Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Patco Chemical Industries on 28 November, 1990
Equivalent citations: 1991ECR516(TRI.-DELHI), 1991(54)ELT330(TRI-DEL)
ORDER D.C. Mandal, Member (T)
1. The main appeal No. E/2447/86-C was filed on 29th August, 1986 and the impugned order was communicated to the Appellants on 3-6-1986. The main appeal was, therefore, filed within the statutory time limit of three months. Supplementary Appeal No. E/126/87-C was filed on 21-1-1987. As it was not filed within the time-limit of three months, the present COD application was filed by the Revenue praying for condonation of delay in filing the supplementary Appeal. In similar cases, where the main appeals were filed within the statutory time-limit, but the supplementary appeals were filed after expiry of the three months' statutory time-limit, this Tribunal has been condoning the delay in filing the supplementary appeals. Following the consistent view taken in such matters, we condoned the delay in filing the supplementary appeal in this case. Thereafter, we heard both the appeals together.
2. By the impugned order, the Collector of Central Excise (Appeals) has set aside the order-in-original No. 19/DC/85/ADS dated 28-6-1985 passed by the Deputy Collector of Central Excise and Customs, Vadodara. In the said order-in-brgihal, the Deputy Collector demanded Central Excise Duty on the excess clearances valued at Rs. 4,70,703.00 illicitly manufactured and removed by the respondents from their factory during the period from August, 1983 to March, 1984 under Proviso to Sub-section (1) of Section 11A of the Central Excises and Salt Act, read with Rule 9(2) of the Central Excise Rules, 1944. He also imposed a penalty of Rs. 50,000/- on M/s. Patco Chemical Industries and a penalty of Rs. 50,000/- on M/s. Divyam Chemical Industries under Rules 173Q, 9(2), 52 A and 226 of the Central Excise Rules.
3. Both the respondents filed necessary declarations for availing of exemption under Notification No. 105/80-C.E., dated 19-6-1980 and Notification No. 77/83-C.E., dated 1-3-1983. Both of them claimed to be engaged in the manufacture of activated carbon with the aid of power falling under Item No. 68 of the erstwhile Central Excise Tariff. Under these notifications, the first clearances of the goods upto a value limit of Rs; 30 lakhs were exempted from the payment of Central Excise Duty. M/s. Patco Chemical Industries declared on 28-4-1984 that the value of their clearances for the year 1983-84 was Rs. 28,02,002. M/s. Divyam Chemical Industries were set up in August, 1983 in the vicinity of the premises of M/s. Patco Chemical Industries. This unit filed a declaration on 28-4-1984 declaring the value of their clearances during 1983-84 to be Rs. 3,27,566.00.
4. During investigation of the case the Central Excise Officers recorded statements of partners of both the firms. In his statement recorded on 21-6-1984, Shri Vijaykumar Naginbhai Patel, Partner of Divyam Chemical Industries stated that Ball Mill/Pulveriser had not been installed in their factory, - they were sending their semifinished goods to M/s. Patco Chemical Industries for pulverising process - that their boiler was not in working condition and that they were taking steam through pipeline from M/s. Patco Chemical Industries and they did not pay any charges for supply of steam. They were utilising the services of Production Manager of Patco Chemical Industries, they had no laboratory for testing their products, wooden vats installed in their factory belonged to M/s. Patco Chemical Industries and that there was no agreement or deed for utilising the machineries and manpower of Patco Chemical Industries. In the statement dated 22-2-1984, Shri Shashikumar Naginbhai Patel, Partner of M/s. Patco Chemical Industries stated that they had installed complete machinery such as boiler, rotary furnace, ball mill, pulveriser and crusher for the manufacture of activated carbon and that they purchased the activated carbon of M/s. Divyam Chemical Industries and resold the same after processing and that they did not raise the invoice for despatch of the goods in five consignments, vide lorry Nos. 627,639,782,938,905441 (The details of these five consignments are given in paragraph 5 of the order-in-original). Shri Narendrabhai I. Patel, Partner of M/s. Patco Chemical Industries in his statement dated 22-8-1984 corroborated what was stated by Shri Shashikant N. Patel in his statement. He also inter alia stated that M/s. Patco Chemical Industries re-sold the product received from M/s. Divyam Chemical Industries after carrying out the following processes, viz., (i) Washing, (ii) Blending by adding charcoal, (iii) Adding acids and (iv) packing. All the partners of the two firms were members of the same family. The Department also found that as per log book of M/s. Divyam Chemical Industries, the production in the factory started on 23-12-1983 and therefore, a quantity of 22,470 Kgs. of activated carbon shown to have been manufactured during August 83 - 23-12-1983 could not be manufactured by that firm and the said quantity was obviously manufactured by M/s. Patco Chemical Industries, but shown to have been cleared in the invoices of M/s. Divyam Chemical Industries. Another quantity of 7640 Kgs. of activated carbon shown to have been sold to M/s. Patco Chemical Industries appeared to be in semi-finished condition and sold by the latter firm after carrying out the processes of washing, blending by adding charcoal, adding acids and packing etc. under their brand-name. Further, a quantity aggregating to 4260 Kgs. of activated carbon cleared under Consignment Notes No. 627 dated 11-5-1983, No. 639, dated 8-7-1983, No. 782, dated 16-11-1983, No. 928 dated 18-1-1984 and No. 105441 dated 10-8-1983 were cleared by M/s. Patco Chemical Industries without issuing invoices and without declaring the said clearances to the Department.
