ORDER
G.R. Sharma, Member (T)
1. By the impugned order ld. Collector ordered confiscation of 12 rolls seized in transit on 10-11-1986 and 68 rolls seized on 7-1-1987 under Rule 173Q. He also gave an option to redeem the goods on payment of fine of Rs. 15,000/-. He demanded duty from M/s. New India Rubber Mills, M/s. Northern India Rubber Mills and M/s. New International Rubber Mills. Central Excise duty amounting to Rs. 28,83,146.23 under Rule 9(2) of the Central Excise Rules. He also imposed a penalty of Rs. 75,000/- each on M/s. New India Rubber Mills, Northern India Rubber Mills, M/s. New International Rubber Mills and M/s. M. K. Enterprises and Shri Vidya Dhari Mahajari. Being aggrieved by this order the appellants have filed the captioned four appeals. As the four appeals arise out of the same order, therefore, they were heard together and are being disposed of by this common order.
2. The facts of the case in brief are that on 10-11-1986 Central Excise Officers intercepted one hand driven cart loaded with 12 rolls of transmission rubber beltings measuring 1290 mtrs. Shri Sham Lal, the cart man could not produce any G.P.I/invoice/other documents covering the consignment. In his statement recorded on 10-11-1986 he stated that the goods had been removed from the premises of M/s. New India Rubber Mills, Dinanagar and were to be kept in the godown of M/s. Northern India Rubber Mills. The staff visited the factory premises of M/s. New India and found that no G.P.I or bill was prepared in respect of the 12 rolls intercepted by the staff. When a visit was made to the godown of M/s. Northern India Rubber (Sales) and stock verification was done, 68 rolls of T. R. Beltings without serial numbers, name of the manufacturer and gate pass number etc. were found. Shri Vipan Kumar, partner M/s. NIR (Sales) in his statement, dated 10-11-1986 stated that these rolls were purchased from M/s. New India, M/s. Northern India and some other manufacturers. These rolls were first detained on 10-11-1986. On verification done on 17-12-1986 and 18-12-1986 revealed that the name of M/s. New India was printed on the wrapper of 42 rolls and brand names NIRMILL, NIRULLA and NIR were found on the wrappers of 12 rolls. One roll was wrapped in a plain paper. The remaining 13 rolls were without wrappers. Shri Vipan Kumar, partner of M/s. NIR (Sales) failed to produce any gate pass/invoice in respect of the detained goods which were seized on 7-1-1987. The statements of various persons connected with the goods including the manufacturers were recorded. Records were resumed scrutinised and statements were analysed.Accordingly, a SCN was issued to the appellants on 27-4-1987 asking them to explain as to why the 12 rolls seized on 10-11-1986 and 68 rolls seized on 7-1-1987 should not be confiscated under Rule 173Q, why CED amounting to Rs. 31,77,600.73 on Transmission Rubber Beltings and Rs. 2,94,454.50 on compound rubber should not be demanded under Rule 9(2) of Central Excise Rules, 1944 and why a penalty should not be imposed on the noticees. The appellants made various submissions. After careful consideration of those submissions, ld. Collector held as indicated in the preceding paragraphs.
3. Shri M.G.S. Mttrthy, ld. Counsel appearing for the appellants submits that according to the SCN these 12 rolls of goods were being removed on 10-11-1986; that the period of notice was 1-4-1982 to 8-11-1986; that removal of the goods outside the period cannot be made the subject matter of a seizure/demand for duty; that all allegations in regard to 12 rolls are outside the scope of notice to show cause and cannot be adjudicated upon; that Prem Sagar’s statement adverted to was not highlighted in the notice to show cause; that there was no evidence for reasonable belief; that there was no evidence whatsoever of clandestine removal from North; that there cannot be any assumption that there was no independent production in the two units; that anything which was found at a particular time cannot be extended to the past.
4. On the contentions of the ld. Counsel about the seized goods ld JDR Shri R. S. Sangia submitted that there was no evidence to prove that the goods were in unpacked condition; that the records of Northern India, New India or New International did not show sale of goods without serial number or in loose condition; that such sales have been denied by Shri Vidya Dhari Mahajan of New India and Shri Vipan Kumar of Northern India in their statements datted 14-1-1987 and 16-1-1987; that they enter the goods in R.G.I only when serial number is marked on the rolls and the same are packed. He submitted that it was clear that 12 rolls measuring 1290 mtrs. were being clandestinely removed and that 68 rolls found in the godown were also removed without payment of duty. He submitted that having regard to this findings, the authorities below have rightly held that purchase of these rolls or clearance of 12 rolls through regular trade channel is ruled out. He, therefore, submitted that confiscation has rightly been ordered by the ld. Collector.
