ORDER
P.S. Bajaj, Member (J)
1. The above captioned appeals have been directed against the common Order-in-Original dated 22.8.2003 vide which the adjudicating authority (Commissioner) has confirmed the duty against the firm appellant No. 1 with penalty and confiscated the goods of appellant No. 2 and also imposed penalty on them, as detailed therein.
2. The appellant No. 1 is a proprietorship concern of Shri Somesh Satish Malik. This firm is engaged in the manufacture and trading of furniture and sanitary fittings since November 2001. Similary firm appellant No. 2 is engaged in the trading and manufacture of watch cases and parts thereof for the last 15 years. This firm is a partnership firm having 3 partners namely Somesh Satish Malik, Smt. Avani S. Malik, and Smt. Usha S. Malik. The duty against firm appellant No. 1 had been confirmed by dubbing its clearances for the period 1.4.2000 to 16.12.2002 with that of appellant No. 2 and another firm known Pioneer Hardware Industries which had 3 partners namely Somesh Satish Malik, Smt. Chetna Ben K. Kataria and Satish D. Malik and stood dissolved on 16.7.2001, as well as by taking into account the clearances of the goods got manufactured from the job workers from outside for trading purposes.
3. The penalty under Rule 25 of the Central Excise Rules 2002 had been imposed on firm appellant No. 2 and its goods had been confiscated with option to get the same redeemed for want of accountal.
4. The learned Counsel has contended that the clearances of firm appellant No. 2 and of the dissolved firm, M/s. Pioneer Hardware Industries could not be legally clubbed with that of the firm appellant No. 1 under the law as the latter is a proprietorship concern having no legal entity as a firm while the former two firms were partnership concerns and that there is no tangible evidence to prove that these two firms were dummy or fictitious firms. He has further contended that the clearances of the goods which were never manufactured by the appellant No. 1 but were rather got manufactured from the job workers after supplying the raw material for trading purposes could not be taken into account for confirmation of duty against it. The Counsel has placed reliance is support of his this contention on the ratio of law laid down in Surindra Engineering Co. Ltd. and Shri H.S. Ahluwalia v. CCE, Chandigarh-II, 2003 (89) ECC 673.
5. On the other hand the learned SDR has reiterated the correctness of the impugned order.
6. We have heard both the sides. So far as clubbing of the clearances for the period in dispute of the firm appellant No. 1 with the other 2 above-said firms is concerned, the same in our view, could not be legally done by the adjudicating authority. The appellant No. 1 is a proprietorship concern of Somesh Satish Malik. It is in fact, no firm in the eyes of law, because for constituting a firm under the law there has to be two or more partners; a single man cannot constitute firm under the Partnership Act. Therefore, appellant No. 1 cannot be legally termed as a firm having any legal entity.
7. The firm Pioneer Hardware Industries, as detailed above, had 3 partners and Somesh Satish Malik was only one of the partners. Copy of the partnership deed of this firm is dated 20.5.1999. This firm was engaged in the trading and manufacture of hardware items. However, this firm stood dissolved on 16.7.2001 and dissolution deed was executed as is evident from the copy of that deed. There is no evidence on the record to prove that this firm was floated by Somesh Satish Malik and other partners were only non-existent or dummy partners and that the firm was financed by the Somesh Satish Malik alone in carrying out the manufacturing and trading activities. After dissolution of this firm in July 2001 its previous clearances could not be legally added to the clearances of the firm appellant No. 1, especially when it is not the case of the Department that the said firm was only a dummy firm on papers.
8. Similarly, firm appellant No. 2 is also a partnership firm and Somesh Satish Malik is only one of its partners as detailed above. This firm is engaged in the trading and manufacturing of watch cases. Its activities are thus different than the one being carried out by Somesh Satish Malik individually as a proprietor of firm appellant No. 1. There is no evidence on the record to prove the flow-back of money between the two. The fact that both these firms are being run from the same premises after putting a partition, is no ground to presume that the firm appellant No. 2 is a dummy or fictitious firm. It is rather a partnership firm carrying on independent trading and manufacturing activities of watch cases. Therefore, the clearances of this firm could not be legally added to that of the firm appellant No. 1. The impugned order of the Commissioner in this regard cannot be thus legally sustained.
9. There is ample evidence on the record to prove that the firm appellant No. 1 had been getting the goods manufactured on job work basis from outside. It is quite evident from the testimony of Manager of the firm that it did not had the capacity to making the casting for certain type of plated hardware articles. For the process of buffing, coating, finishing etc, the firm was dependent upon another partnership firm, Sumcon Auto Industries, while for processing of plating, the buffed die cast goods were sent, to M/s. Khodiyar Electroplating and M/s. Radhe Metals. The stainless steel hardware articles were purchased by the firm appellant No. 1 from outside independent concern, M/s. Jai Kishan Industries. All these facts are quite evident from the statement of the witnesses recorded and evidence brought on record. The fact that the raw material was supplied to the job workers by firm appellant No. 1 could not be made the basis for holding it as manufacturer of those goods. The manufacturers were the job workers. In this context, we are fortfied by the ratio of law laid down in Surindra Engg. Co. Ltd. v. CCE, Chandigarh, 2003 (89) ECC 673 referred by the Counsel wherein it has been relied “that the supplier of raw material does not become a manufacturer by merely supplying the raw material or getting the goods manufactured according to his drawings and specifications.” Therefore, the duty demand in respect of those goods could only be raised from the job workers and not from the firm appellant No. 1 being not the manufacturer.
10. Similarly from the evidence on record, it is evident that the die casting of watch cases had been got done by the firm appellant No. 2 from M/s. Diameco Engineering and turning, while buffing work from M/s. Mavjibhai and plating from a job worker M/s. Khodiyar Electroplating. Therefore, the goods got manufactured by appellant No. 2 from these job workers could not be said to had been manufactured by this firm so as to club the clearances of the same with the clearances of the goods, manufactured by it. The goods procured by both the appellants from the job workers could not be held to had been manufactured by them so as to saddle them with the duty demand.
11. There is also no tangible evidence to establish that there was any mala fide non-accountal of the goods by firm appellant No. 2. No shortage of inputs or finished goods had been detected. It is not the case of the Department that certain goods were in the process of loading in the truck without payment of duty when officers visited the premises. The goods were manufactured by the firm appellant No. 2 out of the duty paid inputs and the same were duly entered in the record. For the goods got manufactured from the job workers, the firm had produced the invoices and this evidence has been wrongly not taken into account by the adjudicating authority.
12. No case against the appellant for clandestine removal of the goods has been made out. It is also difficult to accept that the appellant No. 1 had any mala fide intention to conceal the true facts about trading and manufacturing activities when they were entitled to avail the benefit of the modvat scheme. In this context, the observations of the Apex Court in Amco Batteries v. CCE, 2003 (86) ECC 4 (SC) can be read with advantages wherein it has been observed that when the manufacturer was entitled to get the benefit of the modvat credit, there was no justifiable reason for him to suppress the facts.
13. In the light of the discussion made above, the impugned order is set aside. The appeals of the appellants are allowed with conseqential relief if any permissible under the law.