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Shree Hanuman Metal Industries Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)LC77Tri(Delhi)
AppellantShree Hanuman Metal Industries
RespondentCollector of Central Excise
.....of duty of rs. 1,60,382.97 and penalty of rs. 80,000 from the appellants made by the collector of central excise, delhi by his order-in-original no. 44/1983, date 5-12-1983 is justified.2. appellants' factory situated at jagadhari is engaged in the manufacture of copper and copper alloys falling under t.i. 26a of the central excise tariff. they are also engaged in manufacture of brass utensils falling under t.i 68 ibid. appellants claim that after the introduction of tariff item 68 in the c.e. tariff w.e.f. 1-3-1975, premises manufacturing utensils were segregated and this was within the knowledge of excise department. excise officers were regularly visiting appellants' factory and keeping a watch on utensil manufacturing section and the section manufacturing articles falling under t.i......
1. The questions for decision in this appeal to the Tribunal are whether the appellants have exceeded the clearance limit of goods stipulated under Notification No. 176/77-CE, dated 18-6-1977 and whether the demand of duty of Rs. 1,60,382.97 and penalty of Rs. 80,000 from the appellants made by the Collector of Central Excise, Delhi by his Order-in-Original No. 44/1983, date 5-12-1983 is justified.

2. Appellants' factory situated at Jagadhari is engaged in the manufacture of Copper and Copper alloys falling under T.I. 26A of the Central Excise Tariff. They are also engaged in manufacture of Brass Utensils falling under T.I 68 ibid. Appellants claim that after the introduction of Tariff Item 68 in the C.E. Tariff w.e.f. 1-3-1975, premises manufacturing utensils were segregated and this was within the knowledge of Excise Department. Excise Officers were regularly visiting appellants' factory and keeping a watch on utensil manufacturing section and the section manufacturing articles falling under T.I. 26A.The appellants further claim that they were receiving Gullies from other customers for rolling on job basis and the appellants charged only rolling charges of 40 paise per kg. from them. They also claimed that part of the manufacture is without the aid of power. After the introduction of T.I. 68 and issue of Notification No. 176/ 77-CE, date 18-6-1977, the Excise authorities required information about the value of appellants' clearances and this the appellants submitted to the authorities. They further claim that the value of their clearances was well within the limit stipulated under Notification No. 176/77-CE. The Assistant Collector of Central Excise issued show cause notice dated 1-10-1980 calling upon them to show cause to the Deputy Collector why not demand of duty be made from them as they were not entitled to benefit of concession under Notification No. 176/77-CE. It appears from the Order-in-Original passed by the learned Collector and the appellants' reply to the show cause notice that this show cause notice was subsequently amended requiring cause being shown to the Collector of Central Excise, New Delhi instead of Deputy Collector, Faridabad.

The appellants filed reply dated 5-5-1983 denying the allegations and claiming that they were entitled to benefit of the notification (copy of the amendment proposed in the* show cause notice requiring cause to be shown first to Deputy Collector and then to Collector of Central Excise, Delhi have not been filed). After following the usual procedure, the Collector called upon the appellants to pay duty amounting to Rs. 1,60,382.97 for the clearances made between 18-6-1977 to 31-3-1979 on the ground that in terms of Notification No. 176/77-CE, dated 18-6-1977, appellants'clearances for the period 1976-77 exceeded the value of Rs. 30 lakhs. The Collector also imposed a penalty of Rs. 80,000 under Rule 173Q of the Rules for contravention of Rules 9A and 174 ibid. Aggrieved the appellants have filed the present appeal to the Tribunal.

3. At the hearing of the appeal, Sh. J.S. Kapil, learned Advocate for the appellants argued that the appellants are a small scale unit registered as such and their total investment on plants and machinery is not more than Rs. 10 lakhs. This part of the appellants' argument is not disputed by the other party. He further argued that prior to 1981, Brass Scrap was not excisable and that the Collector had not taken note of that fact. It was further submitted that the appellant had made 'Karahis' (utensils) without the aid of power and value of such hand-made Karahis would work out nearly to Rs. 5 lakhs and this ought to have been excluded under Notification No. 176/77-CE, dated 18-6-1977. He however admitted that factory in which goods falling under T.I. 26A and T.I. 68 are manufactured is one. He however submitted that in determining the value of clearances only job work value should have been taken into consideration and not the value of the raw materials which went into job work. Sh. Kapil, learned Advocate for the appellants further submitted that the entire activity of the appellants was within the full knowledge of the Excise Department and therefore the demand made beyond 6 months was time-barred. He also argued that circles have been consumed in the factory and value of such circles captively consumed ought not to have been taken into consideration in computing the value of appellants' clearances during the relevant period. In support of his arguments, he relies on the following decisions : (i) Free India Dry Accumulators v. Union of India and Ors.-1980 E.L.T 168 (Calcutta) andNarendra Engineering Works v. Union of India and Ors. -1981 ELT. 859 (Bombay).

