ORDER
V.K. Agrawal, Member (T)
1. Both these appeals have arisen out of common Order No. 6/99 (Adj) dated 11.8.99 passed by the Commissioner Central Excise under which Central Excise duty amounting to Rs. 58,39,070 has been demanded from M/s. Thermotech, besides imposing penalty of equivalent amount. A penalty of Rs. 5 lakhs has also been imposed on Shri Pardeep Khanna.
2. Shri Naveen Mullick, learned Advocate, submitted that the Appellant No. 1, a proprietorship unit of Mrs. Neera Khanna, manufactured air conditioners, coolers, heat convertors, transformers and washing machines; that the manufacturing activities were started in 1990 and the Appellant No. 1 was availing of the SSI exemption Notification; that they were also undertaking the trading activities in similar goods from the different premises; that till 31.3.1994, they had been manufacturing their goods under the brand name ‘Thermotech’ and Thermoking’; that they stopped manufacturing activities since March 1995 but the trading activities remained continued till March/April 1996. He further submitted that the Central Excise Officer visited the factory premises of M/s. Thermoking, proprietorship concern of Pardeep Khanna, and M/s. Flevel Intentional, a partnership firm of Pradeep Khanna, and his wife Neera Khanna; that both these units were engaged in the manufacture of electrical appliances; the Officers found the records pertaining to the Appellants; that the Department, after conducing enquiries from their buyers and Sales Tax Department issued a show cause notice dated 30.11.1998 for demanding duty amounting to Rs. 77.04,883 for the period from 1993-94 to 1995-96 on the ground that they had clandestinely removed the goods; that the Annexures A, B and C to the show cause notice were prepared on the basis of parallel invoices; that the Commissioner, under the impugned Order dropped the demand raised in Annexure ‘D’ and ‘E’ but confirmed the demand of Central Excise duty Rs. 58,39,070 after extending reduction of duty on duty-cum-sale price and imposed penalty of equivalent amount on Appellant No. 1 and a penalty of Rs. 5 lakh on Appellant No. 2.
3. The learned Advocate also submitted that the definition of term ‘Manufacture’ in U. P. Sales Tax Act is different from the definition Manufacture in the Central Excise Act; that as per U.P Sales Tax Act, “Manufacture means producing, making mining collecting, extracting, altering ornamenting finishing or otherwise processing, treating or adapting any goods but does not include such manufacture or manufacturing processes as may be prescribed”; that where each process or treatment on the goods may not amount to manufacture under Section 2(f) of the Central Excise Act, the same shall be considered and treated as manufacture under the provisions of U.P. Sales Tax Act; that on the appliances being purchased by them from the open market, they had undertaken the processes like affixing of brand name, painting etc, which amounted to manufacture in terms of U.P. Sales Tax Act and as such reference of Sales Tax Returns or the invoices carrying the O.C Stamp could not establish that all such goods in fact had been manufactured under Section 2(f) of the Central Excise Act; that accordingly the allegation of clandestine removal based on Sales Tax Returns could not form the basis for demanding Central Excise duty. He also mentioned that they did not have the capacity and infrastructure to manufacture such a huge quantity of the goods; that they had only five to six workers, working in one shift and having only 2 kVA power as certified by electricity department; that it is not understood as to how the Commissioner had still considered about their having electric connection of 5 kVA; that it appears that the firm taking the premises in 1997, got the electric connection converted to 5kVA.
3.2 The learned Advocate further mentioned that some goods mentioned in Annexure A, B & C to the notice were received back from various customers and those goods were resold under regular invoices; that the credit notes issued by them and debit notes issued by their customers clearly show the return of the goods; that the value of such goods ought to have been deducted from the three Annexure; that they had discharged the burden by adducing the documentary evidence which should not been discarded merely on the ground to be an after-thought.
3.3 He also mentioned that goods valued at Rs. 30,62,119 were included in the diary/private ledger maintained by Shri V.K. Shourie and recovered by the officers on 4.8.97; that the demand of duty in respect of such entries had already been raised against M/s. Thermoking and the matter has been settled under Kar Vivad Samadhan Scheme (KVSS); that, therefore, raising of the demand against the Appellants is not legally correct and amounts to charging of duty twice for which there is no legal sanction.
