Customs, Excise and Gold Tribunal - Tamil Nadu
Electro Controls vs Collector Of Central Excise on 3 August, 1992
Equivalent citations: 1993ECR54(TRI.-CHENNAI), 1993(63)ELT322(TRI-CHENNAI)
ORDER S. Kalyanam, Member (J)
1. Since the above applications arise out of a common impugned order of the Collector of Central Excise, Cochin, dated 31-3-1992, they are taken up together and disposed of by a common order.
2. These applications have been filed for waiver of pre-deposit of duty of Rs. 89,166 and penalty of Rs. 22,000 on petitioners M/s. Premier Electronics; duty of Rs. 1,17,536 and penalty of Rs. 29,000 on petitioners M/s. Universal Electronics; duty of Rs. 38,913 and penalty of Rs. 15,000 on petitioners M/s. Supreme Electronics and duty of Rs. 1/45,787 and penalty of Rs. 30,000 on petitioners Electro Controls.
3. Shri Chacko George, the learned counsel for the petitioners, submitted that duty has been levied for the period 31-5-1985 to 11-7-1986 by issue of a show cause notice dated 1-1-1987. The learned counsel by making elaborate submissions for a considerable length of time and by taking us through the show cause notice in detail and also the order of the adjudication and other details, mainly contended that in the show cause notice the thrust is that Shri Kochouseph, proprietor of M/s. Prompt India, is the manufacturer of the goods in question and has created all other dummy units and wilfully and deliberately suppressed the facts of his control, management, ownership and proprietary interest in the other units only for the purpose of wrongly and ineligibly availing of the exemption available to small scale units and also concealed the sales pattern by arranging the sale of the goods manufactured in the dummy units in which he has proprietary interest through his own distributor M/s. Prompt India. It was submitted that in the teeth of this main allegation no demand has been made against Shri Kochouseph, proprietor of M/s. Prompt India, in the adjudication order and other units have been treated as manufacturers and duty levied in the absence of any specific allegation in regard to the same. The learned counsel also read out the provisions of Section 11A and in particular emphasised that there must be a specific quantified demand of duty on a manufacturer in terms of the said Section before a person could be fastened with a duty liability. He, therefore, urged that apart from the fact that there was absolutely no allegation that the other units are manufacturers and are liable to pay duty and could be brought within the mischief of Section 11A of the Act/there is an exclusive and express allegation only against Shri Kochouseph, proprietor of M/s. Prompt India and Managing Partner of M/s. Premier Electronics. It was, therefore, urged that duty on all other units is not leviable prima facie on the basis of the very allegation in the show cause notice. So far as duty liability of M/s. Premier Electronics is concerned, the learned counsel submitted that the unit also remains closed since May, 1989 and has no financial resources to pre-deposit any duty without being subjected to undue hardship. The learned counsel also urged that notice to a Managing Partner in law cannot be construed to be a notice against the firm particularly in the context of the general tenor of the allegations in the show cause notice.
4. Shri Jayaseelan, the learned DR, referred to para 80 of the show cause notice and contended that there is an averment in the show cause notice that the total clearance of all the other units for the period upto 31-1-1985 and thereafter till 11-7-1986 should be clubbed together and the value computed under Section 4(a)(iii) of the Central Excises & Salt Act, 1944 taking the selling price of M/s. Prompt India to the dealers for working out the assessable value. In dealing with this allegation the learned DR urged that the purpose of the show cause notice is only to put the persons to whom they are issued on notice of the substance of the allegations against them and the various units in their replies to the show cause notice have not disputed the fact that they were manufacturers and, therefore, even if there is no specific express allegation that the units are independent manufacturers they are liable to pay duty under the show cause notice. In the factual background and the context of this case in any event absence of such an allegation should be only construed to be a technical irregularity which would not in any way either cause prejudice to the petitioners or vitiate the impugned order under law.
5. We have carefully gone through the allegations in the show cause notice and we note that at the outset that the tax liability of more than Rs. 46.12 lakhs levelled in the show cause notice has been almost brought down to a trickle as it were in the order of adjudication and the major portion of the demand has been dropped by the adjudicating authority by a cryptic finding as under :
"I observe that, apart from the fact that the partners/proprietors of the different units are relatives of C.T. Kochouseph, Managing Partner of Premier Electronics and the statements of some of the employees who indicated that Kochouseph seems to be controlling the affairs of all these units, there is no other evidence at all of any common funding or flowback of money arrangement between these units. In view of the various CEGAT decisions cited by the party in support of their case, I have no other alternative but to drop proceedings on this ground."