4. Sh. V. Lakshmi Kumaran, learned S.D.R. on behalf of the respondent controverted Sh. Kapil's arguments. He distinguished the decisions cited by Sh. Kapil and in particular submitted that the Supreme Court's decision in Union of India and Ors. v. Bombay Tyres International- 1983 E.L.T. 1896 had over-ruled the decision relied on by Sh. Kapil and that even if the appellants were job workers the value of raw materials and job work charges would both be taken into consideration in determining the value of appellants' clearances. He however did not dispute that under Notification No. 246/77-CE, dated 15-7-1977 for the purpose of determining the value of clearances under Notification No. 176/77-CE dated 18-6-1977 goods cleared for captive consumption within the factory in which goods are manufactured were not to be taken into account. He further submitted that even making allowance for this captive consumption, the appellants according to their own admission had made clearances of utensils worth Rs. 19,86,240.96, circles worth Rs. 2,54,676.77 and received job charges from others for re-rolling circles to the tune of Rs. 69,258.91, the total of the three would work out to Rs. 23,10,176.84. The appellants had admittedly rolled on job charge 1,77,801.8 kgs. of brass circles from Gullies received from other customers. Clearances made by the appellants would include the value of brass circles done on job charge basis i.e. raw materials and job charges received. At the material time, the value of brass per kg.

was not less than Rs. 20 per kg. The value of this item would work out more than Rs. 35 lakhs and thus the appellants had clearly exceeded the clearance limit set out in the notification. He also submitted that appellants' claim that the demand was time barred was clearly not sustainable. The appellants had never disclosed that they were manufacturing utensils in their classification lists. In support of his arguments, Sh. Lakshmi Kumaran relied on the following decisions : 1. Abilities {India) Ltd., Ghaziabad v. Collector of Central Excise, Meerut-Order No. 907/83-B, dated 5-10-1983 [1984 (16) E.L.T. 619 (Tribunal)],Hindustan Shipyard Ltd., Visakhapatnam v. Collector of Central Excise, Guntur 3. Olympic Times (India) Pvt. Ltd., Meerut v. Collector of Central Excise, New Delhi-Order No. 920/83-B, dated 30-9-1983,Ambika Steel Rolling & Engg. Works, Muzaffarangar v. Collector of Central Excise, Meerut-Order No.Shree Mahabir Metal Mart, Bombay v. Collector of Central Excise, Bombay- Order No.Metal Extruders (I) Pvt. Ltd., Thane v. Collector of Central Excise, Bombay-II- Order No. 915/1983-B, dated 23-9-1983 [1984 (16) E.L.T. 148 (Tribunal)],Madras Petro-chem. Pvt. Ltd., Madras v. Collector of Central Excise, Madras Order N.5, Figures given by the appellants for the preceding year 1976-77, which would determine their eligibility for claiming concession under the notification are set out below :(captive consumption) 43955.3 16139.41 16139.41Rolled for others on jobcharges 177801.8 69258.91 69258.91Clearances of utensils Rs. 1986240.96 Out of the above figures, circles weighing 43,955.3 kg. which were used in captive consumption and their value would have to be excluded in view of Notification No. 246/1977-CE, dated 15-7-1977 and disputing of the argument b,y the other party. It is now to be seen whether in determining the value of appellants' clearance job charges and circles rolled out of gullies by the appellants weighing 1,77,801.8 kgs. and job charges Rs. 69,258.91 should be included. It may be mentioned that during the arguments, Sh. Kapil, learned Advocate for the appellants, admitted that at the relevant time brass cost Rs. 20 per kg. at the lowest. As to appellants' reliance on Free India Dry Accumulator v.Union of India and Ors. (Supra) for the argument that the assessable value would not include the value of raw material supplied by the customer, Sh. Lakshmi Kumaran has rightly pointed out that this decision has been over-ruled by a Division Bench of Calcutta High Court and reported in Union of India and Ors. v. Free India Dry Accumulator-- 1983 ELT 733 (Calcutta). The precedent does not therefore help the appellants. As to Sh. Kapil's reliance on Narendra Engineering Works v.Union of India and Ors.- 1981 E.L.T. 859 (Bombay) we note that the said decision inter alia was concerned with interpretation of value of clearances for job charges under T.I. 68. The concept of job charges and job workers under the Excise law, is available under T.I. 68 under Notification No. 119/75-CE, dated 30-4-1975 and not for any other tariff item. Admittedly the brass circles manufactured by the appellants did not fall under T.I. 68. Therefore this decision does not help the appellants. In the view we take it is not necessary for us to decide whether the Supreme Court decision in the Valuation case impliedly over-ruled the Bombay High Court decision in Narendra Engineering Works. Admittedly the appellants during relevant period as per figures set out above made clearance worth Rs. 23,10,176.44. Adding to this value of brass Rs. 1,77,801.8 gullies on which job charges were done and Rs. 69,258.91, the job charges, there can be no doubt that adding the three together the appellants' clearances would far exceed the stipulated limit of Rs, 30 lakhs because even according to Sh.

