ORDER
M. Santhanam, Member (J)
1. This application has been filed under Section 35 G(I) of the Central Excises and Salt Act, 1944 for raising certain questions of law as arising out of the order of this Tribunal dated 7-8-1985.
2. The facts of the case are briefly as follows:
3. On 17-2-1982 the Central Excise staff visited the factory premises of one M/s Unique Autogears, Jhotwara. It was observed that the unit was engaged in the manufacture of pump driving gears, falling under T.I.68 with the aid of power on its own account and also on job basis for M/s. Eicher Good Earth Ltd., Alwar (Applicants). 149 pieces of pump driving gears, fully manufactured, were lying in the factory and were seized under a reasonable belief the the same were liable to confiscation under Rule 173 Q of the Central Excise Rules, 1944 and for contravention of the provisions of Rules 53, 56-C and 174 of the Central Excise Rules, 1944. Shri Govardhan Lal Sharma, Proprietor of M/s Unique Auto Gears admitted their manufacture on job charges and the removal of 8165 pieces of pump driving gears during the period 1-4-1981 to 17-2-1982. According to him, they had been manufacturing the gears on behalf of the applicants. They claimed that they were small manufacturers manufacturing gears and other machinery and that the goods manufactured by them under T.I. 68 were exempt from Central Excise duty upto a value of Rs. 30 lakhs under Notification No. 105/ 80 CE dated 19-6-1980. A show cause notice was issued and the applicants in their reply urged that the total value of the items processed by M/s Unique Auto Gears was less than Rs. 30 lakhs and that they were entitled to remove the goods for home consumption without payment of duty under the Notification aforesaid. The applicants had taken efforts to obtain permission under Rule 56-C, but they could not take the same. The Additional Collector passed orders on 9-8-1983 holding that the excise duty was to be paid on 149 pieces of pump driving gears. A demand of duty of Rs. 31,353.60P. was made against the applicants and a penalty of Rs. 200/- was imposed.
4. There was an appeal to the Tribunal. On 7-8-1985 orders were passed holding that the applicants had applied for permission under Rule 56C. Despite this being optional and having opted for permission, it was not open to them to disown it at a later stage. The applicants had cleared the goods without payment of duty and were therefore held liable to pay the duty on the clearances. The penalty imposed on the applicants and the demand were confirmed.
5. The present application has been made raising the following questions of laws-
(i) Whether the Tribunal was justified, in the facts and circumstances of the case, to hold that the applicants have cleared the goods without; permission and without payment of excise duty?
(ii) Whether the Tribunal should have held and erred in law that M/s. Unique Auto Gears (whose clearances in the financial year did not exceed Rs. 4 lakhs) were not entitled to exemption from whole of duty under Notification No. 105/80 dated 19-6-1980?
(iii) Whether the Tribunal should have held and erred in law in upholding the imposition of penalty for breach of Rule 56-C of Central Excise Rules, 1944?
(iv) Whether the learned Tribunal should have held and erred in law in upholding the demand of Rs. 31,353.60 against the applicants for the alleged breach of Rule 9(2) of Central Excise Rules on 8165 pump driving gears cleared by Unique Auto Gears who were exempt from payment of excise duty being exempt under Notification No. 105/80 dated 19-6-1980?
6. Regarding the questions (i) and (ii), Shri Sawnney, the learned counsel for the applicants argued that the applicants have not cleared the goods since they have supplied only raw materials. According to him, M/s. Unique Auto Gears were the manufacturers entitled to exemption. He stated that the applicants were not primary manufacturers and the Tribunal has erred in holding them to be so. As the applicants had supplied only raw materials they were not manufacturers. He placed reliance on the ruling reported in 1984 ECR 589 ( R.K.H. Industries and Anr. v. Union of India and Anr. In that case it was held that the mere fact that raw material for manufacture of fan-guards was supplied by M/s. Railis India Limited, would not make them the manufacturers of fan-guards. He also relied on 1984 (16) ELT 415 (Lucas Indian Service Ltd., Madras v. Collector of Central Excise, Madras). In that judgment it was held that in the absence of any finding to the contrary, the plea that the second company was independent unit had to be accepted. Shri Shishir Kumar urged that the goods had been taken for captive consumption and hence it would amount to clearing under Rules 9 and 49 of the Central Excise Rules, 1944.
7. It is seen from the contentions of the learned counsel for the applicants that M/s Unique Auto Gears, whose clearances did not exceed Rs. 4 lakhs, were entitled to exemption from whole of the duty under Notification No. 105/80-CE dated 19-6-1980. The question would, therefore, arise whether the applicants should be deemed to have cleared the goods which were permitted without payment of duty and whether the exemption granted to M/s. Unique Auto Gears would have the effect of absolving the applicants’ of the liability to pay duty as manufacturers despite their applying for permission under Rule 56-C of the Central Excise Rules, 1944. The applicants had supplied raw materials to M/s Unique Auto Gears and the pump driving gears manufactured by the said firm were cleared without gate passes or any other documents evidencing payment of duty. The applicants had applied for permission under Rule 56-C. Under those circumstances, the Tribunal has held that the applicants having chosen to follow the procedure under Rule 56-C they cannot turn round and say that M/s Unique Auto Gears were entitled to exemption in respect of the goods entrusted to them for job work.
8. Questions (iii) and (iv) are consequential questions of law arising out of questions (i) and (ii). Hence the following questions of law are referred to the Hon’ble High Court, Rajasthan, under Section 35-G of the Central Excises and Salt Act, 1944 :-
(i) Whether the Tribunal was justified, in the facts and circumstances of the case, to hold that the applicants have cleared the goods without permission and without payment of central excise duty?
(ii) Whether the Tribunal has erred in holding the applicants liable to pay duty of Rs. 31,353.60 in respect of the clearances in question on the ground that the applicants have applied for permission under Rule 56-C of the Central Excise Rules, 1944?
(iii) Whether the Tribunal has erred in holding the clearances of M/s. Unique Auto Gears as on behalf of the applicants?
(iv) Whether the Tribunal has erred in law in upholding the imposition of penalty for breach of Rule 56-C of the Central Excise Rules, 1944.
The connected papers are also submitted.