3.4The learned Advocate also contended that part of the demand of duty is in respect of invoices which find mention in R.T. 12 Returns and which are, therefore, not parallel invoices; that no demand of duty can be raised in respect of such invoices.
4. Regarding use of brand name “Thermoking”, the learned Advocate submitted that the brand name is not registered and prior to 1.4.94 they were using the brand name and were availing the benefit of small scale exemption; that there is nothing on record by way of any evidence which could establish the brand name Thermoking’ being owned by M/s. Thermoking; that like M/s. Thermoking, they had also been using the said brand name; that there are instances where a common brand name is being used by several manufacturers; that Board has also clarified vide Circular No. 52/52/94-CX dated 1.9.94 that “if there is no person to claim ownership of that mark or name, it does not belong to any person and any body is free to use the name or mark. In such case, units using trade name or brand name, not belonging to any person, are eligible for SSI exemption”. He, therefore, contended that benefit of Notification No. 1/93 cannot be denied to the Appellants as they have established their nexus in the trade for brand ‘Thermoking’. Finally the learned Advocate submitted that Section 11AC of the Central Excise Act was made effective only from 28.9.1996 that is the period subsequent to the period of demand; that, therefore, the said provisions cannot be invoked for imposition of penalty; that it has been held by the Tribunal in the case of Lauls Ltd. v. CCE, New Delhi, (33) RLT 523 (CEGAT) that when a consolidated penalty is imposed under Rule 173Q read with Section 11AC of the Act, apportionment cannot be done in appeal. He also mentioned that even otherwise no penalty is imposable under Rule 173Q of the Central Excise Rules as the Appellants have not contravened any provisions of the Rules as they have been undertaking their activities under the bona fide impression; that law has been settled that in case of a proprietorship firm, there is no difference between the owner and such firm and, therefore, imposition of penalty on Mrs. Neera Khanna has no legal sanctity; that moreover no show cause notice has even been issued to Mrs. Neera Khanna for imposition of penalty under Rule 209A of the Rules; that Shri Pradeep Khanna, in his personal capacity, at time of need was rendering assistance to the firm owned by his wife; that none of the documents of the Appellant firm was being maintained by Pardeep Khanna; that there is nothing on record which can show that Appellant No. 2 was responsible in dealing with the goods of the Appellant No. 1; that mere fact that certain books were laying in the premises of M/s Thermoking, does not show/prove that Appellant No. 2 had a control on M/s. Thermotech and as such no penalty under Rule 209 A can be imposed on him.
5. Countering the arguments Shri M.P Singh, learned DR, submitted that the impugned goods manufactured by the Appellant No. 1 were affixed with the brand name “Thermoking” that Shri Rajesh Kumar, ex-employee of Thermotech, in his statement has admitted that ‘Thermoking’ was the brand name of M/s. Thermoking and the same was affixed on the impugned goods; that this fact has also been confirmed by Shri D.C. Chandla, Marketing Manager, and Shri V.K. Shourie, Marketing Manager, in their respective statements; that the Board’s Circular, referred to by the learned Advocate, pertains to locks and other similar goods since there is a general practice in respect of locks to put any name thereon by the manufactures; that the goods involved in the present matter are not sold in ‘similar fashion’ as the locks and as such benefit of SSI Notification is not available to the goods manufactured and cleared by the Appellant No. 1. He further submitted that as per Notification No. 1/93, brand name of another person may be registered or not registered and its use is sufficient for denying the benefit of the SSI Notification; that if the contention of the learned Advocate is accepted, unregistered brand name will not come within the purview of Para 4 Notification No. 1/93. He also emphasized that in the present matter, the name of the Company which is manufacturing the same commodity and same person, namely, Pradeep Khanna, looking after the work are sufficient evidence to show that Thermoking’ was the brand name of M/s. Thermoking which was affixed by the Appellants on the goods manufactured and cleared by them. Regarding contention of trading activity undertaken by them, the learned DR submitted that the Department has relied upon the affidavit filed by the Appellant unit with the Sales Tax Department to the effect that the goods sold by them are manufactured in their factory; that the learned