JUDGMENT
Pendse, J.
1. These two petitions filed under Article 226 of the Constitution of India can be conveniently disposed of by common judgment as both the petitions are directed against the common order dated June 10, 1986 passed by the Collector of Central Excises and Customs, Pune. The facts giving rise to passing of the impugned order are as follows.
2. Swadeshi Dyeing & Bleaching Mills Pvt. Ltd. Company is registered under the companies Act, 1956 and carries on business of textile processing at Ichalkaranji, District Kolhapur. The Private Limited Company is controlled by the family of Bohra and the three directors are Madanlal Mahanlal Bohra, his son Shreeniwas Madanlal Bohra and wife Gitabai Madanlal Bohra, while one m,ore director is Ghanshamdas Harumandas Purohit. the company is set up in the year 1984 and is a power-operated unit carrying on the work of processing. the company holds L-4 licence from 1984. The Company receives the goods for processing from various customers and the processing is for giving finishing touch to the fabrics. The cotton fabric is received by the Company for the purpose of bleaching and merceriwing and thereafter the bleached and mercerised fabric is processed for stentering, calendering, folding, balling etc.
Silver processors is a partnership concern consisting of six partners and they are Rajendra Madanlal Bohra, Parashottam Madanlal Bohra, Ramakant Ghanshamdas Purohit and three members from the family of Padeale. This partnership concern was set up for carrying out non- power operated unit at Ichalkaranji and the partnership concern owns a plot and building in the industrial area at Ichalkaranji. there is hardly any doubt that both the Private Limited Company and the partnership firm is managed by the same group.
3. The Central Government in exercise of powers conferred by Rule 8(1) of the Central Excise Rules, 1944 read with sub-section (3) of the Additional Duties of Excise Act, 1957 published notification dated April 20, 1982 exempting cotton fabrics falling under sub-item (1) of Item 19 of the First Schedule to the Central Excises and Salt Act. The exemption was available provided the cotton fabric is processed without the aid of power or steam, and the exemption was total. The notification recites that nothing contained in the notification shall apply in respect of clearances of cotton fabrics –
“(a) which are subjected to the process of bleaching with the aid of machines, effected during a financial year –
(i) if the quantity of such bleached cotton fabrics cleared, if any, for home consumption during the preceding financial year by or on behalf of a manufacture from one or more factories or from any factory by or on behalf of one or more manufactures, had exceeded thirty-six lakh square meters; or
(ii) if the quantity of such bleached cotton fabrics cleared for home consumption on any day in the financial year by or on behalf of a manufacture from one or more factories, or from by or on behalf of one or more manufacturers, exceeds fifteen thousand square meters;
(b) which are subjected to the process of printing with the aid of machines”.
The Central Government published another notification dated November 8, 1982, being Notification No. 253/82 exempting cotton fabrics when subjected to any process or processes specified in the table annexed from the whole of the duty of excise leviable thereon. The table recites, inter alia, to the process of calendering, stentering etc. The exemption was not available –
(i) if unprocessed cotton fabrics, falling under sub-item i(a) of the said Item No. 19, on which the duty of excise is leviable thereon under any of the aforesaid two Acts, either in whole or in part, are subjected to any process or processes specified in the said table, within the factory in which the said unprocesed fabrics have been produced; or
(ii) if cotton fabrics, falling under sub-item I of the said Item No. 19, are subjected to any process specified in the said Table within the same factory in which they have been subjected to any process other than the process specified in the table “.
