Customs, Excise and Gold Tribunal - Delhi
United Machinery Works (P) Ltd. vs Collector Of C. Ex. on 7 July, 1995
Equivalent citations: 1995(79)ELT477(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. This is an appeal against the order dated 23-2-1985 passed by the Collector, Central Excise, Coimbatore. The appellants have also filed the above-captioned application seeking permission for production of additional evidence under Rule 23 of the CEGAT (Procedure) Rules, 1982.
2. Briefly stated the facts of the case are that the appellants are engaged in the erection and fabrication of textile machinery classifiable under Item 68 of the erstwhile Central Excise Tariff. The appellants were clearing their products after availing exemption under Notification No. 105/80-C.E., dated 19-6-1980 under which clearances of goods falling under Item 68 upto Rs. 30 lakhs in a financial year were exempt from payment of duty. On 27-1-1984 the Superintendent of Central Excise visited the premises of one M/s. Jayalakshmi Machine Works and recorded statements of Shri K. Nandagopal, a partner of the firm and also drew up a Panchnama consequent to the deposition made by Shri Nandagopal. Statements of Shri V. Venkatapathy, Director of the appellant company and Smt. Indira, partner of M/s. National Machine Works were, recorded and Shri C.V. Balakrishnan was also interrogated. The officers also, seized a number of documents belonging to the appellant as well as M/s. Jayalakshmi Machine Works and M/s. National Machine Works. After further investigations, show cause notices were served on the appellants as well as M/s. Jayalakshmi Machine Works and M/s. National Machine Works which sought to club the values of clearances made by M/s. Jayalakshmi Machine Works and M/s. National Machine Works to the value of clearances/sales made by the appellants for the purposes of exemption under Notification 105/80 on the grounds that M/s. Jayalakshmi Machine Works and M/s. National Machine Works were not capable of producing any goods and the machinery shown in their record as having been produced and sold by them was actually produced by the appellants. The appellants as well as M/s. National Machine Works and M/s. Jayalakshmi Machine Works in their replies to the show cause notice and also during personal hearing denied the allegations. By his order, dated 23-2-1985 the Collector dropped the proceedings in respect of the value of sales made by Jayalakshmi Machine Works mainly on the grounds that unfinished doubling frame and two heavy duty doubling machines were found in their premises and they had access to three-phase power connection. He also observed that they had also incurred sizeable expenditure towards power consumption and electrical maintenance. However, in the case of M/s. National Machine Works, the Collector held that the value of the sales made by them was required to be added to the value of the goods produced and sold by the appellants mainly on the following grounds:
(i) Even though electricity charges ranging from Rs. 60 to Rs. 172 were paid by the appellant from September to December and sizeable expenditure had been incurred under electricity maintenance account the appellant had no access to three- phase power connection and the machinery installed could not have been operated with the minimum power drawn from single phase electric connection;
(ii) The landlord in the case was also the landlord of M/s. Jayalakshmi Machine Works had indicated that the tenant was to bear the electricity charges to be paid to Arul Murugan Textiles while in the case of National Machine Works the same landlord had agreed to bear such charges;
(iii) The letter received on 1-4-1982 of S. Kasthuriswami Naidu has to be disregarded as he was an interested partner. Also the statement of partner of Kannan Steel Industries has to be disregarded as afterthought;
(iv) Though some of the items manufactured on job work basis and some components were purchased from outside, the claim of National Machine Works that they had manufactured some machinery items was not acceptable since manufacture of the machines in question was not possible with single phase power;
(v) The Panchnama drawn by the Department showed that one planning machine and one radial drilling machine were in excess of the list of machinery declared by the appellant to the Department and it could reasonably be presumed that these extra machines belonged to M/s. National Machine Works.
(vi) The statements of Shri Venkatapathy and Smt. Indira proved the case of the Department.
3. Making his submission on the application for additional evidence Shri R. Swaminathan, Learned Consultant prayed that the following documents issued by various Government Agencies, which were available during the proceedings before the Collector may be permitted to be taken on record.