Advocate for the Appellants has not explained the activity undertaken by them within the definition of “manufacture” in the U.P Sales Tax Act; that they were not authorized under Central Sales Tax Act to procure goods for resale under Form ‘C which provides concessional rate of sales tax in respect of the goods meant for further processing. The learned DR also reiterated the findings of the Adjudicating Authority as contained in paragraphs 31 and 32 of the impugned Order and contended that the entries in ledger and bank account cannot be conclusive evidence of trading activity. He also mentioned that the owner of the Appellants’ unit had stated that when he purchased it, the power connection was 5 kVA; that Rajesh Kumar has also confirmed that they were having a power connection of 5 kVA; that there is nothing in their submissions that they could not have produced such larger quantities of goods as both Pradeep Khanna and Rajesh had stated in their statements that the part of the manufacturing process was being got done from various job workers. He also mentioned that the Revenue had made out a case on the ground of recovering of the parallel set of sales invoices over and above the sale invoices reflected in R.T.12 Returns; that some invoices having same numbers were recovered; that if same invoices appear in both the show cause notices, in view of the presence of parallel invoices, it will be fallacious to conclude that same invoices in both the show cause notices or the invoices were submitted with R.T. 12 returns, Regarding plea of returned goods, the learned DR reiterated the findings as contained in para 36 of the impugned Order wherein it is mentioned that credit/debit notes pertained to rate difference, on account of Scheme, on Account of quantity discount and clerical mistakes, etc. but none pertained to the returned goods. He finally submitted that penalty is imposable on the Appellant No. 1 as the Central Excise duty has been evaded. He relied upon the decision in IB. Nagarkar v. UOI . He also mentioned that a penalty under Rule 209A is imposable on Pardeep Khanna as he was looking after work of Appellant No. 1 which is evident from the statement of Rajesh.
6. In reply, the learned Advocate mentioned that the Board’s Circular dated 1.9.94 applies to all the goods specified under Notification No. 1/93-CE and not only to locks. He reiterated that the definition of manufacture in Sales Tax Act is much wider and if their activities were beyond the purview of definition of manufacture, then only they can be called to be engaged in trading under the UP. Sales Tax Act; that in their reply to the notice they had mentioned that they were doing packing of the goods which amounts to manufacture.
7. We have considered the submissions of both the sides. It is not in dispute that the impugned goods were bearing the brand name “Thermoking”. The defence put forth by the learned Advocate is that Thermoking’ being not registered with the appropriate Authority can be used by any body and he has relied upon the Board’s Circular No. 52/52/94-CX, dated 1.9.94. A perusal of the said Circular reveals that the same was issued as “it was reported that there is a practice in the lock industry to use a name or mark even though such mark or name is not owned by any particular person. Such marks are freely available and any manufacturers can use them”. In the light of these facts, the Circular was issued clarifying that if a brand name is not owned by any particular person, the use thereof will not deprive a unit of the benefit of the small scale exemption. Notification No. 1/93 specifically provided that the exemption “shall not apply to the specified goods, bearing a brand name or trade name (registered or not) of another person”. It is apparent from the Notification that it is not essential that brand name need be registered one by another person for the purpose of denying the benefit of Notification. The learned Advocate is confusing the expression “owned” with “registered”. It is not denied by the Appellants that M/s. Thermoking was a unit owned by Shri Pardeep Khanna, husband of Mrs. Neera Khanna and the said unit was manufacturing electrical appliances using brand name “Thermoking”. The Appellants have not brought out any evidence on record to show that there is a practice in electrical appliance industry to use any name or mark as is the practice in lock industry. We agree with the learned DR that M/s. Thermoking being proprietary concern of Pardeep Khanna, who used to look after the Appellant’s unit, being husband of the proprietress, certainly no objection would be raised by him for using brand name “Thermoking’ by M/s. Thermotech. Accordingly we find no infirmity in the impugned Order in denying the benefit of Notification No. 1/9 to the Appellant No. 1.
