Customs, Excise and Gold Tribunal - Mumbai
Saraswati Engineering Works vs Commissioner Of Central Excise on 10 September, 2004
Equivalent citations: 2005(185)ELT40(TRI-MUMBAI)
ORDER
Moheb Ali M. (T), Member
1. M/s. Saraswati Engineering Works (SEW) Ambernath are engaged in the manufacture of Aluminium Castings (Chapter 76 of CETA). They are neither declararants nor registrants under Rule 174 of erstwhile Central Excise Rules. M/s. Saraswati Engineering Works is a proprietary firm, Smt. Vithabai Gopal Musale was the Propritress. Those days (1996) SSI exemption limit was Rs. 30 lakhs.
2. M/s. Saraswati Rubber Works (SRB) Kalina belongs to Shri Gopal B. Musale, the proprietor. This firm carrie out machining process on the Aluminium castings manufactured by M/s. SEW. Gopal B. Musale, who now expired, was the husband of Smt. Vithbai Musale. The Ambernath factory (M/s. SEW) was set up as there was no possibility of setting it up at 'their' Kalina factory because of the restriction placed on the industrial units.
3. The events that led to the seizure of Aluminium Casting manufactured by M/s. SEW would be narrated later on. During the course of investigation the officers found that Aluminium Castings machined at M/s. SRP, are sold from M/s. SEW's office, which is situated in the formers premises at Kalina. Thus what appears to be happening is that Aluminium castings are made at M/s. SEW but machined at SRP are sold from SEW's officer. In the appeal memorandum of SEW it is found that the appellants refers to Kalina unit as their own unit.
4. Aluminium Castings made by SEW are ultimately sold as parts of mixer by them albeit after machining. The prices at which such parts of mixers are sold were indicated mentioned by Shri Gopal B. Musale. During the course of search of the premises of SEW the officers recovered a production register. The register gave details of castings produced year wise 94-95, 95-96. One Shri Madhukar B. Musale, was the Manager of SEW. In his statement dt. 13.8.96 he stated that different types of Aluminium Castings viz. (a) Bottom bracket (b) Fan (c) Close top (d) Holder top (e) JDLS (f) JSLP (g) CDLS (h) CSLP (i) CDLP etc. were manufactured them; that the entries in production register were correct; they never prepared any invoices or delivery challans from their factory at Ambernath; that the Aluminium Castings made by them were cleared as mixer parts from their office situated at SRP premises after machining, Statement of Gopal Musale was also recorded who confirmed the above position. Later these statements were retracted. Regarding the production register found in M/s. SEW's premises it was contended that it was written by one Shri More without the knowledge of the proprietress and even though he was summoned his statement was either not accorded or if recorded was not supplied to M/s. SEW.
5. The officers determined the quantity of goods produced in 94-95 and 95-96 on the basis of the entries found in the so called production register recovered from SEW's premises. For determining the value of the goods so produced the department made use of the statements made by Gopal Musale a PLA holder of M/s. SEW who ran the show at the material time as to the price at which the various parts of mixers are sold.
6. From the above narration it is clear that what are being produced at SEW as Aluminium Castings, are machined at their unit at Kalina (SRP) and are being sold as part of mixtures at certain prices in the market again by SEW.
7. On information the officers intercepted a vehicle carrying 25200 nos. of Aluminium Castings and seized them on the ground that they are being removed form the premises of M/s. SEW owned by Smt. Vithabai G. Musale without payment of duty. In a follow up action, 71200 Pcs. Of Aluminium Castings were seized from the factory premises of M/s. SEW as they were found to be lying without being accounted in the records. On further follow up the officers seized another 43981 pcs of aluminium castings lying in the office premises of M/s. SEW unaccounted. The delivery challan accompanying the vehicle showed that they were consigned to M/s. SRP owned by Shri G.B. Musale. The said person is also a Power of Attorney holder of his wife Smt. Vithabai G. Musale owner of M/s. SEW. Investigation revealed that M/s. SRP were family concerns. No accounts were maintained when goods were sent from one to another. M/s. SEW did not charge any machining charges from SRP.
8. The Commissioner in the impugned order held that the above said seized goods are classifiable under Chapter 85 as parts of mixers vide Rule 2a of Interpretative Rules, since the castings have attained all the characteristics of mixer parts. Having held so he determined the value of these goods on the basis of information furnished by Shri Musale and determined the duty liability. He also confiscated the said goods on the ground that they were either removed without payment of duty or lying unaccounted in the factory/office premises of M/s. SEW.
