ORDER
V.T. Raghavachari, Member (J)
1. The two appeals were heard together as they arise out of the same order.
2. Show cause notices were issued to these two appellants M/s. Bhavana Ap-parells and Indu Apparells in respect of duty payable by them on the readymade garments manufactured and removed by them during the period 1-4-1975 to 15-3-1976. The allegation against them, stated in short, was that they were not eligible for benefit of duty free removals in respect of the periods during which they had respectively manufactured the readymade garments since the manufacture was in the same factory and the total clearances had exceeded the duty free exemption limit. On adjudication the Collector of Central Excise; Bombay-1, under his order dated 29-7-1981 directed exemption be granted to the two appellants proportionately out of the duty free clearances of Rs. 5 lakhs for the year and demanded duty in respect of the balance of clearances. He further imposed a penalty of Rs. 25,000.00 on each of the appellants. On appeal the Central Board of Excise and Customs under its order dated 30-8-1982 confirmed the order of the Collector except to the extent of setting aside the penalty imposed. The revision petition preferred to the Central Government against the said order is now before us, on transfer, as this deemed appeal.
3. We have heard Shri V.J. Manerikar, Advocate for the two appellants and Shri L.C. Chakraborty for the department.
4. The quantum of manufacture and removals by each of the appellants is not disputed. It appears that upto 31-8-1975 the manufacture was by M/s. Indu Apparells; subsequently the manufacture was by M/s. Bhavana Apparells till 23rd February 1976 and thereafter the manufacture was again by M/s. Indu Apparells. Nor is it disputed that the same machinery was used by both the appellants, during their respective periods of manufacture. The firms are owned by father and son respectively. It transpires that benefit was proposed to be claimed by each of the appellants under Notification 150/71-C.E., dated 26-7-1971 and that is the reason why the quantum of manufacture by each of the appellants was kept within Rs. 5 lakh limit. The case for the appellants is that a portion of the factory of M/s. Indu Apparells was separately leased to M/s. Bhavana Apparells and the manufacturing activity of each was carried out in its respective portion and thus there were two distinct factories each engaged in its own manufacture. As earlier mentioned, the Collector had granted benefit of exemption (out of the Rs. 5 lakh limit) prorata to each of the appellants. Therefore, in effect, the Collector did recognise and accept that the two appellant firms were separate and distinct. He held that, even so, benefit of exemption upto Rs. 5 lakhs was not available to each of the appellants since the manufacturing acitivity of both appellants was in the same factory. Proviso 2 of Notification 150/71 read as follows :-
“Where a factory producing articles of ready-to-wear apparel is run at different times of any financial year by different manufacturers, the value of such articles of ready-to-wear apparels so cleared from such factory and in any such year at nil rate of duty shall not exceed rupees five lakhs.”
It is on the basis of this proviso that the Collector came to the conclusion he did (which was upheld by the Board also).
5. The contention of Shri Manerikar is that the conclusion of the lower authorities, that there was only one factory, is not correct and that in fact there were two distinct factories. Reliance in this connection is placed on the agreement of lease under which a portion of the premises of M/s. Indu Apparells was leased out to M/s. Bhavana Apparells. It appears that M/s. Indu Apparells were a licensed factory with an approved premises. The said approved premises was of the entire factory. It is part thereof that had been leased to M/s. Bhavana Apparells. When M/s. Bhavana Apparells sought for a separate lincence for the said separated portion they were not granted any such licence. In any event till M/s. Bhavana Apparells began their manufacturing activity the entire factory premises were in the possession of M/s. Indu Apparells and manufacturing acitivity was being carried out therein. Regarding the later restriction of their factory to a portion only, it does not appear that the approval of the department for the alternation of the licensed premises was obtained. When M/s. Bhavana Apparells commenced operations they utilised the same machinery, it being claimed that they had moved the said machinery to the portion leased to them.
6. Taking into consideration the fact that till M/s. Bhavana Apparells commenced manufacture, the factory was one and even after the lease the alteration of the licensed premises was not approved and the further fact that the same machinery had been used by both, we are satisfied that the factory was one throughout the year, though the manufacturing activity may have been carried on by the two appellants during separate periods (as had been accepted by the lower authorities also).
7. In the circumstances the lower authorities were correct in concluding that in view of proviso (ii) to the notification the benefit of exemption was available for a total sum of Rs. 5 lakhs only, and not to Rs. 5 lakhs individually to each of the appellants.
8. In this view the orders of the lower authorities are upheld and these appeals are dismissed.