SI. No. Particulars Page No. in Paper Book
1. Letters dated 6-6-1981,20-6-1983 & 4-7-1984 issued by the Superintendent of Central Excise. 82-84
2. Particulars of factory and machinery details certified by the Inspector of Factories containing the Inspection Notes of the Inspecting Authority under the Factories Act. 91-93
3. Assessment/Correspondence notes and compounding notice with the Tamil Nadu Electricity Board. 94-101
4. Assessment orders passed by the Commercial Tax Department 102-111
5. Statement recorded from the person in-charge of National Machine Works by the Assistant Commercial Tax Officer on 20-10-1982. 112
6. Income-tax assessment orders against National Machine Works and United Machinery Works 113-115
7. Declaration filed with the Central Excise by National Machine Works. 116
8. Provisional S.S.I. Registration given by the Department of Industries and Commerce to National Machine Works 117
9. Copies of the documents raised by United Machinery Works on National Machine Works 160-168
10. Analysis of the documents (Purchase and Sale) 169-186 Shri Swaminathan submitted that failure on the part of the appellant to rely upon these documents during proceedings before the Collector was not on account of any deliberate omission but due to the reason that they were not aware as to the basis on which the Collector would form his opinion. He therefore prayed that in the interest of justice the appellant should be permitted to rely on these documents. Making his submission on the findings of the Collector in the impugned order, the Learned Consultant submitted that there was no dispute that all the three units were independent. He stated that the Collector had not given any finding that the units in question were related to each other in any way. He contended that the impugned order was not sustainable since even though the case made out by the Department for treating the sale of machinery made by National Machine Works and Jayalakshmi Machine Works as the production and sale of the appellant was based on similar grounds and evidence, the proceedings in respect of Jayalakhmi Machine Works had been dropped, whereas an adverse view had been taken in respect of the value of goods produced and sold by M/s. National Machine Works. He submitted that National Machine Works were engaged in the fabrication of textile machinery mainly by getting the part manufactured through job workers or items bought from the market. He added that vouchers in respect of such transactions were duly recorded in the Ledger Book seized by the Department and the relevant entries clearly disclosed the various concerns from which such parts were obtained. He argued that the Collector's finding that M/s. National Machine Works did not have complete machinery for manufacturing the machines claimed to have been manufactured and sold by them and one radial drilling machine and one planning machine belonging to the said unit were found in the appellants' premises was erroneous since M/s. National Machine Works and the appellants had filed a declaration for availing exemption from payment of duty for the year 1983-84 and such declaration was verified by the Superintendent. He contended that a dummy or non-existent firm could not have filed a voluntary declaration before the Customs authorities. He added that the provisional registration certificate as a Small Scale Industry granted by the Department of Industry & Commerce to M/s. National Machine Works also proved that it was not a dummy unit. He added that this was further corroborated by the fact that the Income Tax Department had also granted registration to M/s. National Machine Works under the Income Tax Act, 1961 after satisfying themselves about the existence of the firm. He submitted that the Collector had based his finding only on the facts that M/s. National Machine Works did not have any three phase power connection. He submitted that in arriving at his finding the Collector had ignored the letter written by Shri Kasthuri Swamy Naidu and the letter dated 13-8-1982 written by M/s. Kannan Industries and also the electricity maintenance account showing expenses of Rs. 2974.65 incurred on electricity charges. He added that about 500 vouchers indicating various items fabricated by M/s. National Machine Works through job workers giving the names of the job workers, description of the material, quantity etc. were ignored. He contended that the Collector grossly erred in ignoring the letter written by Kasthuri Swamy Naidu merely on the alleged ground that it was undated and that he was an interested party. He added that it was not disputed that the letter had been received by M/s. National Machine Works on 1-4-1982. He further submitted that the Collector had erred in ignoring the vouchers produced by National Machine Works evidencing purchase of diesel on the ground that they did not bear the name of National Machine Works. He stated that these vouchers, which were accounted for in the Ledger Book maintained by M/s. National Machine Works, clearly established that the said firm had been using a diesel generating set to meet their power requirement. He added that the Collector had ignored the letter dated 13-8-1982 allegedly on the ground that it was an after-thought as the same landlord had acted differently under similar circumstances. He contended that this finding of the Collector was erroneous since the rent agreement in both the cases of M/s National Machine Works and M/s. Jayakshmi Machine Works provided that electricity charges were to be borne by the tenants. He stated that in the case of Jayalakshmi Machine Works the power was being drawn from a third party at the instance of M/s. Kannan Industries, the latter expressly stipulated that he should not be burdened with any liability towards electricity charges. Whereas in the case of National Machine Works as per the rent agreement it was the responsibility of Kannan Industries to arrange for a three phase power connection. He added that since they failed to provide the same and the cost of generation of electricity through diesel was higher, M/s. Kannan Industries agreed to compensate M/s. National Machine Works. He contended that it was thus clear that Kannan Industries had not agreed to bear the entire cost of generation of electricity through diesel. He argued that under these circumstances the finding of the Collector that Kannan Industries had behaved differently was completely erroneous. He reiterated his stand that the Collector's finding that National Machine Works were not in a position to produce complete machinery was based on conjecture and surmises since the Collector had not disputed the fact that a number of items were either got manufactured on job work basis or were bought out from the market. He added that details of the machinery actually fabricated by National Machine Works was disclosed in their books of account. He submitted that the Collector had also erred in placing reliance on the statements of K. Venkatapathy and Smt. K. Indira which were not voluntary and had been recorded under the dictate of the officers of the Department.
