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TMI Blog1986 (6) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed by his widow and his eldest son, Shri Dharam Kumar with two other minor sons of the deceased. Some changes in the constitution arose subsequently. The manufacturers had opted for compounding levy on the battery plates as prescribed by Rule 96 Y of the Central Excise Rules. This rule restricted the number of workers to 5 in the actual manufacturing process. On 1-9-1970, Smt. Neeru Kumar, wife of Shri Dharam Kumar, started the manufacture of grids and lead welding rods as sole proprietrix in the name of "N.K. INDUSTRIES" in a portion of the ground floor of the premises No. 40, Whites Road, Madras 14. On 6-11-1970, an agreement was entered into between the two firms regarding the supply and delivery of grids and rods. As per the arrangement, N.K. Industries had to deliver the grids manufactured at the factory of Raj Brothers Agencies (for convenience called as R.B.A.). According to the appellants, R.B.A. was subjected to periodical inspection by the Central Excise Department and other authorities. One Mr. Ralli was appointed as Officer in charge of the Mount Road business on 29-4-1978. Subsequently, he was given additional charge of distributing raw materials, allocating work to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grid manufacture is done in our factory with five workers we cannot increase our production. If we increase the number of workers of our factory from the present strength of five workers then naturally we will be asked to clear the plates after payment of Central Excise duty under tariff rate which in turn will increase the cost of our Battery Plates. Due to the abovesaid reason only we have given the grid manufacturing process of M/s N.K. Industries, 40, Whites Road, Madras 14". He was not aware if the electricity for N.K. Industries was being taken from his electricity connection. He could not explain how the workers of N.K. Industries have been deputed for working in R.B.A. The statement of- Smt. Neeru Kumar of N.K. Industries was also recorded and she would say "The rough note books containing the manufacturing details pertaining to my factory which was shown to me were maintained without my knowledge". The Department called on the appellants to furnish the actual total sale value of the battery plates for the years 1978-81. A reply was sent by the appellants. 4. A show cause notice was issued on 11-1-1982 alleging that the appellant had employed more than five worker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enough and included the process of packing. He relied on Mrs. Kausalya Narayanan's case, in 1980 E.L.T. 102 [Mrs. Kaushalya Narayanan and Others v. Dadajee Dhackjee and Co. (Pvt.) Ltd] of the Bombay High Court wherein the Lordship have held that the words "Manufacturing Process" referred to "A process which has nothing to do with the manufacture of production of excisable goods and persons employed in such a process are not to be taken into account." He, therefore, urged that even if some workers were engaged in packing it cannot be considered as being engaged in the manufacturing process. He further urged that the decision of the Supreme Court in 1983 E.L.T. 1986 (S.C.) (Union of India and Others etc. etc. v. Bombay Tyre International Ltd. etc. etc.) and also a subsequent decision of the Supreme Court in 1985 (22) E.L.T.306 (S.C.) (Union of India and Others v. Godfrey Phillips India Ltd. and Others) have held that determination of value included cost of packing of the excisable article. He also drew our attention to Section 2f(ia) and (iii) of the Central Excise Act which made particular reference to packing only in respect of manufactured tobacco and re-packing from bulk packs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons engaged otherwise than in manufacturing process. He cited the ruling reported in 1986 (24) E.L.T.9 (Raja Industrial Works Sringeri v. Asstt. Collector of Central Excise, Davangere & others where the Hon'ble Karnataka High Court has held that even the staff in the sales section should not be treated as a different unit for the purpose of determining the value of the goods cleared by it. He stated that packing would also come within the scope of Rule 96(ii) and cited 1978 E.L.T.673 (M/s Aurofood Private Limited). In 1981 E.L.T. 884 (Mettur Chemical Industrial Corporation), the Madras High Court has held that manufacture would include each and every other process incidental or ancillary to the completion of the manufactured product so as to put the same into market as a marketable commodity. Following an earlier ruling in 1978 E.L.T. (J 673) (Aurofood Private Limited v. Union of India and Others) wherein it was held that "packing of biscuits in tin containers cannot be characterised as post-manufacturing operation so as to exclude their cost from the value of biscuits." He also relied on Bombay Tyre International and stated that even in that ruling the Supreme Court