarily" was not used for example Items IA, IC, 12, 15C and 18(3). This would show that astray use of power would not disentitle the manufacturers from the benefit of the notification in the present case.

29. Shri Sachar submitted that the authorities cited by Shri Gupta had no application to the present case. Even the judgment relating to aluminium canisters did not apply because in that case the question was the function of the canisters. The question here was totally different and related to a process and not to an article.

30. As regards the interpretation of the word "ordinarily" in the notification, Shri Sachar contended that it would cover any equipment which could be used either with or without the aid of power. In the present case it was on record that the machine was previously being operated with the aid of power and therefore it should be deemed to be operated ordinarily with the aid of power.

31. We have carefully considered this interesting question. In the first instance we find that none of the authorities put forward by Shri Gupta applies in terms to the present case. The word "ordinarily" can have a wide range of meanings, and the meaning in a particular case has to be seen with reference to the context. It appears to us that in the present case it has to be used in the sense in which it is "ordinarily" used, that is, as a rule, to which there may be some stray exceptions.

32. A possible meaning would be that if in a particular industry it is the general practice for certain processes to be carried on with the aid of power, then any goods manufactured by that process (whether or not power is used by that particular manufacturer) should be deemed to be manufactured by a process "ordinarily carried on with the aid of power". In other words, the deciding factor would not be whether a particular manufacturer uses power or not, but whether the generality of manufacturers do so. In the light of Governmental policy generally and the long-established practice of the Central Excise Department, which is founded on that policy, we do not think this would be a proper interpretation. It appears to us that there is a clear intention on the part of Government, in these "power-based" notifications or tariff items, to differentiate between a manufacturer who actually uses power and one who does not, in favour of the latter. We therefore proceed to the alternative interpretation which indeed according to us involves the "ordinary" sense of the word. This would be that where a manufacturer does not use power as a rule, but may do so in one or two stray instances, it would be deemed that in his factory no process is ordinarily carried on with the use of power. Conversely, where except on stray occasions he does use power, it would be considered that the processes are "ordinarily carried on with the use of power". Apart from carrying the ordinary sense of the word, this interpretation would have a logical, economic and administrative justification. It would mean that a manufacturer who for some special reasons uses power in say one week out of 52, would not thereby be penalised by having his entire output charged to duty. Conversely, a manufacturer who uses power in 51 weeks out of 52, would not be able to claim exemption for the one week when he does not use power (a fact which would be well-nigh impossible administratively to verify without day-to-day supervision).

33. The above interpretation is more or less the one put forward by Shri Gupta, but it does not help his clients, because it leads to the conclusion reached by the Collector and set out in para 25 above. It is based on circumstantial evidence such as records of power consumption, but this is inevitable in such a case. Under the Self Removal Procedure there is no day-to-day supervision of a unit which would show directly whether power is ordinarily used or not. In the present case there was no supervision at all. In such cases, circumstantial evidence such as statements of power consumption have to Be relied upon. In the present case a month-wise statement of power consumption is available, and it is possible on the basis of this statement to arrive at a judgment as to whether during a particular period it can be said that processes were ordinarily carried on with the aid of power or not. This is what the Collector has done, and in the light of the pattern of power consumption which we have referred to in para 25 above, we consider that the Collector's approach and findings were reasonable.

34. Shri Gupta had argued that the figures of monthly production did not show a substantial increase during the period when power was alleged to have been used, namely, May 1979 to November 1980. This argument was convincingly rebutted by Shri Sachar who pointed out to para 15 of the appellants' revision application, wherein they had stated as an "important aspect of the case of the appellants" that the use of electricity would not result in an increase in the production rate.

35. Shri Gupta made a submission that even assuming that power was used, the Collector should have excluded the production in the months of May and June 1979. His basis for this was that the power consumption in May 1979 was 2 units and in June 1979 it was 5 units, and these months had been included in the period where power was held to have been used. However, during July and August 1978, 2 units and 5 units respectively had been used. Nevertheless, the Collector had excluded 1978 from the period during which power was used. Shri Gupta submitted that on the same logic the months of May and June 1979 should have been excluded. If this was done, not only would the excisable quantum of production be reduced, but this also benefit the appellants in regard to the rate of duty on the remaining part of the production.

36. We are not able to accept the above suggestion based on similar figures in two different periods. We had analysed in para 25 above the pattern of consumption over varied periods. In 1978 there was power consumption only in 4 months, two of them being July and August. It was therefore reasonable to take 1978 as a whole as a period when power was not used. However, in the period from May to November 1979 there were only 5 months when power was not used and May and June 1979 were among the 14 months when power was used. Taking into account the fact that these bills were submitted on a monthly basis and therefore no accurate accounts of day-to-day or week-to-week consumption of power could be obtained, the Collector had necessarily to proceed on the basis of fairly long periods of time, and during such period even if the consumption during any particular month was more, that could not be omitted, in view of the approach we have adopted in interpreting the notification. (In fact, Shri Gupta could have gone further and argued, though he did not do so, that the Collector should also have omitted the entire production in the 5 months between May 1979 and November 1980 during which there was no recorded consumption of electricity).

37. Shri Gupta had also argued that since the machinery in the factory included two seaming machines, of which one could be worked only by hand, the entire production of the factory could not be said to be with the use of power and therefore a part of the production was not dutiable. Even if this argument was acceptable it would obviously not be possible to divide the production in this manner, because no reliable records are available of the number of tins which would have been produced without the use of either a power operated seaming machine or a power operated press. This situation is entirely due to the action of the appellants in using power without the knowledge of the Central Excise authorities. Having created such a situation they cannot claim to benefit from it by raising a question about the exact number of containers which might have been manufactured without the aid of any power.

38. We have examined at length above the arguments put forward in detail and persuasively by the learned Counsel of the appellants but we find no reason to disagree with the conclusions reached by the Collector. There remains the question of penalty and fineThe appellants are held to have removed goods valued at over Rs. 27 lakhs without payment of the duty due. A penalty of Rs. 50,000 for such an offence cannot be considered as excessive. The fine of Rs. 10,000, in regard to the containers valued at over Rs. 50,000 which were seized on 27.11.1980 cannot also be considered as excessive. We, therefore, see no reason to modify either the personal penalty or the fine.

39. In the result, we confirm the order of the Collector of Central Excise, Baroda, and reject this appeal.

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