4. On collection of intelligence by the anti-evasion unit of Poona Central Excise Collectorate, a squad visited the factory premises of Swadeshi Dyeing and Silver Processors between September 5 and September 7, 1985. The squad noticed that both the units, which are situated side by side are related to each other and have dealings with each other so as to constitute them as a single unit. The anti-evasion unit secured various documents and also recorded th statements of the directors and partners. On the basis of the evidence collected, it was obvious that both the units, that is Swadeshi Deying and silver Processors are one and the same and the two units are related with each other and manufacture and clear excisable goods without paying duty. The Collector thereupon served show cause notice dated September 20, 1985 on the company and its directors as well as the partnership firm and the partners. The show cause notice alleged that the two units have contravened provisions of Rule 174 read with 173Q(1)(c) of the Central Excise Rules, inasmuch as both the units are engaged in the manufacture of excisable goods by suppressing the fact that they constitute one factory as defined under Section 2(e) of the Act. The show cause notice further charged that during the period from October 1984 to August 1985 the units failed to declare the value of the goods. The show cause notice further claims that M/s. Silver Processors which is claiming to be a non-power operated unit is in fact found to be using power by installing three electric motors in the factory premises. Two units were therefore, directed to show cause why excise duty amounting to Rs. 95,91,489.82 should not be recovered as an escaped duty and penalty. The two units were also directed to show cause as to why L-4 licence granted should not be revoked or suspended. The show cause notice also includes Annexure `A’ which sets out the evidence on which reliance would be placed by the Department at the time of hearing.
5. The tow units through their advocates inspection of the documents and also filed reply denying that the two units constitute the same factory and the modus operandi of spliting the two units was only for the purpose of securing advantage of the notifications. The Collector served Addendum to the show cause notice by pointing out that Silver Processors which claims to be a non-power operated unit had purchased a felt calendering machine in November 1984 and which can work only with the aid of power. the calendering machine was given on rental basis to the private limited company and was subsequently sold.
After giving ample opportunity to the representatives of the two units and after a detailed hearing, the Collector by the impugned order came to the conclusion that the two units constitute a single manufacturing unit, that is the same factory for the purpose of Central Excises and Salt Act. The Collector therefore, held that the concern unit should immediately apply for the licence/amendment of the licence under Rule 174 in respect of the entire premises of the power operated unit and the corresponding nonpower operated unit. The Collector held that the demand for escarpment of duty and the penalty for the period prior to the show cause notice is canceled because the department ought to have found out the modus operandi of the two units and their failure to do so though may not operate as res judicata for levy and recovery of duty from the date of the show cause notice, it would be desirable that levy for the earlier period should not be enforced. Feeling aggrieved by the order of the Collector, both the Private Company and the Partnership firm have filed these two petitions.
6. Shri Desai, learned counsel appearing on behalf of the Department raised preliminary objection to the maintainability of the petitions on the ground that there is efficacious alternate remedy available to the petitioners by filing an appeal before the Appellate Tribunal constituted under Section 35-E of the Act. Shri Kantawala, learned counsel appearing on behalf of the petitioners, did not dispute that the right of appeal is available but submitted that thee petitioners, did not dispute that the right of appeal is available but submitted that the petitioners should not be driven to adopt that remedy after a passage of more than three years. Shri Kantawala submitted that the petitioner would be put to unnecessary expenses if the petitioners are not driven back to file appeal. We made it clear to Shri Kantawala that even though we are inclined to hear the petition on merits, we would not permit the counsel to challenge findings of fact recorded by the Collector. Shri Kantawala stated that the petitioner would raise only question of jurisdiction of the Collector to issue show cause notice and pass th impugned order, and any finding record by the Collector would not be challenged. On this specific assurance we proceeded to hear the petitions.