Kapil, learned counsel for the appellants' brass at the relevant time cost Rs. 20 per kg. The brass on which the job charges was done would cost approximately Rs. 38 lakhs. We, therefore, find that the appellants exceeded the stipulated limit under the Notification.

6. An argument was advanced that the appellants had made some utensils without the aid of power and this quantity whose clearance would work out to roughly Rs. 5 lakhs should be excluded. There is no merit in this contention for more reasons than one. Firstly, the Collector rejected this plea because it was not substantiated by any document.

The goods had already been manufactured and cleared from the factory long back. Then it was also un-imaginable that a Rolling Mill could run without mechanical energy and power. Admittedly, the appellants' factory uses power. To claim that part of utensils are made without the aid of power when the factory is using power is a plea which is clearly not acceptable. As to the appellants' claim that the demand was time barred, because the Excise department was in full knowledge of the appellants' activities, we do not find any merit in this contention also.

There is no clear evidence that excise authorities were in full knowledge of appellants' quantum of production. The learned Collector in rebutting appellants' plea of time bar held as under : "This argument, to say the least, is derisive. The utensils manufactured by rolling units became dutiable as a result of issue of Notification No. 176/77, dated 13-6-977, as the notification stipulated that such units will pay duty on goods falling under T.I. 68 whose value of clearance had exceeded Rs. 30 lakhs in the preceding financial year. The scrutiny of classification lists for the relating period reveal that the party did not mention about manufacture of utensils in col. 5 of the classification lists where the particulars of all excisable goods manufactured has to be given.

The party, therefore, made a mis-declaration and misled the department for which reason contravention of Rule 198 has been invoked. The party did not supply the figures of gullies rolled for the customers and for their own use. They simply informed that 239277.300 kgs. of copper alloys circles were cleared in addition to utensils falling under T.I. 68 during the year 1976-77. Rather what I find is that despite the best effort made by the Deptt. to elicit requisite information from them, the department had to resort to extreme course of issuing formal summons to them. Even subsequently some more references were made; the conclusion is obvious that they had something to conceal. I do not find any documentary evidence nor any circumstantial evidence to show that the department was well aware to their data of clearances and their manufacturing activity of utensils. Apparently they went on clearing goods unauthorisedly without payment of duty during 1977-78 and 1978-79 without making any formal declaration to the department and without observing any Central Excise formality. In the circumstances I find the defendant had suppressed the facts of their clearances wilfully and with the intention to evade duty. 'As such the limitation period of 5 years will apply in their case for demanding duty under Rule 9(2) of the Central Excise Rules, 1944." 7. The appellants have not been able to convince us that there was material before the excise authorities from which reasonably they could have known about quantum of appellants' product of utensils.

Collector's order would suggest that in the classification list, the appellants suppressed fact of manufacture of utensils. The appellants have not been able to show that this finding is wrong. The mere fact that the excise authorities were coming to appellants' factory, as claimed by the appellants, would not mean that they knew of the quantum of appellants' production. From this state of evidence the learned Collector was right in holding the appellants guilty of suppression of facts.

As to the question of penalty, while Sh. Kapil, learned counsel for the appellants assailed it as unjustified, the learned Departmental Representative left the matter entirely to the Bench.

On the facts and circumstance of the case, the penalty of Rs. 80,000 clearly appears harsh and excessive. It is reduced to Rs. 5,000. With this modification in penalty, the appeal is dismissed.

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