4. Appearing on behalf of the respondent, Shri Somesh Arora, Ld. JDR prayed for rejection of the application filed by the appellants for production of additional evidence. He contended that the material now sought to be relied upon by the appellants was not before the adjudicating authority and there was no evidence to show that they were prevented for reasons beyond their control from relying upon the said evidence. He contended that the appellants could not be permitted to make out a fresh case at this stage. Making his submissions on the points raised by the appellants in regard to the findings of the Collector in the impugned order, he submitted that the facts in the case against M/s. Jayalakshmi Machine Works were different and accordingly the appellants were not entitled to plead that the proceedings in the case of M/s. National Machine Works should have also been dropped. He referred to the various findings of the Collector in the impugned order and stated that as brought out in the said order M/s. National Machine Works were admittedly not carrying out any manufacturing activity. He contended that during the material period all goods shown to have been produced and cleared by them were in fact produced in the premises of M/s. United Machinery Works Ltd. He added that, as held by the Collector, M/s. National Machine Works did not have the requisite machinery in their premises and in fact some of their machines were found in the premises of M/s. United Machinery Works. He added that they also did not have three phase power connection and there was no evidence that they had actually utilised diesel generating set for generating power. He contended that under these circumstances, the Collector had rightly held that M/s. United Machinery Works were producing and clearing the goods against invoices raised in the name of M/s. National Machine Works and these facts were confirmed by the statement of one of the Directors of United Machinery Works and also by one of the Directors of National Machine Works. On these grounds, he pleaded for rejection of the appeal.
5. We have examined the records of the case and considered the submissions made on behalf of both sides. The appellants have filed an application for seeking permission for production of additional evidence in terms of Rule 23 of the CEGAT (Procedure) Rules, 1982. According to the appellants the documents which they seek to produce as additional evidence in support of their case were available during proceedings before the Collector but they could not use the said documentary evidence since they were not aware about the basis on which the Collector would be forming his opinion. It is seen that in regard to the filing of additional evidence at the appellate stage, the Tribunal in the case of Prakash Pipes & Industries Ltd. v. Collector of Customs reported in 1993 (68) E.L.T. 779 has observed that "the general principle is that the Appellate Court should not travel outside the record of the lower court and cannot take any evidence in the appeal. Rule 23 of CEGAT (Procedure) Rules is an exception and that exception should be exercised sparely and judiciously". Supreme Court held in State of U.P. v. M.L. Srivastava that additional evidence should not be permitted to be produced to enable the party to fill up any lacuna, specially when the party could have produced such evidence before the lower authorities but failed to do so without sufficient cause. The same view was affirmed in the case of Jain Exports Pvt. Ltd. v. Union of India reported in 1993 (66) E.L.T. 537 (SC). Following the ratio of these decisions we do not find any reason to allow the application filed by the appellants for placing on record additional evidence. The application is accordingly rejected.
