ORDER
Jeet Ram Kait, Member (T)
1. By this appeal, the appellants herein viz. M/s. Macneill & Magor Ltd. (hereinafter referred to as appellants) challenge the order-in-original No. 17/91, dated 28-6-1991 passed by the Collector of Central Excise, Madras whereby he has demanded duty of Rs. 10,44,855.52 under the proviso to Sub-section (1) of Section 11A of the CE Act 1944, besides imposition of a penalty of Rs. 75,000/- on the appellants under Rule 173Q of the CE Rules, 1944. There is also a demand of duty of Rs. 6,12,332.12 from M/s. KEL on the goods removed without payment of duty under Rule 9(2) of the Rules, read with proviso to Section 11A(1) of the Act besides another demand of duty of Rs. 97,896.79 under Rule 9(2) read with Section 11A(1) of the Act. They have also been imposed penalty of Rs. 70,000/- under Rules 173Q and 226 of the CE Rules. The Collector has also ordered confiscation of the plant and machinery with an option to redeem the same on payment of duty of Rs. 10,000/-. There is also a imposition of penalty on Shri N. Srinivasan, formerly Vice President of the appellant’s company, who is not in appeal before us.
2. The appellants herein are manufacturers of electrical starters, circuit contractor relays, oil circuit boards, HT contractors, control panels, vacuum circuit breakers and spares therefor. They are holders of Central Excise licence L4 Nos. 1/71 and 5/75.
3. M/s. Kilburn Electricals Ltd (hereinafter referred to as KEL) are also manufacturers of the above electrical products. They are also holders of Central Excise licence L4 No. 1/87. One Shri S. Srinivasan’ functioned as the Vice President of the appellants as also the Managing Director of M/s. ‘KEL.
4. On gathering information that the appellants herein are indulging in evasion of Central Excise duty, the Directorate General of Anti-Evasion, Madras searched the premises at Ayanavaram and Ambattur on 27-7-1989. It was found that from 1-4-1988 the operations of the electrical factory of the appellants at Madras i.e. at Konnur High Road Ayanavaram were taken over by M/s. KEL as per the terms and conditions entered into between them. The amounts receivable from customers against supplies made earlier to take over, the payment to creditors for supply of materials, etc. and past liabilities including Bonus to staff were the responsibility of the appellants. Although the appellant’s company was taken over by KEL, the Central Excise licence of the appellants were continued in the same premises and another licence was obtained by the KEL for part of the same premises for their manufacturing activities. The appellants continued to function in the same at Ayanavaram even after the take over of the appellants’ factory and its operations by KEL with effect from 1-4-1988, after setting apart a part of the licenced premises for KEL. Even after the take over of the factory by KEL, manufacture and clearance of the items were continued to be shown in the name of the appellants till 11/1988 and statutory returns were filed in the name of the appellants and the goods were shown to have been manufactured by the appellants and were cleared to KEL on, the strength of gate passes. The statutory documents like gate pass either in the name of appellants or in the name of KEL even after take over were signed by one Shri Ga-napathy, formerly Commercial Manager of the appellants and at the relevant time consultant to KEL. Appellants had removed certain goods to the KEL at Ambattur under various GPs without payment of duty by making an endorsement in the GP-1 that the goods are exempted from payment of duty ‘for captive consumption’ without showing any authority for claiming such exemption. They have however not claimed any such exemption in their classification lists, according to the department. The items so removed were all finished goods drawn from the RG-1 stock as seen from the RG1 on page Nos. 370, 380, 373, 386 and 394 valued at Rs. 61,88,206.326 as per the statement given by Ramani Sundaram, Accountant of the appellants/KEL. In the above background show cause notice was issued to the appellants on 6-2-1990 on the ground of violation of Rules 173B, 173C, 173F, 173G and 226 of the CE Rules, 1944 alleging that they have not filed any classification list for use of the items captively, no price list has been filed and appropriate duty has not been determined and statutory accounts did not reflect the true nature of the clearances of the goods and accounts were manipulated to show that the goods were removed for captive consumption, whereas the goods were in fact not consumed captively. After considering the reply furnished by the appellant vide their letter dated 9-11-1990 and after personal hearing, the Commissioner has passed the order-in-original which is impugned before us. Aggrieved by the said order-in-original, the appellants have come in appeal on the following grounds:
(a) The department was aware of the age-old practice of removal of goods from bonded stock under nil gate passes indicating therein "exempted for captive consumption" with debit entries in the RG1 and submission of monthly RT 12s that was in vogue. (b) Omission to mention the notification in the GP is only a procedural mistake and it cannot take away the substantive right to the benefit of notification. (c) Longer period of limitation been invoked on the mere presumption of suppression of facts without any supporting evidence. (d) Demand of duty is not sustainable for the reason that the department was informed, though late, that the factory has been taken over by M/s. KEL with effect from 1-4-1988 and as per the terms of transfer, physical assets like plant and machinery, material work in progress, finished goods lying in the factory belonged to KEL. Hence duty should have been demanded from KEL. (e) When the factory has been taken over by KEL, the duty on the goods which were lying in the shop floor liability lies with the KEL and not on the appellants. (f) Department has not controverted the fact of such a procedure of removal of goods for captive consumption and mere non-mention of the Notification No. 217/86 while filing classification list cannot deny them the benefit. They have also relied upon the following decisions in the grounds of the appeal in support of their plea for setting aside the order impugned. (a) Special Bench Decision in the case of CCE, Pune v. Industrial Oxygen Co. P. ltd. reported in 1993 (66) E.L.T. 215 (T) = 1988 (15) ECR 265 wherein it was held that "because Chapter X procedure has not been followed it cannot be denied the substantive benefit of Notification No. 118/75 so long as the goods have reached the destination of the factory for captive consumption. (b) Prameela Plastics P. ltd. v. CCE, reported in 1989 (22) ECR 367 wherein the Tribunal held that Modvat benefit is admissible even if letter of intimation of intent to avail was sent to the department. (c) Supreme Court judgment in the case of CCE v. Chemphar Drugs & liminents reported in 1989 (40) E.L.T. 276 wherein it was held that extended period of limitation of five years is applicable only when something positive other than mere in action or failure on the part of manufacturer is proved. It was further held that conscious or deliberate withholding of information by manufacturer, necessary to invoke larger period of limitation.
5. Shri V.S. Venugopalan, learned Counsel appearing for the appellants argued the matter on the above lines and submitted that no evidence has been brought in by the department in support of their plea of contravention of rule by the appellants. He submitted that the appellants are also eligible for Modvat Credit. So far as invocation of longer period of limitation is concerned, he argued that longer period of limitation cannot be invoked in this case inasmuch as the department was well aware of the operations of the appellants and they have been periodically submitting the monthly returns. Therefore, the allegation of suppression cannot be held against the appellants and he sought for setting aside the order impugned.
6. Shri A. Jayachandran, learned DR appearing for the department defended the order impugned. He also referred to the comments forwarded by the Deputy Commissioner (R&T), Chennai-III Commissionerate vide CNO.V/NIL/2/364/2001-R&T, dated 10-1-2002, a copy of which has been placed in the file. The learned DR prayed for rejection of the appeal.
7. We have carefully considered rival submissions and gone through the case records. We observe that in this case, the Commissioner by the order impugned has dealt with the case of two parties viz. M/s. Macneill & Magor Ltd. (the appellants herein) and M/s. Kilburn Electricals Ltd. Both the companies have been found to have contravened various provisions of the Act and the rules made thereunder and duty has been demanded from both of them and both have been imposed penalty as well. In the appeal before us, we are concerned with the appeal of the appellants only. We find that the issues that arise for consideration in the present appeal are :
(a) Whether the goods cleared by them under GP No. 1233, dated 23-3-88; 1241, 1242, 1243 and 1244 all dated 30-3-88 can be considered as clearances made for captive consumption; and (b) Whether the appellants have suppressed the facts from the department warranting demand of duty for larger period in terms of the proviso to Section 11A(1) of the CE Act, 1944. (c) Eligibility to Modvat Credit on the removals made to KEL.
