ORDER
S.L. Peeran, Member (J)
1. This appeal arises from Order-in-Original No. 76/94 dated 4.1.95 confirming duty demand of Rs. 4,62,509 in respect of goods manufactured by the appellants as well as another manufacturer namely Frontline Fabricators (Pvt.) Ltd. (hereinafter referred to as FFPL) which the Commissioner held the said manufacturer to be a hired labour and clubbed the clearances of both and denied the benefit of SSI exemption on the ground that the premises and machinery being common and the same had been leased out by the appellants to M/s. FFPL. The demands have been confirmed for the period from 1.4.92 to 4.10.93 in terms of Rule 9(2) of CE Rules read with proviso to Sub-section (1) of 11A of CE Act. An amount of Rs. 2,64,962 paid by the appellants through TR-6 challan dated 14.10.93 and 12.1.94 towards the confirmed amounts have been adjusted. Penalty of Rs. 50,000 has been imposed under Rule 173Q of CE Rules.
2. It is the contention of the appellants that both the units are to be treated as independent one although M/s. FFPL had entered into the lease agreement with the appellants and handed over the premises, but however, they carried out the manufacturing activity and this fact had been made known to the department by filing separate RT-12 returns and also taking out Registration certificates showing the same address. They had also shown the ground plan showing bifurcation, and the same had been approved and details of RT-12 returns were accepted time and again. Their contention is that the work carried out by M/s. FFPL is not as a hired labour but on principle to principle basis in terms of a detailed contract and the copies were also furnished. It is pointed out that in terms of the said contract, the appellant was only to supervise the production as quality control was to be retained and M/s. FFPL was to manufacture independently although the lease of the premises was with the appellant. It is stated that even if the benefit of Notification is denied by clubbing the clearances, the demand for duty in respect of the clearances made by M/s. FFPL cannot be adjudicated on the appellants alone. It is pleaded that the clearance of M/s. FFPL is required to have been separated and separate demand issued to them and demands confirmed by denying the benefit of Notification. He submits that as the facts of the separate clearances had been made known to the department and RT-12 returns filed including ground plan having been approved, therefore question of Rule 9(1) to allege clandestine removal and also invoking proviso to Section 11A alleging suppression does not arise in the matter. It is stated that the Commissioner has in the impugned order accepted the plea of separate manufacture carried out by M/s. FFPL. However, he has clubbed the clearances solely on the ground that M/s FFPL was only a hired labour and manufactured the goods in terms of the contracts supplied by the appellants and the appellants had supervised the manufacture by their engineers. It is also contended that when the fact of manufacture by M/s. FFPL had been admitted by the Commissioner on record, and more particularly the contract indicates that the contract was on the basis of principle to principle, therefore M/s FFPL cannot be considered as a hired labour. They also pleaded that there is no suppression in the matter in invoking large period and imposing penalty by invoking Rule 173Q of the Act.
3. Ld. Advocate points out to the available evidence on record including the approved RT-12 returns, Lay out plan, where separate premises of both the units are clearly indicated. He also points out to Monthly Returns of both the units indicating the same address and about the same having been approved. Therefore, he contends that there is no suppression for invoking the larger period. He submits that at best, the benefit of notification can be denied but the demands in respect of clearances made by M/s. FFPL cannot be confirmed on the appellants without due notice to them and they being made party in the case. He submits that even if on an extreme view is taken that the clearances of M/s. FFPL was on the basis of hired labour, even then, M/s. FFPL are bound to have been put to notice in the matter, and as they have not been implicated in the case, the impugned order suffers from illegality and requires to be set aside on these grounds.
4. Ld. DR Shri M. Kunhi Kannan takes us through the entire findings of the Commissioner and submits that the findings are clear and the role of both the units have been discussed and he submits that although M/s FFPL has been considered as a hired labour, they are not required to be put on notice as the entire manufacture and clearances of the goods is deemed to have been done by the appellants and the Commissioner has treated them as the manufacturer of the goods. He submits that larger period is invokable ass the terms of the lease deed has not been brought to the notice of the department and hence there is suppression of facts. He submits that merely because RT-12 returns have bene accepted and approved, it does not mean that the department was aware of this arrangement and that M/s FFPL was only a hired labour, therefore the impugned order is required to be upheld.
5. On a careful consideration of the submission and on a perusal of the entire records, the fact that both the appellants and M/s. FFPL having taken out separate Registration certificates on the same premises is established. The appellants and M/s. FFPL both have filed Layout Plan indicating the bifurcation of the premises and thereafter they have also filed RT-12 returns showing the same address and also about clearances made in respect of manufacture done independently. The same Superintendent has approved the RT-12 returns after endorsement receipt from the Inspector of Central Excise as having been verified. The Commissioner also in the impugned order has accepted the plea that there was manufacturing done by M/s. FFPL. However, he has treated them as hired labour. The question now is as to whether the hired labour according to Commissioner is required to have been put to notice as contended by the Ld. Counsel as to whether they can be treated as hired labour. Ld. Counsel has taken us through the contract entered into by the appellants with M/s. FFPL. We have perused the same and notice that the term of contract indicates that M/s. FFPL was to manufacture and supply foundation bolts as per the drawings supplied by them. There is no indication that M/s. FFPL were only a hired labour and that they were not manufacturing on principle to principle basis. Although M/s. FFPL has entered into the lease deed, but yet they had in terms of the lease also agreed to manufacture for the appellants and the fact of clearance and RT-12 returns have to be filed to the department. On a perusal of the agreement and the purchase order, it is clear that the relationship between them is that on principle to principle basis and not that of hired labour. The appellants plea that M/s FFPL in the circumstances ought to have been put to notice by the Commissioner is justified and they not having been put to notice has made the order unsustainable in the facts and circumstances of the case. Further, we notice that there is no suppression of any fact in the matter as both the units had obtained separate Registration certificates by showing bifurcation in the drawings as noticed by us in the records. The RT-12 returns also indicate the same address. The fact that both the units manufacturing from same premises was made known by utilising the same machinery to the department. Hence it cannot be said that there is suppression in the matter calling for invocation of larger period. It is also significant to note that the department had issued two separate Registration certificates under Central Excise Act and Rules to the two entities namely the appellants and M/s. FFPL even though the machinery was installed in that portion which was leased out to the appellants. Normally the Jurisdictional Superintendent is supposed to verify whether adequate machinery is available in the premises for the manufacture of the declared goods for which the Registration certificate is issued. In this case, the facts show that the Registration certificates for M/s FFPL was issued despite knowing that in their premises there was no adequate machinery. Thus everything about the circumstances of operations of the two units were fully in the knowledge of the department.
6. In view of the aforesaid findings, we set aside the order impugned both on merits as well as on limitation.