6. As regards the Collector's finding in the impugned order, the appellants have mainly contended that even though the facts in the case of National Machine Works were similar to the fact in the case of Jayalakshmi Machine Works, the show cause notice seeking to treat the value of goods claimed to have been manufactured and sold by Jayalakshmi Machine Works as goods produced and sold by the appellants was dropped, whereas goods produced and sold by National Machine Works were treated as having been produced and sold by the appellants. In this regard, it is seen that the Collector has given detailed reasons for distinguishing the case of National Machine Works from that of Jayalakshmi Machine Works. In particular it has been observed that in the case of National Machine Works it was an admitted fact that there was no three phase electrical connection in the premises where goods were claimed to have been produced and it was also admitted that even in the new premises which was visited by the officers, no production of goods could have been undertaken since it was being used only as an office premises. The Collector has also observed that M/s. National Machine Works had admitted that they had stopped manufacturing activities since September 1983 after vacating the old premises. We are inclined to agree with the finding of the Collector that the claim that the landlord of the old premises was supplying diesel while the generator has been provided by one of the partners and by supplementing the power generated with the available single phase electric supply, M/s. National Machine Works were able to carry out the manufacturing activity, is not worthy of credence since the undated letter from one Shri Kasthuri Swami Naidu in which he had claimed that he had arranged for diesel engine and six barrels of diesel oil and also the letter dated 13-8-1982 from M/s. Kannan Industries stating that they would bear the diesel charges were evidently not reliable and the letter dated 13-8-1982 of Kannan Industries also did not stand the test of credibility since it could not be expected that when the rent charged by the landlord for the premises was only Rs. 600/- he would also agree to bear the charges for the purchase of diesel required, for the generator belonging to the tenant. In this regard we are also inclined to agree with the Collector that the power charges as shown to have been incurred in the ledger, of National Machine Works were insignificant and were not adequate for operating the machine claimed to have been owned by them.
7. We find that another point raised by the appellants is that there was no power consumption since they were getting the components manufactured on job work basis. In this regard we find that the Collector relying upon the number of invoices in respect of various sophisticated and high valued machines supplied during 1982-83 has rightly concluded that such large number of heavy machines could not have been manufactured by M/s. National Machine Works with the aid of single phase power even if their claim that some of the parts were manufactured on their behalf by others on job work basis and some others were purchased from outside is accepted as correct. In support of his finding that M/s. National Machine Works were not equipped to manufacture the machines claimed to have been manufactured and sold by them daring the relevant period, the Collector has also referred to the Mahazar drawn by the officers on 29-1-1984 in regard to the machine installed in the premises of M/s. United Machinery Works. He has pointed out that when compared with the declaration filed by the said manufacturer for claiming exemption in terms of Notification No. 46/81, one planning machine, one radial drilling machine and one lathe installed in their premises were found to be in excess and M/s. United Machinery Works had conceded that one planning machine of M/s. National Machine Works was kept in their premises. It is seen that these findings of the Collector that M/s. National Machine Works had neither the machinery required for the manufacture of sophisticated machines which were shown to have been manufactured and sold by them nor the essential three phase power supply without which the production of heavy machines of, large value could not have been possible is also corroborated by the statement of Shri Venkatapathy, one of the Directors of M/s. United Machinery Works and the statement of Smt. K. Indira, Director M/s. National Machine Works. Shri Venkatapathy had inter alia stated that the other two units could not be run independently and they were compelled to come for their assistance. He had also confirmed that machinery of M/s. National Machine Works was installed and used by M/s. United Machinery Works. Though it has been claimed by the appellants that the statements were recorded according to the dictates of the officers, we are inclined to agree with the Collector that the Departmental officers could not have extracted these statements by force or coercion since these persons being educated and well informed, they could not be forced to state whatever was dictated to them by the departmental officers. In view of the detailed reasons given by the Collector on various points raised by the appellants, we are inclined to agree that the machines claimed to have been manufactured and sold by M/s. National Machine Works were actually manufactured by the appellants and they had suppressed the production of such machinery by showing them in the relevant accounts as having been manufactured by M/s. National Machine Works.
8. In view of the foregoing, we do not find any infirmity in the findings of the Collector. Accordingly we confirm the impugned order and reject the appeal.