TMI Blog1984 (2) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... mbay, it was found that the company was allotted a quota of Stainless Steel Sheets by M.M.T.C. to the extent of 55 M.T. of Stainless Steel Sheets, the cost of which exceeded ₹ 30 lakhs. On or about 21st February, 1979 the office premises as well as the factory premises of the appellants were searched and the relevant records were seized and goods were detained under a reasonable belief that the company had manufactured and cleared excisable goods exceeding ₹ 30 lakhs in value without obtaining Central Excise licence and without payment of central excise duty. During the course of enquiry it was found that the appellants had another unit at Calcutta engaged in the manufacture of G.I. Buckets, C.I. Pipes, C.I Fittings and C.T. Fittings and C.I. Manhole covers. The sum total of the value of the capital investment made from time to time on plant and machinery in both the units of the appellants together were found to have exceeded by ₹ 10 lakhs. It was also found that the total value of clearances of all excisable goods, individually as well as collectively from the said two units of the appellants firm exceeded ₹ 30 lakhs during the financial years 1976-77, 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eem the same on payment of fine of ₹ 2 lakhs. That option to redeem was to be exercised within three months. 5. Being aggrieved by the said order dated 29-9-1982 of the Collector of Central Excise, Bombay, the appellants preferred an appeal before the Appellate Tribunal, Bombay as per the provisions of the Central Excises and Salt Act, 1944 which was transferred to the Special Bench at Delhi by the order of the President of the C.E.G.A.T. 6. We have heard Shri E.R. Srikantiah, Consultant for the appellants and Shri A.K. Jain, S.D.R., for the Department and have gone through the record, Shri Srikantiah, the learned Consultant of the appellants submitted that by virtue of Notification No. 176/77-C.E., dated 18-6-1977, the Central Government had exempted the goods falling under Item No. 68 of the First Schedule of the Central Excises and Salt Act, 1944 and cleared for home consumption on or after 1st April in any financial year by or on behalf of the manufacturers from one or more factories from the whole of duty of excise leviable thereon subject to certain conditions as set out therein. The provision under the said notification provides that the exemption would be availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Collector in his decision has not given any reason as to why he opted for the contrary decision of the Madras High Court in preference to two other decisions of Delhi and Allahabad High Courts reported in 1978 E.L.T. J 525 and 1978 E L.T. J 39. 8. It was pointed out by the learned Consultant of the appellant that though the issuance of the Exemption Notification will justify the inference that the goods were excisable goods, it was submitted that from the moment the notification is issued under Rule 8(1) of the Central Excise Rules, 1944, exempting the goods from the whole of the duty of excise leviable, the goods ease to be excisable goods under the strict meaning of the definition of excisable goods as mentioned in Section 2(d) of the Central Excises and Salt Act, 1944. Reliance was also placed on the facts that the legislature amended Section 6 and Section 8 of the Central Excises and Salt Act, 1944 as it then stood in 1956 by substituting the words excisable goods with the words any specified goods included in the First Schedule. The Statement of Objects and Reasons appended to the Amending Bill with reference to the said clause was also referred to. In the absenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion that G.I. Buckets had been manufactured with the aid of power. The affidavit of Shri Satyanarayan Singh who was the person in-charge of the Bucket department of the appellant firm was not duly considered. To reject an affidavit arbitrarily is improper and incorrect. Our attention has been drawn towards an affidavit of Shri R.K. Agarwal dated 6-1-1983 who stated that he had found that the manufacture of G.I. Buckets was by hand and no power was used. According to the learned Consultant, the affidavit of Shri Satyanarayan Singh coupled with the affidavit of Shri R.K. Agarwal, Consulting Mechanical Engineer, who visited the factory, show and prove that G.I. Buckets had been manufactured without the aid of power. The department has not established or proved by any piece of evidence that G.I. Buckets in the units were being manufactured with the aid of power. The G.I. Buckets in the appellants unit are manufactured without the aid of power and are not to be charged to duty at all as they are eligible for the exemption under Notification No. 179/77. 11. Regarding the imposition of penalty by the Collector, it was submitted that the penalty of ₹ 2 lakhs has been im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her or not the exemption was available had to be examined only on the basis of the Notifications providing that exemption. Without having a licence under the provisions of the Central Excises and Salt Act, 1944, the benefit of the exemption notification could not have been availed of. He cited a case of Madras High Court M/s. Metta Paints Works v. Dy. Supdt., Central Excise (Writ Petitions No. 286 and 287 of 1963) decided on 16th December 1965 in support of his contention. He submitted that as per the law as laid down by Madras High Court in Tamil Nadu (State of Madras) Handloom Weavers Cooperative Society v. Asstt. Collector of Central Excise, Erode (1978 E.L.T. J 57) and Delhi High Court in Vishal Andhra Industries v. Union of India (1983 E.L.T. 2265), once the goods are exempted from excise duty, they do not cease to be excisable goods. The character of a product as excisable goods does not depend on the actual levy of duty but depends on the description as excisable goods in the First Schedule to the Act. He pointed out that the decision given by a single judge of Delhi High Court in Sulekh Ram s case (Supra) stands over-ruled by the Division Bench judgment of Delhi High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 or 7 workers were doing that work. It is impossible for 6 or 7 workers to mauufacture 225 G.I. Buckets a day without the aid of power. He also pointed out that as per the list of the machinery submitted by the appellants there are machineries which are to be used for the manufacture of G I. Buckets and these machineries can only be operated by the aid of power. Admittedly the appellant s factory at Bombay is registered under the Factories Act as well as with the D.G.T.D. but the appellants have never pointed out nor supplied any information to these authorities that the G.I. Buckets were being manufactured without the aid of power. He submitted that the order passed by Shri B.N. Rangwani, the then Collector of Central Excise, Calcutta dated 18-3-1980 does not help the appellants in the present case. In that order, the learned Collector only held that the Bucket factory of the appellants at Calcutta could not be treated as a factory as defined in the Factories Act, 1948 and as such the G.I. Buckets produced in that factory could not be charged to duty under Item 68 of the said Schedule even though their total clearance value had exceeded ₹ 30 lakhs in certain years. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whole of duty of excise (Notification No. 179/77, dated 18-6-1977). Earlier to that there was a Notification No. 55/75-C.E., dated 1-3-1975 exempting agriculture implements from duty under Item 68 of the Central Excise Tariff. This contention of the appellants cannot be accepted in view of the definition of the words Excisable goods as given in Section 2(d) of the Central Excises and Salt Act, 1944. The disputed goods fulfill both the qualifications i.e. the goods have been mentioned in the First Schedule to the Act and they are subject to a duty of excise. By issuing Exemption Notifications these goods do not cease to be excisable goods. Hon ble Judges of the Madras High Court in a Division Bench decision Tamil Nadu (Madras State) Handloom Weavers Co-operative Society Ltd. v. Asstt. Collector of Central Excise, Erode (1978 E.L.T. J 57) laid down : Once the goods are exempted from excise duty, they do not cease to be excisable goods. The character of a product as exciseable goods does not depend on the actual levy of duty but depends on the description as excisable goods in the First Schedule to the Act. 21. In Vishal Andhra Industries v. Union of India (1983 E.L.T. 226 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1977 it was to be established by the appellants that the sum total of the value of the capital investment made from time to time on plant and machinery installed in the industrial units in which the goods under reference were manufactured was not more than ₹ 10 lakhs and that the total value of all the excisable goods cleared by them or on their behalf in the preceding financial year did not exceed ₹ 30 lakhs. 27. In this case there cannot be any dispute about the fact that taking into account the total value of all excisable goods including the exempted goods cleared by the appellants during the relevant year had exceeded ₹ 30 lakhs and therefore the appellants could not claim exemption of this Notification No. 176/77. 28. On the point of the value of the capital investment made from time to time on plant and machinery in each of the factories of the appellants had also exceeded ₹ 10 lakhs as has been observed by the authority below. The learned Consultant has not been able to show and prove even before us that the sum total of the value of the capital investment made from time to time on plant and machinery installed in the industrial units in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been installed in the factory premises of the appellant at Bombay, which could be used for manufacturing G.I. Buckets. These machines are run by the aid of power. When the appellants were not manufacturing the G.I. Buckets with the aid of power then what was the necessity of having these machines meant for manufacturing G.I. Buckets. Admittedly, the appellants have a power connection in their factory premises and they are using the power for running their machines. It does not seem to reason as when the appellants were using power for manufacturing other products in those very premises, why they were not using the power for the manufacture of G.I. Buckets. Even if a part of G.I. Buckets is manufactured with the machines which are being run with the aid of power, then the entire G.I. Buckets would be considered to have been manufactured with the aid of power. In the case of Metro Readywear Company v. Collector of Customs (1978 E.L.T. J 520) decided by the High Court of Kerala it was held that ironing with electric iron amounts to a process of manufacture with the aid of power though the garments had been manufactured without the aid of power. The authority .below has rightly rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture of the excisable goods is not normally invoked unless a party is a habitual offender and a delinquent. The department has not been able to show and prove that the appellants were habitual offenders and delinquents. The mala fide intentions on the part of the appellants have also not been proved by the department for invoking such provisions and in such circumstances we are unable to agree with this part of the order of the authority below vide which he ordered the confiscation of the land, machinery, building, etc. used in connection with the manufacture of excisable goods involved in this case under Rule 173Q(2)(b) of the Central Excise Rules, 1944 and we set aside the said part of the order. The plea of the appellants that the provisions of Rule 9(2) could not have been invoked legally is not tenable. Admittedly the appellants were manufacturing excisable goods without obtaining licence under the Central Excise Act and Rules. When no licence is obtained for the manufacture of excisable goods and removal is effected without payment of duty, Rule 9(2) is attracted [N.S. Metal Industries v. Union of India, 1977 T.L.R. (NOC) 31]. The entire demand of duty is within time under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been put forth or considered by the Hon ble Tribunal. In fact in the Patna High Court decision itself, the goods have been held to be excisable even after exemption. It appears that the Tribunal has overlooked the fact that Patna High Court is in no way inferior or less authoritative to Delhi or Madras High Court specially to an appeal arising out of territory of Bombay High Court on the basis of Section 2(d) of the Excise Act, and, therefore, the said judgment is in no way in conflict either with the Delhi High Court or with the Madras High Court decisions but rather while interpreting the wordings of Notification No. 176/77 the Patna High Court, independent of said Section 2(d) has held that the exempted goods are not to be taken into account while computing the value of clearances of all excisable goods cleared . Since there is no contrary judgment to the said Patna High Court decision on the interpretation of Notification No. 176/77 to our knowledge, therefore, the same was binding as law on the Appellate Tribunal in view of the Delhi High Court decision in the case of J.K. Synthetics Ltd. v. Collector of Central Excise, Civil Writ No. 115-D/63, decided on 28-7-1970; ..... X X X X Extracts X X X X X X X X Extracts X X X X
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