ORDER
G. Sankaran, Sr. Vice-President
1. These appeals are against Order-in-Original No. 23/Collr/MP/82 dated 18.8.1982 passed by the Collector of Central Excise, Kanpur. By this order, the Collector-
(a) imposed a penalty of Rs. 5 lakhs under Rules 9(2), 52A, 226 and 173Q of the Central Excise Rules, 1944 (“the Rules”, for short) on Jain Industries;
(b) confiscated seized goods valued at Rs. 85,129.82 under Rules 173Q but allowed an option for redemption of the goods on payment of a fine of Rs. 20,000/-; and
(c) demanded under Rule 9(2) payment of Central Excise duty amounting to Rs. 6,96,800.43 on excisable goods (steel-furniture) cleared during the period 1975-76 to 1979-80.
2. We have heared Shri. V. Sreedharan, Advocate, for the appellants and Shri L.C. Chakraborty, DR, for the respondent.
3. A few undisputed facts may be stated M/s. Jain Industries had an industrial unit at No. 87, Acharya Nagar, Kanpur, where furniture was being manufactured but without the aid of power. M/s. Techmechos had an industrial unit at 55, Industrial Estate, Kanpur, where manufacturing operations were being carried out with the aid of power. The former firm had father and two sons as partners while the latter had only the two sons as partners.
4. The Department’s case is that both firms are one and the same, though functioning under two different names, that steel furniture parts were being manufactured with the aid of power at 55, Industrial Estate, then transferred to 87, Acharya Nagar, where steel furniture was being assembled out of these parts though without the aid of power. Hence, the items of furniture manufactured at 87, Acharya Nagar, and cleared during the material period were liable to be charged to Central Excise duty and since such operations had been carried on clandestinely, the firm was liable to a penalty. The case for the appellants, briefly stated, is that the two firms were distinct and different and that no furniture parts were being manufactured at 55, Industrial Estate. The Collector has found against the appellants on both these contentions.
5. For our present purpose, it does not seem necessary to go into the question whether the two firms were one and the same or were distinct and different entities. This is because, even if they were one and the same, duty liability will attach to the steel furniture manufactured and cleared by the unit at 87, Acharya Nagar, only if it is shown that the furniture parts used in their manufacture had been manufactured at the unit at 55, Industrial Estate. The whole thrust of the submissions made before us by the counsel for the appellants was that this was not the case. It is, therefore, just as well to go into this aspect first.
6. The evidence adduced in support of the Department’s allegations are :-
(a) an entry in the”Gate Entry Register” showing the despatch inter alia of 148 brackets and other parts of steel furniture from the unit at 55, Industrial Estate to that at 87, Acharya Nagar;
(b) the statements recorded from Shri Ram Assary, a Rickshah puller, Shri Bajrang Singh, an employee of the firm and Shri H.K. Sharma, a supervisor of the firm; and
(c) The panchnama dated 12.3.1980 which is said to contain an admission by Jain Industries that they had received parts of steel furniture from the Industrial Estate unit and used them in the manufacture of furniture at the Acharya Nagar unit.
7. The collector in his order, has stated that it had been admitted by Jain Industries that in the workshop portion at 55, Industrial Estate, power-operated machines had been installed for the manufacture of parts of steel furniture with the aid of power. The counsel for the appellants, however, submitted that the appellants had right from the beginning been denying this position. No such admission was made. Shri Chakraborty’s submission on this point was that the Collector seems to have relied, for this purpose, on the panchnama dated 12.3.1980 at page 39 of paper book – II filed by the appellants and the letter dated 30-3-1979 from Jain Industries to the Assistant Engineer, Government Industrial Estate, Kanpur. We have seen the panchnama and the list attached thereto. It details the stock of component parts of steel furniture physically verified on 12.3.1980 at the 55, Industrial Estate Unit. It contains a notation “component parts of steel furniture produced with the aid of power-As per list attached”. Though a partner of the firm has signed the panchnama and the list, it does not, in our view, amount to an admission that the furniture parts listed therein had been manufactured with the aid of power. The letter dated 30.3.1979 also does not contain any admission that parts of furniture were being manufactured at 55, Industrial estate with the aid of power. In this context, Shri Sreedharan draw our attention to the letter dated 3.12.1971 (page 23 of paper book – I) from Jain Industries to the Assistant Collector. This letter says that though power was not being used in the manufacture of steel furniture, the unit had been covered in the purview of Central Excise since power was being used in the manufacture of steel tubes and engineering items. The unit intended to shift their steel furniture section to an entirely separate premises at G.T.Road, keeping a separate account of that section, and that no power would be used in that section for manufacture of furniture. The letter seeks permission to surrender the Excise licence and request for treatment of the steel furniture manufacturing section as a non-power unit. The licence was surrendered with effect from 1.1.1972.
8. Photocopy of the “Gate Register” of the Acharya Nagar unit has been filed by the appellants -page 1-7 of paper book II. This covers the period 30.1.80-11.3.1980. The entries do not show receipt of furniture parts. On 11.3.80,480 brackets are shown to have been received from the Industrial Estate unit. But, the description of the goods is “Bracket Balti” (in Hindi). The appellant’s explanation that these are brackets for buckets is plausible. The statement dated 11.3.1980 of the rickshah puller (Shri Ram Assary) who transported these brackets does not contain anything adverse to the appellants. The statement dated 11.3.1980 of Shri Bajrang Singh, the paid labourer of the Acharya Nagar unit, says that these brackets are used in the foot pipe of the cots. This, of course, is at variance with the entry in the “Gate Register”. The Department could have, but did not investigate the matter further with a view to finding out whether the brackets were for buckets or for furniture. In this context, the following passage in the Collector’s order is intriguing, to say the least: –
“I deal with certain other points raised by the party to escape payment of duty. One of the points raised is that no trade opinion had been obtained and furnished to the party to show that the seized brackets are used as part of steel furniture. Regarding this contention of the party, it is sufficient to mention here that in case the department was not in a position to advance any evidence or Trade Opinion to the effect that these brackets are used as part of steel furniture, it was open to the party to adduce the evidence and to show that these brackets cannot be used as parts of steel furniture. Since they have not adduced any evidence on this point, I do not want to interfere with the allegation framed by the department and hold them as proved.”
This, it is needless to add, is hardly the way to follow in quasi-judicial proceedings.
9. The statement dated 11.3.1980 of Shri H.K. Sharma, Supervisor, of the Acharya Nagar unit also does not support the Department’s case.
10. In our view, all these pieces of evidence put together do not result in the conclusion that the Acharya Nagar unit had been assembling furniture out of parts made with the aid of power at the Industrial Estate unit. If this be so, the steel furniture manufactured at the former unit did not attract excise duty since only such furniture “in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power” fell within the purview of item No. 40 of the Central Excise Tariff Schedule.
11. We do not consider that the Department has established its case. The appellants, therefore, succeed. The appeals are allowed and the impugned order is set aside with consequential relief to the appellants.