ORDER
Jyoti Balasundaram, Member (J)
1. The above appeals arise out of the order dated 27-12-1991 of the Collector of Central Excise, Ahmedabad confirming a duty demand of Rs. 11,44,588/- on decorative laminated top units (referred to as DLTUs in short) alleged to have been manufactured and cleared by the first appellant company and a demand of Rs. 10,28,914/- on steel furniture such as Drawer units, lock units, tool cabinets etc. manufactured and cleared by the appellant company without payment of Excise duty and imposing penalties of Rs. 10 lakhs and Rs. 5 lakhs on the first and second appellant respectively.
2. The Adjudicating authority has rejected the contention of the appellants that they were not clearing fully manufactured units but only purchasing decorative laminated top units from M/s. Siddharth Engineering Works and reselling them with adjustment on steel frames and has further rejected the contention that the steel furniture was purchased from another manufacturer namely M/s. Sam Engg. Works on the ground that M/s. Roopa Industrial Corporation and M/s. Jaymine Trading Co. who allegedly sold the steel furniture to M/s. Sam Engg. Works, were not found to be in existence.
3. We have heard Shri P.M. Dave, learned Advocate and Shri K.K. Dutta, learned DR and carefully considered their submissions. During the period 1987-88 and 1988-89, the appellant company was engaged in the manufacture of complete steel table units by assembling the laminated top units of the table alongwith other parts of the table. The different models namely Model No. 1348, 1345, 2060, 20.66, 2048 and 2054 consisted of decorative laminated tops of different sizes, top frames, U frame rounds and footrest rounds.
4. Shri Uttam Rao Anand Rao Bhogal who was working in the factory as fitting and packing supervisor, stated that he was engaged in fitting steel furniture from the different parts manufactured in the factory after completion of colouring works etc. from other departments that different models of DLTUs does not simply consist of decorative top units but also other parts such as top frames, U frames etc. which are fitted to the top frames by nuts, screws. The illustrative process of manufacture of DLTU is given in the statement of Mr. Bhogal as follows :-
“1348 DLTU : For manufacturing such type of unit, the decorative tops of the size 4′ x 2′ were received in his department from their stores department while top frame, U frame small nug-2(round), U frame round big No. 1, foot rest round No. 1 were received from colour department of their factory; after receipt in his department, the decorative laminate top was fitted with top frame by screw and afterwards above mentioned U frame small nug-2 (round) U frame round big No. 1 and foot rest round No. 1 decorative laminated top fitted with top frame altogether were packed in one corrugated box and after it had been packed 1348 DLTU has been written on it.
1354 DLTU : For manufacturing such type of units, decorative tops of size 4-1 /2′ x 2-1/2′ were received in his department from stores department whereas 4-1/2′ x 2-1/2/ top frame, U frame, round No. 4 and foot rest round No. 1 were received in his department from colour department and after receiving the same decorative laminated top was fitted with top frame with screw; then afterwards the aforesaid U-frame round No. 4 and foot rest round No. 1 were fitted with top frame as shown above and were packed in one corrugated box alongwith U-frame and foot rest and for fitting the same necessary required hardwares were also packed in corrugated box; that the whole unit thus manufactured was called decorative laminated top unit.
2060 DLTU : For manufacture of such unit, decorative laminated top of the size 5′ x 3′ was received from their stores department while square leg No. 4 foot rest C type No. 1 L brackets etc. were received from colour department; that afterwards, the remaining parts as referred to the above square legs No. 4 foot rest, ‘C’ type ‘L’ type brackets and for fitting all these the necessary required hardware were packed in one corrugated box and on box 2060 DLTU was written. The whole unit thus manufactured and packed was called Decorative Laminated Top Unit.”
Therefore, the whole unit after fitting work is completed and necessary required hardware, packed in the corrugated box only is known as Decorative Laminated Top Unit. This has been further corroborated by the Panchnama drawn on 4.1.1990 in which the corrugated boxes lying in the bonded store room, containing the marking (1348 DLTU and FDU No. 1) were examined and found to contain (1) Decorative laminated fitted with top frame by means of screw and (2) U-frame (U)(ii) (round 2). (3) U-frame (4) Foot rest part (1) round No. 2 and 5 below in small decorative box of foot U frame and foot rest. Shri Bhogal confirmed that all these packing and fittings were done in the packing department of the factory. The production floor of the factory was inspected by the officers of Central Excise Department on 4-1-1990 and different sizes of decorative tops were lying in the factory. Shri Bhogal and Shri S.K. Jagdish Chander Sheth stated that these were the tops which are received from M/s. Sidharth Engg. Works, Ahmedabad.