7. Shri Kantawala submitted that the Collector had no jurisdiction to consture the two exemption notifications and conclude that the two units are one and the same. The learned counsel submitted that the two exemption notifications grant exemption from payment of duty in respect of processes carried out with the aid of power of steam in one case and in other case processes without the aid of power. It was contended that there is nothing wrong for one person to set up two units, one where the process is carried out without the aid of power and the other with the aid of power and it is not permissible for the Collector to conclude that the two units are really composite one and can be termed as “factor” within the definition of the Act. We are unable to accede to the submission of the learned counsel. The expression “factory” has been defined under Section 2(e) of the Act and means any premises including precincts thereof, in which or in any part of which excisable goods other than salt are manufactured. It is necessary to ascertain what was the process carried out in these two units to appreciate the purpose of service of show cause notice on the two units. The customers hand over grey fabrics for the purpose of processing and only the processed fabric has got a salable value. Initially it is necessary to carry out the process of bleaching and mercerising. the process of bleaching and mercerising is carried out by non-power aided unit by hand processing and while the grey fabric is still in wet condition, it is transferred to thee power operated unit for carrying out the process of finishing, calendering, stentering, etc. After completion of these process the fabric is packed and returned back to the customers, and it is only such processed fabric which can be sold in the market. Now perusal of exemption Notification No. 253/82, dated November 8, 1982 makes it clear that if unprocessed cotton fabrics are subjected to any processes specified in the said table, that is calendering or stentering within the factory in which the said unprocessed fabric has been produced, then exemption is not available. In other words the exemption in respect of processes of calendering and stentering is available provided the other process of bleaching and mercerising is not carried out in the same factory. The modus is, therefore, found out by nominally setting up two separate units one for the purpose of bleaching and mercerising while the other for calendering and stentering. The process of bleaching and mercerising does not bring into existence a new article which is of a marketable value, but the wet fabric which has undergone bleaching and mercerising is required to be further processed by calendering and stentering to make it a final product. It is, therefore, obvious that to secure advantage of both the exemption notifications a method is found out to split up the factory into two units, one run by the private limited company while the other by the partnership firm, but both under the control and care of the same group of persons.
8. The Collector in the impugned order has set out number of factors to conclude that the two units really constitute one composite unit or a factory. the premises in which the two units are set up are adjoining to each other. The premises stand in the name of the partnership firm and is alleged to have been leased to the company in June 1985 for a duration of eleven months. the consideration agreed to be paid was Rs. 400/- per month and the same was payable at end of December 1985. The premises were used by the company even prior to this agreement of lease for eleven months. Both the company and the firm was constituted in October 1984. The Collector is therefrom, right in concluding that this alleged agreement to lease by the firm to the company is nothing but a camouflage to indicate that the two units are separate. There is further telltale circumstance to indicate that the two units ar one and the same. The two units spent substantial sum in August 1985 for construction of a compound wall between the area of the two units. It is impossible to believe that a large amount would be spent when the lease to the company is only for a duration of eleven months. Even in spite of construction n of a compound, an opening was left to enable the employees of the two units to travel over and the tankers of the partnership firm are parked in th area which is alleged to have been let out to the company. The common door in the compound wall enables the two units to enjoy th premises of each other. The evidence also established that the electricity was provided by thee partnership firm to the company and there was no material to indicate that charges were paid by the company. The evidence collected by the Collector unmistakably establishes that the partnership firm receives from the customers grey fabric for the purpose of bleaching and mercerising and after that process is over the wet fabric is forwarded to the company for finishing operations like calendering and stentering, folding, dyeing etc. The two units are run by the same family and there is clinching evidence to establish the charge that the setting up of the two units is nothing but a camouflage to secure advantage of the two exemption notifications. That piece of clinching evidence is the fact that the firm, which is a non-power operated unit purchased felt calendering machine which works only with the aid of power. After purchase the same was rented out to the company and after sometime a document was prepared to indicate that the machine was sole to the company. All these factors taken singularly and cumulatively unmistakably establish that setting up of the two units is nothing but an attempt to claim that the two units are separate and are entitled to the advantage of the two exemption notifications. The conclusion of the Collector that the two units are one and the same and the mere preparation of record to indicate that the two units are separate and distinct cannot be accepted, nor can lead to the conclusion that separate processes are carried out in two separate factories is correct. In our judgment, on the strength of the findings recorded by the Collector, the conclusion that the units should apply for a licence or amendment of the licence as required under Rule 174 cannot be faulted with. The order of the Collector does not suffer from any infirmity and the petitions must fail.
9. Accordingly, rule in each of the petition stands discharged with costs.
10. Shri Kantawala applied for continuation of interim relief, Prayer refused.