5. In the light of the aforesaid facts, the Deputy Collector held that the clearances shown to have been effected by the two firms should be clubbed together for the purpose of determining the eligiblity to exemption notification referred to earlier in this order. Thus, clubbing the clearances, he held that there was excess clearances valued at Rs. 4,70,703 over the exemption limit of Rs. 30 lakhs during the financial year 1983-84. He, therefore, held that duty was payable on the said excess clearances and he confirmed the demand for duty under proviso to Sub-section (1) of Section 11A of the Central Excises and Salt Act, read with Rule 9(2) of Central Excise Rules, 1944, in addition to imposing penalty of Rs. 50,000/- on each of the two firms.
6. By the impugned order, the Collector (Appeals) has set aside the order-in-original of the Deputy Collector and granted consequential relief to the respondents therein. For the reasons given in his order, the Collector (Appeals) has not clubbed the clearances of the two firms for the purpose of the exemption notification. The impugned order has been challenged by the Revenue in the two Appeals on the grounds that the respondents did not have complete machinery, technical know-how and the manpower to manufacture activated carbon falling under Tariff Item No. 68 and they were sending semi-finished goods to M/s. Patco Chemical Industries for further processing. In ground No. 2 of the appeal, the Revenue has stated that the log book maintenance by M/s. Divyam Chemical Industries showed that they started production from 23-12-1988. Therefore, the production of 22,470 Kgs. of activated carbon from 10-8-1983 to 23-12-1983 could not have been manufactured by them in the light of the above facts. In the third ground of the appeal, it is stated that M/s. Patco Chemical Industries purchased 7640 Kgs. of activated carbon from M/s. Divyam Chemical Industries in semi-finished condition and carried out processes of washing, blending by adding charcoal, adding acids and packing etc. under their brand name. Thus this quantity was fully manufactured by M/s. Patco Chemical Industries only, and hence its value must necessarily be included in the clearance value of M/s. Patco Chemical Industries. In ground No. 5 of the appeal, it has been stated that M/s. Patco Chemical Industries cleared 4260 Kgs. of activated carbon without showing in the invoices and without declaring the same with the Department. The value thereof should also be included in the aggregate clearance value of M/s. Patco Chemical Industries.
7. During the hearing before us, the learned Departmental Representative, Shri Murthy reiterated the grounds of appeal. He stated that the Collector (Appeals) had not dealt with all the allegations in the show-cause notice and the findings of the Deputy Collector. He particularly drew our attention to pages 15, 16 and 18 of the order-in-original and the statement iof Shri Vijaykumar Naginbhai Patel, Partner of M/s. Divyam Chemical Industries at page 44 of the paper book, which says that semi-finished goods were sent by M/s. Divyam Chemical Industries to M/s. Patco Chemical Industries for finishing. The learned advocate also confirmed that grinding and pulverising of the chemically treated raw-material were done in the factory of M/s. Patco Chemical Industries. He, however, conceded that Collector (Appeals) had held that there was no suppression of facts and this finiding had not been challenged in the ground of appeal,
8. In the show-cause notice and in the order of the Deputy Collector, various allegations have been discussed in details. We observed that the Collector (Appeals) has not discussed all those allegations and findings given by the Deputy Collector in the order-in-original. Collector (Appeals) clubbed together the clearances of the two firms taking into consideration certain aspects, but the most important point has been totally ignored by him. The point is that M/s. Divyam Chemical Industries did not have complete plant and machinery to manufacture activated carbon. This is an admitted fact. It is also an admitted fact that in the absence of complete machinery semi-finished goods were being sent by them to their sister concern M/s. Patco Chemical Industries and the latter used to complete the manufacturing process. In the circumstances, M/s. Patco Chemical Industries were the manufacturers of the goods and not M/s. Divyam Chemical Industries. The Deputy Collector was, therefore, correct in clubbing together the value of both the firms for the purpose of determining the admissibility to the exemption notifications in question. The total value of clearance shown to have been done from the two firms exceeded the exemption limit of Rs. 30 Lakhs, in the financial year 1983-84. Central Excise Duty was correctly chargeable on the excess clearances over the exemption limit of Rs. 30 Lakhs.
9. Show-cause notice was, however, issued on 30-3-1985 for the clearances effected during the financial year 1983-84. The show-cause notice was not issued within the statutory period of six months as prescribed in Section 11A(1) of the Central Excises and Salt Act. In the impugned order, the Collector (Appeals) has observed that there was no evidence brought on record to prove and establish suppression of facts on the part of the appellants. This finding of the Collector (Appeals) has not been challenged in the appeal filed by the Revenue. No argument has also been addressed by the learned Departmental Representative on the question of limitation before us. In the circumstances, the demand for duty should be held to be time-barred under Section 11A(1) of the Act, ibid. We decide accordingly. The duty demanded by the Deputy Collector cannot, therefore, be recovered from the respondents, the demand being time-barred.
10. In the light of the Collector (Appeals) findings that there was no suppression of facts on the part of the respondents, the imposition of penalty on the respondents is not warranted. We, therefore, set aside the penalty imposed on them.
11. In view of the foregoing discussions, while deciding the merit of the case in favour of the Revenue, we set aside the demand for duty as time-barred and also set aside the penalty as unwarranted. The appeals are disposed of in these terms.