1. The appeal has been filed against the orders passed by the Collector of Central Excise & Customs, Pune dated 13-7-1982. The appellants are a Government of Maharashtra Undertaking duly registered under the Indian Companies Act, 1956. The management of the Corporation is carried on through the Board of Directors appointed by the Government of Maharashtra. The Corporation has units at Pune, Pachora, Nagpur and Rasayani. At Pune and Pachora Unit, some parts of Bullock carts, falling under Tariff Item No. 68, are manufactured. At Nagpur Unit, P.P. Foods and at Rasayani Unit, Fertilisers are manufactured. In respect of Pune Unit, the Corporation assembles bullock carts at various sites. The main frame, side frame, axle bracket, yoke pipe etc.
are manufactured and cleared from the units at Pune and Pachora. The other parts required for assembly of bullock carts are purchased from the open market. The bullock carts are assembled at the sites of the buyers without the aid of power. Such sites are not factories within the meaning of Factories Act. The Assistant Collector (Preventive) Central Excise, issued a show cause notice that the appellants are violating various Central Excise Rules. He claimed that the appellants are manufacturing excisable goods viz. Bullock carts and demanded duty for the period 1-4-1978 to 31-3-1981. The show cause notice was issued on 23-10-1981. The appellants pointed out that the Collector had already issued a show cause notice and that a fresh show cause notice should not be issued. In reply to that show cause notice issued by the Collector, the appellants pointed out that they are not manufacturing Bullock carts in their factories. They urged that they were purchasing major parts from open market and were merely assembling the bullock carts at the sites of the customers. The Collector rejected the contentions of the appellants. Shri B.D. Deshmukh, Advocate, appearing for the appellants argued that the appellants were not manufacturing bullock-carts. He, further, pointed out that under Tariff Item No. 68 during the period 1-3-1975 to 17-6-1977, the goods should have been manufactured in a "factory" as defined in Section 2(m) of the Factories Act and that such factory must employ 50 or more workers in the case of power operated units or 100 or more workers in the case of non-power operated units. From 18-6-1977 under Notification No. 176/77, the above criterion of duty liability was changed. This notification was replaced by Notification Nos. 89/79, dated 1-3-1979, which enabled calculating the combined clearances of all factories belonging to the same manufacturer. The position continued to exist in Notification No.105/80, dated 19-6-1980. The appellants are not manufacturers of bullock-carts at their factories at Pune or Pachora. Even otherwise the appellants are entitled to the Exemption under Notification Nos. 179/77 and 91/81. He also stated that the show cause notice was time-barred.
The Collector has ignored the legal position, arbitrarily treated the appellants as manufacturer of bullock carts and imposed heavy penalty and demanded a large amount of duty without authority of law.
2. On behalf of the Deptt. Shri Khanna, S.D.R., pointed out that the clearances of both the units should be taken together in terms of Notification Nos. 176/77, 89/79 and 105/80. They were both factories under Section 2(m). The appellants never brought it to the notice of the Deptt. that the bullock carts were manufactured with their own labour at the site. He urged that the invoices mentioned about the sale of''bullock-carts' and hence the manufacture had been made out. As many as 10,000 bullock carts were assembled and sold to factories. Since there was mis-declaration in the Classification List, suppression of materials was established and demand for duty and imposition of penalty were quite justified.
3. We have carefully gone through the matter and we find that the show cause notice issued cannot be sustained. The gravamen of the charge is that the appellants manufactured bullock carts at their factory at Pune. The show cause notice proceeds on the basis that the appellants manufactured excisable goods and parts of bullock carts, falling under Item No. 68. The value of the total clearances has been taken for the purpose of assessment of duty. The learned Counsel for the appellants urged that the appellants were not 'manufacturing' any bullock carts.
It is seen from the reply to the show cause notice that the appellants were manufacturing some parts of bullock carts and together with the parts purchased from open market, such as tyres they were assembling the carts at the sites of the customers. The Department has not adduced any evidence.
4. There is no evidence to show that the assembly of bullock carts took place in their factory at Pune. The appellants is an Institution owned by the State Government and the Government of India and there is no reason to discredit their statement about their assembling the bullock carts at the respective sites. Mr. Deshmukh points out that 60% of the component parts were purchased from outside and that hired labour was used for putting together and merely tightening the nuts and bolts required for bullock carts. These parts were purchased from M/s. Dunlop Co., Bombay and Ors. On the basis of these facts, it is impossible to accept that the appellants are manufacturers of bullock carts. It is manifest that the appellants are not engaged in any manufacturing activity. Mere assembly of bought out items (duty paid) alongwith some self-manufactured items and sale of the composite item will not be manufacturing activity within the meaning of Section 2(f), especially, when the assembly is done at the site. Viewed in this background the recitals in the invoice lose force.
5. Even assuming for the purpose of argument that the appellants are manufacturers of bullock-carts, then they are entitled to rely on Notification No. 176/77 replaced by Notification No. 89/79 which precludes taking into account the clearances which do not fall within the definition of a factory under the Factories Act, 1948. In any event, the sites are not factory and there is no evidence to show that the assembly was carried out with the aid of power or more than the exempted number of workers. The learned Counsel for the appellants rightly pointed out that the lower authorities have not considered the question of application of Notification No. 176/77 and also Notification No. 46/81.
6. It is also urged that the demand is barred by time under Section 11 A. The show cause notice was issued on 23-10-1981 in respect of duty for the period 78-79 and 80-81. We must point out that there is no allegation in the show cause notice on any suppression. We also note that the show cause notice refers to letters dated 2-1-1981, 7-1-1981 etc. These factors show that the appellants have been contending right from the beginning that they were merely assembling bullock carts at the respective sites of the customers and that they were not the manufacturers. The officials have been frequenting the factory and they were fully aware of the activities. It is, therefore, futile to contend that there was suppression of matters. The show cause notice also does not contain particulars of the alleged suppression.
7. In view of the above circumstances, the appeal is allowed with consequential relief.