Customs, Excise and Gold Tribunal - Delhi
S.F. India Limited vs Collector Of Central Excise on 6 November, 1986
Equivalent citations: 1987(11)ECR212(TRI.-DELHI), 1988(33)ELT636(TRI-DEL)
ORDER H.R. Syiem, Member (T)
1.This is an appeal against the order of the Central Board of Excise and Customs, New Delhi, No. 379-B, dated 18.7.1981 passed on an order of the Collector of Central Excise, Calcutta No. 99(33)/73/Collr.-108/76, dated 26.7.1976. The appellants, M/s. S.F. India Ltd., were charged by the Central Excise with removing 193 man-cooler fans from their factory from 5.7.1967 to 10.6.1969. They engaged M/s. Flow Link Industries on contract to get piece rate jobs and supplied the raw materials to them for assembling electric fans according to their own specifications. M/s. S.F. India Limited were said to have held the goodwill and proprietary rights on the man-cooler fans. In the investigations, the Central Excise found that M/s. Suburban Industrial Works understood and engaged in the manufacture of electric fans from 5.7.1967 to 10.6.1969and manufactured 193 man-cooler fans which were removed from the factory to M/s. Flow Link Industries for onward transmission to M/s. S.F. India Ltd. Neither M/s. S.F. India Ltd. nor M/s. Suburban Industrial Works held licences for the manufacture of the man-coolers; and duty had not been paid on the 193 fans removed in the period and the removals were without gate passes and without maintenance of accounts of production etc. M/s. S.F. India Ltd. and M/s. Suburban Industrial Works were charged with contravention of Section 6 of the. Central Excises and Salt Act, 1944, Rules 9(1), 173F, l73G(1), 173G, 173G(3) of the Central Excise Rules, 1944. The Excise duty that remained unpaid came to Rs. 28,474.43 on the 193 fans.
2. The learned counsel for M/s. S.F. India Ltd. began by asking who would be the manufacturer in these circumstances. They may have supplied the materials to M/s. Flow Link Industries to pass them on to M/s. Suburban Industrial Works, but it was M/s. Suburban who manufactured the goods i.e. the man-cooler fans. They had nothing to do with creating the fans and he quoted in support 1985 (22) E.L.T. 302 re : Cibatul. He then read the show cause notice. There can be no question he said that the transactions between M/s. S.F. India Ltd. and M/s. Suburban Industrial Works was a principal to principal transaction and there was no connection between the two; M/s. S.F. India Ltd. have nothing to do with the business of M/s. Suburban Industrial Works. They are not the manufacturers.
3. He proceeded to quote 1984 (16) ELT 415 (Trib.), 1986 (25) ELT 356, 1986 (25) ELT 90 and 1986 (23) ELT 187.
4. The demand, according to the learned counsel, was time-barred; the period was 5.7.1967 to 10.6.1969 when the notice was dated 21.1.1976. There had been correspondence with the Central Excise on their activities and they had told the Central Excise about what they were doing and what they were going to do.
5. The fans are classifiable as industrial fans, because they are required to cool machines.
6. The learned counsel for the department, Mr. Verma said that Cibatul judgment is not applicable, because it concerned only the trade marks. The allegation here was that they got fans manufactured by a dummy party. He said that M/s. Flow Link Industries had been set up only as a shadow and served only as a dummy to cover up the true nature of the transaction. He then read paragraph 10 of the order-in-original in which the Collector said that M/s. S.F. India Ltd. engaged M/s. Flow Link Industries to get certain jobs done on piece rates and that the latter entrusted the work to M/s. Suburban Industrial Works. M/s. Suburban Industrial Works returned the fans after complete manufacture and received payment for manufacturing them. The learned counsel pointed out that in the letter dated 2.9.1969 to M/s. Flow Link Industries, M/s. S.F. India Ltd. undertook to pay the excise duty if levied on the fans. It was M/s. S.F. India Ltd. who got the fans manufactured under their own brand name and all the profits accrued to them. He then referred to 1986 (25) ELT 609 and said that the facts were at par with this case.
7. The learned counsel, Mr. Verma said that there was no time-bar, since the show cause notice was under Rule 9(2) and in 1973 Rule 9(2) had no time-limit. He quoted 1986 (25) ELT 288.
8. The goods, man-cooler fans, had no special shape or design to entitle them to be called industrial fans. He also said that only 93 fans were manufactured by M/s. Suburban Industrial Works. It is not known where the rest of the goods were made.
9. The learned counsel for M/s. S.F. India said that in 1986 (25) ELT 609 quoted by the learned counsel for the department, the others were only dummies. In their case neither M/s. Flow Link nor M/s. Suburban Industrial Works were dummies but units which operated on their own identities. All the transactions were between one principal and another.
10. It is difficult for us to accept the explanation of the learned counsel for M/s. S.F. India Ltd. that the transaction between them and M/s. Suburban was on a principal to principal business. There is a good deal of mystery about how M/s. Suburban Industrial Works were created. We read in the Collector's order that they did not even have a central excise licence and the flow of materials and finished goods between two or three parties has no rational explanation. We are still not clear what role M/s. Flow Link play in all this except to receive some material from M/s. S.F. India Ltd., forward them to M/s. Suburban Industrial Works, receive the finished fans and then transmit them back to M/s. S.F. India Ltd. What purpose this complicated routine of goods and materials serves is unknown and the papers and the proceedings and the learned counsels tell us nothing. They say that M/s. Suburban Industries were independent unit, but we see them differently. To all intents and purposes they were raised for the sole purpose of hiding Vide camouflaging M/s. S.F India's manufacturing activities and for the purpose of setting up a unit ostensibly separate and independent from M/s. S.F. India and they almost succeeded.' But in the end, they were uncovered and we think the officers did a good job. We think that M/s. S.F. India were the manufacturers, not only procuring the materials but also using their own brand name and goodwill to advertise and propagate their goods, taking care to arrange their business in a way that would appear that M/s. Suburban Industrial Works were the manufacturer, which, they would have been had they really been independent licensed units; but in this case it was not so. The learned counsel, Mr. Venna pointed out that only 93 of the man-cooler fans were actually manufactured by M/s. Suburban Industrial Works and we do not know where the other 100 or so fans were manufactured. There seems to be a good deal about this case that has not come out totally and that more is hidden from the public view than has been disclosed.
11.The appellants are mistaken to say that man-coolers are industrial fans for cooling machines. They are man-coolers i.e. fan with large displacements generally used in factories and similar establishments where large numbers of people work together, where heat gains are high because of machine proximity, congestion etc. etc. They are capable of keeping large numbers of workers in reasonable comfort not only by cooling but circulating the air much more efficiently than ordinary domestic fans.
12. The appellants say the demands were time-barred. But we have seen that the transactions were all fraudulent and were meant to conceal their true nature from the central excise in order to evade duty. The demands were made correctly under Rule 9(2). This plea is rejected.
13. We are not satisfied that we should interfere with the action of the Collector and the Board, and so we reject the appeal.