9. The Commissioner holds that M/s. SEW produced 48367 Pcs. mixer parts in 94-95 and 95-96 valued at Rs. 71,09,181/- and 777469 Pcs. Valued at Rs. 1,14,81,051/-respectively. After allowing the SSI exemption of Rs. 30 lakhs in each of the years, the Commissioner demanded Rs. 18,31,222/-being duty on the mixer parts clandestinely removed in the years 1994-95 and 1995-96. He also confirmed the penalties imposed by the original authority.
10. Heard both sides.
11. The Commissioner held that the seized castings are parts of mixer classifiable under Chapter 85 of the Schedule to CETA. Admittedly these castings have not been machined as the panchanama and the statements of various persons indicated. The Commissioner applied Rule 2 (a) of interpretative Rules to hold the Aluminium castings as mixed parts. The Tribunal in the case of Shivaji Works Ltd. v. CCE, Aurangabad [1994 (69) ELT 674] held that casting prior to machining do not achieve the essential charastics of machine parts and therefore cannot be classified as parts of machine The Commissioner's finding in regard to the seized goods cannot be sustained as the issue is no more res integra. The seized goods will have to be assessed as aluminium castings under Chapter 76 and duty worked out accordingly.
12. Now we deal with the demand for duty of Rs. 18,31,222/- on the clearances made during 94-95 and 95-96 by M/s. SEW. The goods cleared by M/s. SEW in the above said period were parts of mixers. They cannot be considered as Aluminium castings of Chapter 76 as they were cleared after machining. Whether such machining is done in M/s. SEW premises or not will not make any difference to the issue since the goods are sold by SEW after machining. The appellant did not contend that the castings produced in the year 94-95 and 95-96 were sold as such. Therefore we uphold the finding of the Commissioner that the goods are classifiable under Chapter 85.
13. The Commissioner relied on the production register maintained in SEW's premises recovered from there to determine the total quantity of mixer parts produced by the appellant during the year 1994-95 and 95-96. The correctness and authenticity of this register is assailed by the appellant inter alia on the ground that statement of the person who made those entries had not been furnished and that there were several irregular entries in the said Register. We observe that the person who maintained the production figures is not a casual worker but a supervisor. There is no reason to disbelieve the entries made therein. Further the appellant has not furnished any other account of production. The appellants themselves admitted at one point of time that the entries made in the register were correct. Their manager corroborated these averments. We are aware that the appellants retracted his statements later on. But we hold such retraction does not damage the evidentiary value of the register itself seized from the premises of the appellant.
14. The Commissioner applied the prices at which the goods are sold to determine the total value of clearance during the said years. Besides, as per the finding of the Commissioner the castings after machining were being sold in the market by raising regular invoices by M/s. SEW at the prices shown in the respective bills for - parts. This is admitted by the Manager of the appellant firm. The rate per pc of these parts was also furnished by Shri G.B. Musale. Under these circumstances no fault can be found in the method adopted by the lower authorities to determine the value of production and clearances in 94-95 and 95-96. Therefore, the duty liability in correctly worked out in so far as goods produced and cleared in those years after giving allowance of small-scale exemption of Rs. 30 lakhs for each of the years. We already held that the seized goods cannot be considered as mixer parts. Their liability to confiscation arose out of the fact that they were removed/unaccounted etc. The Commissioner however valued them as mixer parts, a status the goods did not achieve at the time of seizure. He gave an opinion to the appellant (SEW) to redeem the goods on payment of Rs. 8 lakhs. This fine determined on a wrong premise that they were mixer parts taking their value as if they were such parts cannot be upheld. Confiscation and redemption fine imposed has to be set aside. The Commissioner already held that the goods should be taken into record and cleared on payment of duty as and when they were cleared.
15 The Commissioner imposed a penalty of Rs. 18,81,262/- on Smt. Vithabai G. Musale under Rule 173Q of Central Excise Rules which is equivalent to the duty demanded on the mixer parts. Considering the fact that the unit is a small-scale unit and the fact that the affairs of the unit were entirely looked after by the Shri. Gopal Musale who has expired since we hold that this amount of penalty is excessive. We reduce the penalty to Rs. 50,000/-.
16. Appeal is thus partly allowed.