5. We have heard the rival submissions. We have also perused the evidence on record in the form of statements and other documents. We find that in the instant case there are two issues. The first issue is the seizure of the goods and the second issue is the demand of duty. Therefore, the contention of the appellants that the allegations in regard to 12 rolls and in regard to 68 rolls were outside the scope of notice to SCN and cannot be adjudicated upon is not tenable. As the various statements recorded and the examination of the statutory records revealed that these 12 rolls and 68 rolls were being carried in the hand cart or kept in the godown were non-duty paid and were being clandestinely removed or earlier removed without payment of duty. We note that the ld. Collector has dealt with these issues separately and elaborately. Having regard to the fact that the appellants have not been able to produce any evidence about the payment of duty on the 12 rolls and 68 rolls and therefore, we uphold the confiscation of these rolls.
6. The second allegation against the appellant was that the three units namely New India, Northern India and New International were not independent units. The Department alleged that if we look at the constitution of the units, we find that M/s. New India is the partnership concern where the partners are Shri Vidya Dhari Mahajan and Shri Vipan Kumar Mahajan s/o Shri Vidya Dhari Mahajan. In the case of Northern India it was found that it is a partnership concern and the partners arc Vinay Kumar Mahajan, s/o Shri Vidya Dhari Mahajan and Smt. Vimal Rani Mahajan, w/o Shri Vidya Dhari Mahajan. The third unit was New International which was a proprietary concern floated by Shri Vidya Dhari Mahajan as ‘Benami’ concern. The Department alleged that Northern India and New India jointly produced goods but recorded the same as their independent production. The Department alleged that the two units did not have independent working machinery that this was supported by letter dated 31-5-1984 of the S.D.O., P.S.E.B.; that separate production in these units had not started. Ld. DR argued that the statement of Shri Mohan Lal of Northern India recorded on 10-1-1987 showed that except mixing machine rest of the machines installed in the factory were not working. He submitted that movement of 12 rolls on 10-11-1986 from New India to Northern India after completing the process of cutting supports the allegation of non-availability or non-working of the machines. Ld. Counsel for the appellants in reply submitted that the units were producing goods independently; that ground plants were approved; that separate L-4 Licence were issued to the units; that the units were regularly visited by the officers of Central Excise that the visits reflected in R.G.I showed that production based checks were regularly being carried out; that Preventive & Audit Parties visited the factories. Ld. Counsel submitted that the only evidence relied upon are letters and Mohan Lai’s statement that ld. Collector has deliberately avoided any discussion of the various statements made in their reply regarding excise control and supervision.
7. The have heard the rival submissions on the independent units and their independent functioning or otherwise. We note that Shri Mohanlal’s statement is very clear in which he submits that except the mixing machine, no other machine was working in one unit. Mixing alone is not the process in the manufacture of T. R. Beltings. It means that the production in the two factories were joint only a few operations were being conducted in one factory and the remaining operations were being conducted in the other factory. Thus, the units cannot be termed as producing goods independent of each other. In so far as visits of officers and the production checks reported to be undertaken by them concerned, they do not prove that the units were independently producing the goods. The allegation that the ld. Collector avoided to comment on the visits of officers is thus not necessary to be dealt with inasmuch as the visits of officers in no way established that the units were manufacturing goods independently. Stock verification is based on the records maintained and the allegation is that though the production was being done mainly in one factory except some operation being undertaken in the other factory but it was being recorded in the statutory records of the different units.
8. The allegation was that M/s. New India had not started functioning as the SDO, PSEB, Dina Nagar in his letter dated 31-5-1984 addressed to the Ex. Engineer had observed in the year 1984 that separate concern in the name and style of M/s. New India had not started functioning that their meter and machinery was not separated; that M/s. New India was not running separately and that separate production had not started; that these fact were admitted by M/s. Northern India in their letter dated 20/29-9-1984 addressed to the SDO, PSEB. As against this the appellants submitted that they were drawing electricity from their power house for Rs. 3,000/- per month; that this was confirmed by Shri Vidya Dhari Mahajan. Ld. Counsel submitted that shading of power between the two units is proved; that no evidence was brought on record to prove otherwise; that production and manufacture of goods is proved; that R.G.I registers of New India were being written and assessments were being made; that manufacture was all along within the knowledge of the Department; that common electric connection is by itself not a factor justifying clubbing. In support of his contention he cited and relied upon the decisions reported in 1996 (87) E.L.T. 672 and 1997 (95) E.L.T. 93.