has adver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturer who employs or had at any time during the calendar year preceding the date of application employed more than five workers". (2) The show cause notice refers to two dates in 1978, four dates in 1980 and one date in 1981 as the dates on which the appellant had employed more than five workers including Mr. Ralli. Under the impugned order, the Appellate Collector has found that on the following dates i.e., 23-6-1978, 26-6-1978, 14-1-1980 and 21-3-1981, the appellant had employed more than five workers. On 23-6-1978, the daily work book of R.B.A. indicates the names of the following persons and the work assigned to them. Satish Pasting Basha " Thulasi " Chellamuthu Masala Elumalai Packing Arumugam Welding On 23-6-1978, these six persons were so employed. 8. It was argued that this date has not been mentioned in the show cause notice. The show cause notice mentions a date, i.e., 28-6-1978 and on that day, the position was as follows: Satish Pasting Basha " Arumugam Chellamuthu Helper Thulasi Welding Elumalai Packing The total number exceeds five. On 14-1-1980, the note book indicates of upstair works. The proceeding in respect of 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institutions is yet another factor that it was with a view to exercise supervision and control over the workers in both the factories. Needless to point out that Mr. Ralli has produced these registers and also has admitted that he was supervising the work of both the factories. Mr. Ralli has admitted that he was doing supervision work in N.K. Industries. He was also maintaining their registers and was in charge of allocation of work. In this background, it is clear that he was deputing workers from N.K. Industries to R.B.A. in the manufacture of batteries whenever the workers of N.K. Industries were without any work. The entries in the registers are confirmed by his conduct and exercise of overall supervision in the allocation of work. 12. The records of both the firms were kept in a room situated in R.B.A. This is yet another circumstance confirming that both the institutions were under the same supervisory control facilitating easy movement of the workers. The workers, who were admittedly in the pay-roll of N.K. Industries, have worked in R.B.A. Of course, Mr. Harvey and Mr. Wilson have not been produced for cross-examination. Even ignoring these statements, there is enough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was initial packing in brown paper or newspaper and final packing in dealwood boxes. So, packing is a process incidental or ancillary to the sale of the manufactured product either in retail or wholesale. Packing has to be taken into consideration for the purpose of the provisions of the Central Excises Act including Section 2(f)of the Act. This is apparent from the decision of the Supreme Court in 1983 E.L.T 1896 (S.C.) (Union of India and Others etc. etc. v. Bombay Tyre International Ltd. etc. etc.). Para 53 of the judgment is as follows: "We have also been referred to S.2(f) of the Act which defines the expression "manufacture" and it is urged that the degree of packing to be considered for the purpose of including its cost in the "value" of an excisable article should be spelled out from that definition. We are unable to accept the suggestion. The expression "manufacture" is related to the taxable event and refers to a process which enters into the character of the article, while "packing" has been defined by S.4(4)(d) (i) in relation to the "value" of the article". In 1984 (17) E.L.T. 455 (Tribunal) (Collector of Central Excise, Calcutta v. Kanoria Jute Mills, Calcutta) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 has no application to the present facts for the process of repairs of motor cars and recharging of batteries had nothing to do with the manufacture of the excisable goods. It is rightly emphasized by the Department that the appellant has resorted to colourable devices basically to avoid payment of tax. We are also not impressed with the argument that the seizure is irregular. Even assuming without conceding that there is some irregularity, the evidence relating to the search would not be inadmissible and a finding could be arrived at and after scrutiny of the evidence. We have scrutinised the evidence in the light of the legal principles. 16. We, therefore, hold on point (1) that the appellant had employed more than five workers during the years 1978-79 and 1979-80. 17. An objection has been raised that the calculations for purpose of duty is not proper. The Collector has fixed the value of the batteries on the ground that particulars have not been furnished by the appellants. In para 44 of the order it is observed that the appellants have failed to furnish the details of the quantity of battery plates produced and cleared and the value of the plates for each financi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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