8. Dealing with the question (a) above, we find from the records that the factory of the appellants at Ayanavaram was taken over by KEL with effect from 1-4-88 and yet the appellants continued to be in possession of the L-4 licence which was in their name and the later, on taking over of the factory by the KEL, they have also obtained another L4 licence in their name. It is also seen from para 6 of the impugned order that even after take over of the operations of the factory by KEL, the manufacture and clearance of the items were continued to be shown in the name of the appellants till November, 1988 and statutory returns were also filed in the name of the appellants (MML) and the goods shown to have been manufactured by the appellants were in turn shown to have been cleared to KEL. The statutory documents like gate passes either in the name of the appellants or in the name of KEL were signed by one and the same person viz. Shri Ganapathy formerly Commercial Manager of the appellants who was at the relevant time Consultant to the KEL. As already noted above, appellants had cleared various goods covered by five Gate passes, and these clearances have been effected before the take over of the company by KEL and in the Gate passes it is mentioned that “Exempted for captive consumption” without showing the notification under which the goods were exempted. But the records amply reveal that the goods have not been cleared for captive consumption but had been removed to KEL another factory at Ambattur. The goods removed were all finished goods drawn from RG-1 register in pages 370, 380, 373, 386, 394 etc. The relevant notification for captive consumption applicable to the present case is Notification No. 217/86 as amended. This notification at the material time permitted removal of goods for captive consumption within the factory of production, whereas in the present case, the goods have been removed from Ayanavaram to Ambatlur and the Ambattur factory belonged to another manufacturer i.e. KEL., Shri Ramani Sundaram, accountant of the appellants as well of KEL and Shri Ramamurthy, Stores in charge of KEL Ambattur have clearly admitted that the goods have been removed to the Ambattur factory of KEL, without the cover of statutory transport documents. In view of the above findings, we answer the question in favour of the Revenue that the removals of the goods covered by the gate passes noted above cannot be considered as removal for captive consumption and hence duty is de-mandable for the removals covered by the gate passes noted above.
9. Coming to the next question as to whether longer period of limitation can be invoked for demand of duty in this case, we find that a plea has been taken that the appellants have been maintaining all the statutory documents like RG-1 register and they have been regularly filing the statutory RT 12 returns. We observe that in this case, the appellants in their reply dated 9-11-1990 chose to keep silent about filing classification list and price list for the purpose of captive consumption. What they have mentioned in the G.P.I is “exempted for captive consumption” and the name of the consignee is appellants’ own name at Madras. Therefore as per the GPls they have removed the goods within their factory only. Captive consumption means removal of the goods within the factory in the same premises or to another factory of the same manufacturer, if it was permitted at the relevant time. But what they have resorted to was, removal of the impugned goods to KEL at Ambattur who is another manufacturer located at another place, in the guise of captive consumption. Both are Public Limited Companies and are separate legal entities and separate juristic persons. By no stretch of imagination one can come to a conclusion that non-mention of notification under which captive consumption was permitted, was merely an omission on the part of the appellents. On the other hand these facts came to the knowledge of the department only from the statements of Shri R. Sundaram Ramamurthy. Further, even the take over of premises, on their own admission, have been intimated to the department late and’not immediately on its occurrence. We observe that under the Self-Removal Procedure Scheme, an assessee is permitted to remove the goods on determination of duty by himself and lot of faith is reposed on the assessee in that regard. But in the present case noted above, the assessee has not come out clean before the department about the removal of goods to another manufacturer at another place and they chose to keep the department in dark about such removals. Therefore, in the above background, we are of the considered opinion that the appellants have held back information from the department with an intent to evade payment of duty and hence longer period of limitation has been correctly invoked in this case and we answer this point also in favour of the department.
10. So far as eligibility to Modvat Credit is concerned, it is an admitted position that the finished goods have been taken over by their successor unit i.e., KEL. Therefore, the claim of Modvat Credit if any should have been raised by the KEL and not the appellants before us and KEL are not in appeal before us. In the circumstances the claim for Modvat Credit is also devoid of merits and as such the appellants are not eligible to Modvat Credit for the goods removed to their successor unit i.e. KEL.
11. We observe that the appellants have also submitted additional documents such as the copy of the order of the Hon’ble High Court of Madras order dated 8-6-1999 on Writ Petition filed by M/s. Kilburn Electricals Ltd. seeking to challenge the order of Regional Director Company Law Board in regard to change in the registered names, etc. The subject-matter covered in the said Writ proceedings does not in any way affect the proceedings before us, as it is a different matter altogether which has been dealt with in the Writ petition. Similarly the appellants have also submitted a copy of the proceedings before the Industrial Tribunal, Tamil Nadu in the matter of dispute relating to conditions of service of workmen, for adjudication under Section 10(1)(d) of the Industrial Disputes Act, 1947 between the Workmen and the Management of Macneill and Magor Limited (now known as Williamson Magor and Co Ltd.) and Kilburn Electricals Ltd. Madras. These proceedings are not relevant to the case before us.
12. In view of our findings above, we do not find any reasons to interfere with the order passed by the lower authority and we uphold the impugned order and reject the appeal. Ordered accordingly.