9. On a careful consideration of the above submissions about sharing of power we find that there is a letter written by M/s. Northern India admitting that New India had not started functioning; that their meter and machinery was not separated; that M/s. New India was running separately. In view of this letter we doubt very much whether the power was being shared and whether the agreements about sharing of power and steam were documents existing and correctly showing the position. Since the premises of New India and Northern India were adjacent to each other, therefore, the visits of the officers will not prove or disprove the availability of the separate electric connection. We would better like to accept the evidence which is based on letters written to the Government in this case to the PSEB.
10. COMMON BRAND NAME : – Shri Sangia, ld. DR submitted that M/s. Northern India and New India were selling their products with common brand names; that the brand names were NIRMILL, NIRULLA, NIRCO, NIR; that these were registered brand names of M/s. Northern India; that though Shri Vidya Dhari Mahajan claimed that they could use any brand name. However, on the other hand he took up the matter with Shri Kane, Advocate for safeguarding their interest in regard to these brand names. He submitted that it is evident that these brand names could be used only by M/s. Northern India and not by M/s. New India. Ld. Counsel submitted that trade marks were known to the excise authorities; that trade marks use alone does not justify clubbing. He submitted that in reply to the SCN it was contended by the appellants that it was not the case of the Department that one was getting goods manufactured with his trade mark from the other nor was that goods manufactured in one get branded in the name of the other. Ld. Counsel submitted that trade mark were enumerated in the price list and thus it was within the knowledge of the excise authorities.
11. We have considered the rival submissions about use of brand name. We note that the brand names were registered in the name of M/s. Northern India. We also note that Shri Vidya Dhari Mahajan was particular that his brand name should not be abused and thus use of the brand name of M/s. Northern India by others namely M/s. New India and New International clearly shows that the goods were being manufactured jointly and not in the individual factories.
12. Other allegation was that the appellants were claiming that sales were organised through NIR (Sales). It was alleged that orders placed on New India were executed either by Northern India or NIR (Sales) and vice versa. Ld. Counsel submitted that the three firms have been supplying T. R. Belting against orders placed on the firms other than the firms which supplied the goods; that this fact was admitted by Shri Vidya Dhari Mahajan; that this practise was universal that there was no dispute; that consideration was charged by the supplier of goods only; that there may be cases of advance payment which have to be squared by book adjustments. Ld, Counsel submitted that it is not the case of the Department that payment was received by one although order was executed by the other.
13. Ld. DR submitted that orders placed on New India were executed by Northern India or NIR Sales and vice versa; that New International came into existence later on; that there was evidence on record that goods shown to have been manufactured by New International were actually manufactured by Northern India or New India; that Dr. V.P.Nanda in his statement stated that M/s. New International during the period of lease was not manufacturing T.R.beltings but used to get it manufactured from M/s. Northern India or New India. He submitted that this fact is further supported by the consumption of power by M/s. New International; that consumption of power by M/s. New International do not justify the production of T.R.Beltings as consumption of power during 1985-1986 was nil whereas production of T.R.Beit-ings shown is 75,807 mtrs. He submitted that the movement of goods from New International to M/s. NIR (Sales) is not proved by records that Shri Vidya Dhari Mahajan stated that goods were received F.O.R. godown whereas Shri K.R.Marhawa stated that movement of goods was not there only bills were sent to New International; that M/s. New International did not maintain any cash book, wage register or attendance register. He also stated that M/s. New International was a Benami concern; that finance was being arranged by Shri Mahajan; that only 5% to 7% of the goods were manufactured in New International and that too with labour and material of Northern India; that the remaining quantity was manufactured in the premises of M/s. Northern India or New India but accounted for in the records of New International. Ld. Counsel for the appellants submitted that the statement of Shri Marhawa which has been largely relied upon by the respondents was obtained by inducement. Replying to this allegation ld. DR submitted that there is other evidence to support the view that New International was not an independent unit inasmuch as purchase of canvas by New International was received in the premises of M/s. Northern India; that Shri Paw an Kumar, Manager of Salwan Goods Booking Agency stated that raw material was delivered to NIR (Sales) Behrampur Road; that Tirathram of New India acknowledged the receipt that this will show that the goods consigned in the name of New International were being received by Shri Tirathram of New India. Ld. Counsel submitted that the Collector has omitted the words.
