ORDER
Jyoti Balasundaram, Member (J)
1. The appellants are aggrieved by the imposition of penalty of Rs. 1 lakh under the provisions of Rule 209-A of the Central Excise Rules, 1944 vide the impugned order of the Collector of Central Excise, Rajkot. In this case, a show cause notice was issued proposing recovery of Central Excise duty of Rs. 52,63,999.43 P from M/s. Kinotone or M/s. International Talkie Equipment Company Ltd. (the appellants herein) on the ground that M/s. Kinotone (Central Excise license holder for manufacture of excisable goods such as parts of Cine Projector Equipment) M/s. Cine Lamp (SSI unit engaged in the manufacture of parts of Cine projectors viz Arc lamp) availing full exemption under Notification Nos. 83/83-C.E., dated 1-3-1983,85/85-C.E., dated 17-3-1985 and No. 175/86- C.E., dated 1-3-1986 and the appellants herein were inter-linked and interconnected units each controlled by one Adalja family and had engaged in the manufacture and clearance of excisable goods viz. complete Cinema projectors and availed the benefit of exemption under the aforesaid SSI notifications incorrectly by declaring themselves to be independent manufacturers of parts of Cinema projector equipments. The notice also proposed imposition of penalty on M/s. Kinotone and the appellant under Rule 173-Q of the Central Excise Rules and proposed penalty under Rule 209-A on M/s Cine lamp. The Adjudicating Authority confirmed the duty demand against M/s. Kinotone holding that there is nothing on record to show that M/s. International Talkie Equipment had engaged themselves in the manufacture of goods. In other words, he held that M/s. Kinotone alone was the manufacturer of goods in dispute.
2. Having held that the appellant herein is not the manufacturer of excisable goods, the Collector concluded that no penalty can be imposed upon them under Rule 173-Q. He however, held that there was convincing evidence on record that appellant had close association with M/s. Cine lamp and M/s. Kinotone in the manufacture and clandestine removal of Cinema projectors; that the apellants had financial interest in the business of both the other notices; that the appellant introduced itself to the customers as the manufacturer of Cinema projectors. On the basis of the above evidence, he held that the appellant herein was concerned in acquiring possession of “transporting, removing, depositing, keeping, selling or purchasing excisable goods which it knew or had reason to believe are liable to confiscation and therefore, imposed a penalty of Rs. 1 lakh under Rule 209-A. Hence this appeal
3. We have heard Shri D.N. Mehta, learned Advocate, who submits that the penalty imposed under Rule 209-A cannot be sustained in view of the fact that the show cause notice proposed penal action only under the provisions of Rule 173-Q and Rule 209-A was not invoked in the notice. He therefore, prays for setting aside of the same.
4. The prayer is opposed by the learned DR Shri M.P. Singh who contends that citing of a wrong Rule of provision does not vitiate the action taken by the Commissioner against the appellant and since the appellant had ample opportunity to show cause against imposition of penalty and further since the same evidence which was relied upon in the show cause notice for proposal of penal action has been relied upon in the impugned order for imposing penalty under Rule 209-A, the penalty is sustainable.
5. We have considered the rival submissions. We find that the show cause notice alleges that M/s Kintone was engaged itself in the manufacture of complete Cinema Projectors by mis-declaring itself as an independent manufacturer and in clandestine removal thereof through the association of International Talkie Equipment Co Pvt. Ltd. and on this basis, the notice called upon M/s Kinotone and the appellant herein to show cause against levy of excise duty on Cinema projectors manufactured and clandestinely cleared by M/s Kinotone under the brand name/trade name of ITEC during the period 1-4-85 to 31-3-90. The notice proposed penal action on M/s Kinotone and the appellant herein under Rule 173-Q(1) and Rule 9(2) of the Central Excise Rules. The appellant answered the charge in the notice by denying that they organised the sale of complete Cinema projectors manufactured by M/s Kinotone and that all the equipment including Cinema projectors bore the brand name “ITEC”. They denied liability under Rule 173-Q. The Adjudicating Authority has given up the charge contained in the show cause notice and has held that the appellant is concerned in acquiring possession of or transporting, removing, depositing, keeping, selling or purchasing excisable goods in question which they knew or had reason to believe, are liable to confiscation. He has held that since the show cause notice does disclose the intention of the Department to impose penalty upon the appellant, imposition of penalty under another appropriate provisions of the Central Excise Rules, 1944 would not vitiate the proceedings when they are fully informed of the charges against them and were called upon to show cause why penalty should not be imposed on them. He has relied upon the decision of the Tribunal in the case of T.S. Narayana Rao v. Collector of Customs [1990 (50) E.L.T. 328] in support of his finding. However, we agree with the learned Counsel that it was not open in law for the Collector to impose penalty under Rule 209-A as the appellant had no opportunity to represent against imposition of penalty under this Rule. The ingredients of Rule 173-Q(1) and Rule 209-A are different from each other and they govern different situations. Hence the assessee was entitled to a opportunity to defend itself against penal action in terms of Rule 209-A. In this view of the matter, we hold that the imposition of penalty under Rule 209-A upon the appellant is bad in law and set aside the same.
6. The Tribunal’s decision relied upon by the Collector is distinguishable as the issue in that case was whether the non-mention of the particular sub-clause of Section 112 of the Customs Act providing for penalty would vitiate the penalty imposed in the case. However, in the present case as we have already stated earlier, both Rule 173-(1) and Rule 209-A provide for penal action but in separate sets of circumstances. Rule 173-Q(1) applies to manufacturers while Rule 209-A is not applicable to a manufacture and we do not agree with the learned DR that opportunity to show cause against imposition of penalty under Rule 173-Q is sufficient for holding that the appellant had adequate opportunity to defend itself against imposition of penalty under Rule 209-A.
7. The decision of the Apex Court in the case of Roche Products Ltd., 1989 (44) E.L.T. 194 (S.C.) relied upon by the learned DR are also distinguishable. The Supreme Court held that confiscation of goods and imposition of penalty in exercise of Reversionary powers under Section 130(2) of the Customs Act is an irregularity but does not affect the order if the same officer is empowered to confiscate the goods and impose penalty as an Adjudicating Authority under other provisions because when an Authority has power to do a certain act and he does the same in exercise of such power but with reference to a wrong provision of law, that would be a irregularity and would not vitiate such order. This is not an answer to the point in dispute before us.
8. The decision of the Supreme Court in the case of Collector of Central Excise Calcutta v. Pradyumna Steel Ltd., 1996 (82) E.L.T. 441 (S.C.) also does not advance the case of the Revenue. The Court held that mere mention of wrong provision of law when the power exercised is available although under a different provision is by itself not sufficient to invalidate exercise of that power. This decision is not an authority for the proposition that imposition of penalty under a provision of law different from the provision cited in the show cause notice, is legally permissible particularly when the different provisions for penalty are applicable to different sets of persons and in different situations. In the results, we set aside the penalty imposed upon the appellants and allow the appeal.