ORDER
C.N.B. Nair, Member (T)
1. This appeal of M/s. Jindal Strips Limited is directed against duty demand of about Rs. 3.5 lakhs and imposition of penalty of Rs. 5,000/- on them.
2. The facts leading to the passing of the impugned order are that upon scrutiny of the sale records maintained by the appellant, the Central Excise Officers noticed that they had disposed of “different items of parts and machinery and other fabricated items” during the period May, 1991 to March, 1993. The goods disposed of were ‘MS Shell, Kiln Shell, Dummy Plate, M.S. Pipe, M.S. Pressure Ring, Column Gantry, Plate for columns, M.S. Tank, G.I. Sheet, Triple Joint, M.S. Angle, M.S.L. Block, Brass Gear, Brass Bush Roll, Gun Metal Bush, Gunmetal Bush Gear, Cast Iron Rod, Brass Bush, Gear Box, Gear coupling, Girth Gear, Discharge hood top bend plate, M.S. Rod, Girth, Gear flange, etc.” The appellants explained in reply that the subject goods were not manufactured by them but had arisen from dismantling certain old and used machinery which they had purchased. The appellants also produced challans and other documents relating to the purchase of such old items like kiln. It was the appellant’s contention that they had dismantled the old kiln, used part of the items recovered and had disposed of the remaining items after minor operation such as polishing, cleaning, etc. In the adjudication proceedings, the Commissioner accepted the explanation and allowed benefit in respect of certain items which had been co-related as emerging from the dismantling of old kiln, involving duty demand of about Rs. 41,000/-. The Commissioner did not accept the explanation in respect of the remaining goods and held that duty was rightly payable by the appellants. We read the finding of the Commissioner:-
“8. As regards the remaining items no documentary evidence could be produced by the noticee to establish that the said goods are dismantled parts of different old and used machineries purchased by them. However, the noticee tried to establish their case by producing certain purchase vouchers in order to co-relate the vouchers with the goods recovered from the old and used machineries purchased. But the attempt of the noticee was not successful because they could not establish one-to-one co-relation. Further the description of different goods sold under different invoices were totally different from the description of the goods given in the purchase documents. Further, the Range Supdt. On factual verification submitted that the goods covered under different sale invoices are distinct, identifiable, marketable products, having a different name, character or use and totally different from the goods described in the corresponding purchase vouchers produced by the noticee. Hence the claim of the noticee that the subject goods were not manufactured goods, but emerged through dismantling of old and used purchased machineries and cleared after making small and minor operations such as cleaning, polishing, etc., does not hold good. In fact the noticee manufactured different excisable goods falling under different headings of the Central Excise Tariff as detailed in the show cause notice during the material period without paying the central excise duty and without recording the production of such goods in the Statutory RG-1 Register. Hence I come to the conclusion that the charge made against the noticee holds good in respect of the items other than those mentioned in para 7.1 above.”
3. In the present appeal also the contention of the appellant is that they are manufacturers of sponge iron, steel belets and slabs. They do not manufacture the items alleged in the impugned show cause notice. Those items have arisen during the course of dismantling purchased old kilns, etc., and the disposal of such items cannot attract Central Excise duty as that duty is incidental to manufacturing of goods and not resale of purchased goods.
4. We have perused the records and have considered the submissions made by both sides. The charge against the appellant is that they had clandestinely manufactured and removed the items mentioned in the show cause notice. This allegation is based on the evidence that the appellant had disposed of these items by sale. There is no evidence whatsoever about the manufacture of these items by the appellant. The appellant’s own explanation is that these items have arisen from machinery which they had purchased and dismantled. This explanation has been rejected only on the ground that “they could not establish one-to-one co-relation” between the goods purchased and the goods sold. The order also observed that the description of the goods sold by the appellant are totally different from the description of the goods given in the purchase documents. These are no reasons for holding that the items in question had been clandestinely manufactured in the appellant’s factory and removed. It is in the nature of dismantling machinery that the items obtained will not have the same description as the items dismantled. A charge of manufacture has to be supported by more tangible and positive evidence. The finding in the order, therefore, cannot be sustained.
5. In view of what has been stated above, the appeal is allowed and the duty demand and penalty imposed on the appellants are set aside.