5. The statement of Shri Ashok R. Patel, Director of the company was recorded on 3-1-1990 wherein he deposed that the appellant company had been manufacturing steel furniture and its parts and also carrying on trading business; that on going through the invoice produced on 20-1-1990 in respect of sales of furniture, there was invoices of ‘NE’ series (Non-Excisable) i.e. for goods sold by them as bought out articles; that they had some decorative units of different sizes and that they purchased top units mostly from M/s. Sidharth Engg. Works which units were of wood manufacture without laminated sheets and the tops were having frames affixed on them and they had despatched the top units alongwith the accessories and parts to their customers. In his further statement recorded on 4-1-1990, he stated that what was received from M/s. Sidharth Engg. Works were only tops i.e. patia and nut fittings. The Excise Clerk of the appellant Shri S.J. Seth also confirmed that tops were received from M/s. Sidharth Engg. Works.
6. The argument of the learned Counsel that the panchnama of 4-1-1990 relates only to the manufacturing activity carried on in the shop floor of the appellant factory and does not reflect their trading activity, cannot be given any weightage in the absence of categorical assertion by either the Excise Clerk or the Fitting Supervisor or the Director of the company that in addition to the manufacturing activity, the appellant, also carried on trading activity. At this juncture, it is to note that Shri Bhogal, Fitting Supervisor has stated in his cross examination of 11-11-1991 that he is aware that the company is also purchasing parts of DLTUs from outside. The ld. Counsel next referred to the invoices of Sidharth Engg. Works (Pages 44 to 64) of paper book to support his contention that what was supplied by M/s. Sidharth Engg. Works was the entire DLTU and not the laminated tops or patties.
7. We have gone through the invoices and find that in almost all of them the items have been described as DLTU top unit of different models, like 2048, 1348, 2060 and it is only in invoice at page 56 there is reference to CRADENTA to the top. Therefore, there is no doubt that what was supplied was only the tops i.e. incomplete parts of the table units which were kept in the store room of the appellants’ factory and still in the production department before forwarding to the packing and fitting department. We therefore, agree with the findings of the adjudicating authority that the appellants had cleared complete units without payment of duty and accordingly confirm the demand on this count.
8. The second head of demand on steel furniture such as laminated units, safes etc. is solely based upon the fact that the two concerns namely M/s. Roopa Industrial Corp. and M/s. Jaymine Trading Co. of Ahmedabad from whom the furniture was reported to have been purchased by M/s. Sam Engg. Works who in turn, sold to the appellants company, were found to be non-existent. This is the only basis on which the adjudicating authority has come to the conclusion that the appellants created them on paper showing steel furniture manufactured and cleared by them. We see great force in the contention of the learned Counsel that there is no evidence to arrive at the conclusion particularly in view of the fact that payments by the appellants to M/s. Sam Engg. Works and payments by M/s. Sam Engg. Works to M/s. Roopa Industrial Corp. and M/s. Jaymine Trading Co. are not denied. (See Bank certificates of payment made by M/s. Sam Engg. Works to M/s. Roopa Industrial Corpn. and M/s. Jaymine Trading Co. at pages 124 to 127 of paper book No. 1). We therefore, hold that the burden of proof of manufacture and clandestine removal of locker units and drawer units has not been satisfactorily discharged by the department and set aside the demand on this account.
The penalty against the first appellant company is warranted in view of the confirmation of charge of manufacture and clandestine removal of decorative laminated top units without payment of duty. However, in view of our finding that the demand of Rs. 10,28,9147- on steel furniture is not sustainable, we reduce the penalty upon the first appellant company to Rs. 5 lakhs. The penalty on the second appellant Director is legally sustainable in terms of Rule 209A as he was the person looking after the affairs of the first appellant company and had carried out the entire operation of clandestine manufacture and removal of decorative laminated top units (DLTUs) with the knowledge of liability of the goods for confiscation and had initiated the misdeclaration in the invoice (relating to DLTUs) marked ‘NE’ in order to falsely bring into existence non-excisable trading goods. For the same reason which weighed with us for reducing the penalty on the appellant company, we reduce the personal penalty imposed on the second appellant director to Rs. 2,50,000/-.
In the result, the impugned orders are upheld and the appeals dismissed subject to the modification in quantum of penalty as set out above.