ORDER
Jyoti Balasundaram, Vice-President
1. The adjudicating authority has confirmed a duty demand of Rs. 4,22,013/- together with interest under the proviso to Section 11A(1) of the Central Excise Act, 1944 read with Rule 9(2) of the Central Excise Rules against M/s. Kumaran Implements by holding that they were the real manufacturers of agricultural implements cleared by them and by M/s. Sree Sastha Industries, and imposed penalty of amount equal to duty upon them. He has also confiscated agricultural implements and dies seized from the premises of Sree Sastha Industries on 28-7-1997 bearing the brand name ‘Kumaran’, with option to redeem the same on payment of a fine of Rs. 2,500/- and ordered confiscation of land, building, plant, machinery etc. of both Kumaran Implements and Sree Sastha Industries, with option to redeem them on payment of a fine of Rs. 10,000/-.
2. The case of the department is that both units were functioning as one unit, and a separate entity was created only with an intention of enjoying the benefit of SSI exemption. In other words, it is the case of the department that value of clearances has been fragmented so as to wrongfully claim the benefit of SSI exemption.
3. We have heard both sides.
4. It is clearly brought out that the two units have regular exchange of money, men and material. There was regular exchange of raw material between the units, there was a common store for raw materials, there was a regular inflow of funds from one unit to another, orders were collectively received and executed commonly, there was a common source of power, brand name ‘Kumaran’ is used for supplies made by Sree Sastha Industries also, orders for hammers exceeding the capacity of 16 lbs, although collected in the name of Kumaran Implements, are actually executed by Sree Sastha Industries since the power hammer installed at the Kumaran Implements does not have the capacity to manufacture such hammers. The proprietor of Sree Sastha Industries, Shri M.K. Krishnan Kutty, has admitted that both units are managed by him and that they have a common office, that there are no separate accounts for the sales of scrap from both the units etc. Mrs. Padmini, wife of Shri Krishnan Kutty, owns Kumaran Implements. She has also admitted that both units are functioning as one but shown as two distinct entities in order to enjoy duty concession. The stand of the appellants that although funds flowed from one unit to another, the financial outstanding was settled at the end of the year, is not substantiated with reference to any documentary evidence and cannot, therefore, be accepted. In the light of the above features, the Additional Commissioner has rightly held that Kumaran Implements is the real manufacturer and liable to pay duty. In the light of the Tribunal’s orders in Chaitanya Polypack Inds. v. CCE, Visakhapatnam (Final Order No. 1676/SZB/2004, dated 12-10-2004 [2005 (179) E.L.T. 581 (Tri.)] and the Supreme Court’s decision in CCE, New Delhi v. Modi Alkalies & Chemicals Ltd. [2004 (171) E.L.T. 155], we uphold the duty demand. However, duty has to be recalculated after extending the benefit of abatement of duty from price, treating the price as cum duty price, and after extending the benefit of modvat credit on verification of duty paying documents to be produced by the appellants. For the purpose of recomputation of duty, the case is remanded to the original adjudicating authority who should also redetermine penalty after recalculation of duty. Confiscation of seized goods is upheld. Confiscation of land, plant, building, machinery etc. is set aside, as such action is very harsh against the first offender.
5. The appeals are thus partly allowed.