8. The defence taken by the Appellants is respect of parallel invoices and clearance of excisable goods without payment of duty is that they were engaged in trading activity and the definition of “manufacture” is wider in U.P. Sales Tax Act than the definition of “Manufacture” in Section 2(f) of the Central Excise Act and they were not having capacity to manufacture all the goods alleged to have been manufactured by them. We are of the view that the Adjudicating Authority had dealt with ail the defences taken by the Appellants and they have hot been successful in rebutting those findings before us. Shri Rajesh Kumar, Authorised Representative of M/s. Thermotech, in his statement dated 3.9.98, has clearly deposed that the Appellant No. 1 was getting the work done on job work also till December 1995 when Thermotech was engaged in manufacturing, they used to sell only goods manufactured by M/s. Thermotech and after closure of manufacture in December 1995, they purchased goods and sold them under their invoices; there was 5kVA connection in the factory. This fact has been confirmed by Shri Kul Bhusan who purchased the shed from Mrs. Neera Khanna, by deposing that U.P.S.E.B. had sanctioned and installed 5 kVA power connection and the shed who purchased by him as it is (alongwith 5 kVA power connection), Shri Rajesh was shown some invoices and he deposed that the goods were manufactured by M/s. Thermotech and the invoices were not included in RT 12 Returns. He has admitted to have kept parallel invoices. Shri Subhash Oberai, Accountant, has also deposed in his statement dated 12.10.1998 that ledger account taken from CPU contained sales of the goods manufactured and cleared by M/s. Thermotech and many of the sales shown in computer ledger had not been shown in RT 12 returns. The Adjudicating Authority had given a specific finding in the Adjudication Order that the definition of “Manufacture” under Sales Tax Law did not include the “Packing”. The Appellants have mentioned in their Memorandum of Appeal that they were also undertaking other processes like affixing brand name, testing etc. We do not find any force in these submissions. In their reply had only mentioned packing without any details or specifications. In view of the statements discussed we do not find any reason to interfere with the finding of the Adjudicating Authority that the Appellant No. 1 was not engaged in trading done in respect of the sales shown to the Sales Tax Department. Even there is no substance in their submissions that some goods were returned by dealers and credit/debit notes were issued. Once the excisable goods were have been removed from the place of manufacture, excise duty becomes payable irrespective of the fact that the goods are subsequently returned. It is not the case of the Appellant No. 1 that duty has been demanded twice on the returned goods. However, we find force in the submission of the learned Advocate that the demand has been made in respect of entries made in diary recovered from Shri Sourie from M/s. Thermoking which have settled their case under KVSS. This aspect has to be looked after by the Adjudicating Authority and if demand of duty has already been made from M/s. Thermoking, the Department cannot again demand duty in respect of same entries from the Appellant No. 1. The demand of duty made against Appellant No. 1 is upheld except the demand on account of entries made in the said diary. The Adjudicating Authority after checking the fact and after hearing the Appellant No. 1 in this regard, will pass the appropriate Order.
9. As the Appellant No. 1 had removed the excisable goods without payment of duty and without observing Central Excise formalities, penalty is imposable on them under Rule 173Q of the Central Excise Rules. Certainly in view of the settled legal position penalty cannot be imposed under Section 11AC of the Central Excise Act as the entire period of demand is prior to insertion of Section 11AC in the Act. As the Adjudicating Authority has imposed combined penalty under both Section 11AC and Rule 173Q, it cannot be apportioned of by the Tribunal as held in the case of Lauls Ltd., supra. We, therefore, set aside the penalty and remand the matter to the Adjudicating Authority for considering imposition of penalty under Rule 173Q after following the principles of natural justice. As show cause notice did not contain any charge of imposing penalty on Mrs. Neera Khanna under Rule 209A of the Central Excise Rules, penalty imposed on her is set aside. The penalty under Rule 209A is imposable on Pardeep Khanna as he was looking after the affairs of M/s. Thermotech. This is apparent from the statement dated 3.9.98 of Shri Rajesh Kumar who deposed that the entire work regard to what goods were to be manufactured and whom they were to be sold to was looked after by Pardeep Khanna. According to the said statement Pardeep Khanna was also looking after appointment of employees, purchase of raw materials and all were being submitted to him. Shri Subhash Oberai also deposed in his statement dated 23.9.98 that Pardeep Khanna was the actual controlling person of the affairs of Thermotech. This is further evident from the statement dated 3.7.98 of Shri Pardeep Khanna himself. He appeared before the Excise Officer on behalf of his wife Mrs. Neera Khanna in response to summons dated 29.6.98 issued to her, to tender his statements under Section 14 of the Central Excise Act. This act itself goes to show that he was conducting the affairs of M/s. Thermotech. A penalty of Rs. 5 lakh imposed on him is quite reasonable and the same is upheld. Both the appeals are disposed of in above terms.