We should like to note that in the absence of specific appeal by the Department against this finding, the Tribunal being a statutory appellate authority will not be able to go beyond that whatever may be the merits or demerits in the respective contentions of the parties. On going through the entire show cause notice, we find that the gravamen of the charge by the Department is against Shri Kochouseph, proprietor of M/s. Prompt India, and Managing Partner of M/s. Premier Electronics, who as the manufacturer has created all other units as dummy units only for the purpose of availing small scale exemptions in contravention of law. It would be relevant at this state to extract the relevant allegations in the show cause notice :
"Whereas it appears that Shri C.T. Kochouseph, Proprietor of M/s. Prompt India, L.F.C. Road, Kaloor, Cochin and Managing Partner of M/s. Premier Electronics, L.F.C. Road, Kaloor, Cochin, has contravened the provisions of Section 6 of the Central Excises and Salt Act, 1944 read with Rule 174; Rule 173B; Rules 173F and 173G(1) read with Rule 9(1); Rule 173G(2) read with Rule 32A, Rule 173G read with Rule 53 and Rule 226 of the Central Excise Rules, 1944 inasmuch as he has manufactured Voltage Stabilizers falling under Heading No. 85.36 of the Central Excise Tariff Act, 1985 (Previously under Item No. 68 of the Central Excise Tariff) during 1-1-1982 to 11-7-1986, a part of them unaccounted without applying for and obtaining a Central Excise licence even after crossing the exemption limit in his premises viz. M/s. Premier Electronics which manufactured 'V-Guard' brand Voltage stabilizers, creating dummy units viz. M/s. Supreme Electronics (two factories) which manufactured 'V-Star' and 'V-Guard' brands, M/s. Universal Electronics which manufactured 'Voltex' and 'V-Guard' brands and M/s. Electro Controls (two factories) which manufactured 'V-Kind' and 'V-Guard' brands and clearing the same through M/s. Prompt India during the period 31-5-1985 to 10-7-1986, the extent of which are shown in Annexure I to IV to this Show Cause Notice, by wilfully and deliberately suppressing the facts of his control, management, ownership and proprietary interest in all the above mentioned units but instead showing the ownership of these units as of somebody else for the purpose of wrongly and ineligibly availing of the exemption available to small scale units, by concealing his sales pattern by which he arranged to sell the goods manufactured in the above mentioned units in which he has proprietary interest through his own distributor viz. M/s. Prompt India and by fraudulently showing the clearance at factory gate to an unrelated buyer in the course of wholesale trade with an intention to show assessable value very less all for the purpose of evading payment of duty of excise thereby attracting the provisions of Section 11A of the Central Excises & Salt Act, 1944 and also for manufacture and clearance of excisable goods (1) without obtaining a Central Excise licence; (2) without payment of appropriate Central Excise duty by debit entry in the Personal Ledger Account prior to the removal of the said goods; (3) without cover of a valid Central Excise transport document viz. GP.1 to transport the said excisable goods and (4) without accounting the said goods manufactured and cleared in the prescribed Central Excise stock register viz. RG1 register to be maintained in the units.
2. The aforesaid Shri C.T. Kochouseph, Proprietor of M/s. Prompt India and Managing Partner of M/s. Premier Electronics is hereby required to show cause to the Collector of Central Excise, Catholic Centre, Broadways, Cochin, as to why:"
We also note that there is no specific allegation against the other units as manufacturers liable to pay any duty except the cryptic reference in para 80 of the show cause notice, which reads as under :-
"From above it appears that the total clearance of the goods by M/s. Premier Electronics, M/s. Supreme Electronics, M/s. Universal Electronics and M/s. Electro Controls is to be dubbed together for the period upto 31-5-1985 and for the period from 31-5-1985 to 11-7-1986 not only their total clearance to be clubbed but the value is to be computed under Section 4(a)(iii) of the Central Excises & Salt Act, 1944 taking the selling price of Prompt India to the dealers for working out the assessable value."
Therefore, on careful consideration of the averments in the show cause notice, on prima facie ground we are obliged to hold in the light of the allegations in the show cause notice, that the demand raised against M/s. Premier Electronics, a firm, of which Shri Kochouseph is the Managing Partner would be sustainable. In the absence of any allegation against the other units, on prima facie grounds, we are obliged to hold that the duty levied on the other units may not be sustainable their respective replies to the show cause notice admitting themselves as manufacturers notwithstanding. Having regard to the factual background of the case, the amount of duty involved and the allegation of suppression levelled and other relevant factors, we direct M/s. Premier Electronics to pre-deposit the duty of Rs. 89,166 (Rs. Eighty-nine thousand and one hundred and sixty-six) and a penalty of Rs. 10,000/- (Rs. Ten thousand) on or before 30th October, 1992 and report compliance, subject to which pre-deposit of the balance of penalty by M/s. Premier Electronics shall stand dispensed with pending appeal. We also grant waiver of pre-deposit of duty and penalty by all other units pending disposal of the appeals and also grant stay of recovery of the same. The matter will be called on 30th October, 1992 for reporting compliance.