“As far as my information” so as to make it clear as if it was not safe which obviously it is about the statement of Dr. V.P. Nanda”.
14. We have heard the rival submissions on the question of sales and manufacture. We have also seen the statement of DR. V.P. Nanda. We find that this statement has two parts and the appellants have relied only on the second part and thus there is no inaccuracy in the statement of Dr. V. P. Nanda as quoted by the ld. Collector. Thus we hold that the three units in so far as sale of goods and receipt of raw material is concerned, were not independent. They were not independent also in so far as manufacture of the goods is concerned inasmuch as manufacture was taking place only in some units at a particular point but the production was being recorded in the statutory records of the three units.
15. On the finding that New International did not maintain any cash book, wage register or attendance register. Ld. Counsel for the appellants submitted that the finding was without allegation that this does not lead to that inference; that the entire quantity of excisable goods shown as manufactured in New International to be clubbed with the production figures of North India or New India.
16. On perusal of the rival submissions we find that the appellants have not been able to give a satisfactory answer as to why cash book, wage register or attendance registers were not being maintained. Non-maintenance of the cash book, wage registers or attendance registers clearly shows that funding was being done from a common source and there was a financial flow back.
17. On the question of raw material shown to have been purchased by M/s. New International but received in the premises of Northern India and Pa wan Kumar’s statement ld. Counsel for the appellants submitted that it was a general allegation that Shri K.R. Marhawa does not advert to it or prove the relevant entries that there is no reference to this in the SCN.
18. We have perused the submissions of both sides on the receipt of raw material purchased in the name of New International but received elsewhere. We have also seen the points raised by the ld. Counsel for the appellants. We find that instead of confining the replies to this finding the ld. Counsel has taken up only the technical points on the face of the documentary evidence available. We hold that this finding of the ld. Collector is sustainable.
19. About the correspondence by Northern India on behalf of New International we find that the objection of the appellants is that these two letters were not specifically referred to in the SCN and that Shri Vidya Dhari’s explanation in the letter to Bhagat was ignored. On a careful consideration of these submissions, we find that the letter is an indicator that there was commonality among the three units.
20. Having regard to the above discussions, we find that looking to all the facts and the contentions of both the sides, the units were not independent so as to be eligible for the benefit of SSI exemption each. We also note that all the facts invariably lead to the conclusion that the units were created only to evade payment of duty. They were not independent, manufacturer of each unit, was not being recorded in the records of that unit alone complete manufacture of the product was not taking place in the same unit but certain operations were being undertaken at different places. There is ample evidence on record to show that New International was a dummy unit to take advantage of the benefit of duty exemption. We also note that New India and Northern India did not have complete machinery to manufacture the goods on their own. The goods were being manufactured in one unit but they were being shown in the records of more than one unit to take advantage of duty exemption. We also note that the three units were family concern in which the father, the son and the wife were the partners or proprietor of the units. Thus, the funding was being arranged by Shri Vidya Dhari Mahajan which can be termed as a common funding from the same source, cash book was not being maintained or wage register was not being maintained by M/s. New International clearly shows that there was flow back of money. Looking to all the facts as discussed above clubbing has rightly been done of all the clearances of the three units. In this view of the matter, confiscation of 12 rolls seized in transit on 10-11-1986 and 68 rolls seized on 7-1-1986 is confirmed. Option to redeem the goods on payment of fine of Rs. 15,000/- is upheld. Demand of CED of Rs. 28,83,146.23 from M/s. New India Rubber Mills, M/s. Northern India Rubber Mills and M/s. New International Rubber Mills is confirmed.
21. In so far as imposition of penalty is concerned, we note that though SCN has been addressed to Shri Vidya Dhari Mahajan, however, the endorsement in the SCN does not indicate that the same was despatched to Shri Vidya Dhari Mahajan. In the absence of any docuinentary proof in this regard, we hold that since no SCN was issued to Shri Vidya Dhari Mahajan, therefore, no penalty is imposable on him. Regarding others looking to the facts of the case and the parts played by them, we uphold imposition of penalty. However, looking to the facts and circumstances of the case, we reduce the penalty amount to Rs. 25,000/- each imposed on M/s. New India Rubber Mills, M/s. Northern India Rubber Mills and M/s. New International Rubber Mills. The appeals are disposed of in the above terms.