Decided on July 04,1991



V.P. Gulati, Member (T) - (1.) THIS appeal is directed against the order of the Additional Collector of Central Excise, Belgaum dated 26 -7 -1989. The appellants have been called upon to pay a duty of Rs. 47,534/10 for the period 29 -7 -1987 to 1 -11 -1988 invoking the longer period of limitation and a penalty of Rs. 50,000 is also - imposed on them in terms of the impugned order. The duty has been demanded from the appellants for the reason that the goods manufactured in the appellant's factory have been shown to have been cleared in the name of another firm belonging to the same Group viz. M/s. Shankar Construction Company. The Learned Advocate for the appellants pleaded that the two companies namely M/s. Shankar Traders, the appellants herein and M/s. Shankar Construction Co. are two independent legal entities and were engaged in separate manufacturing activities. M/s. Shankar Traders, it was pleaded, were manufacturing Pre -stressed Cement Concrete (P.C.C) poles and M/s. Shankar Construction Co. were manufacturing R.C.C. Poles. He pleaded that Shankar Traders had entered into a lease agreement with M/s. Shankar Construction Co. for utilisation of a portion of their factory primarily for the manufacture of the RCC Poles and that they had a separate power meter. He, however, conceded that part of the facilities Shankar Traders were utilised by Shankar Construction Company for their manufacturing activity. He has pleaded that for subsequent years M/s. Shankar Construction Co. and Shankar Traders have been treated as separate entities and each one of them is being given the benefit of exemption of Notification 175/86. In this background he has pleaded that the Department could have no grievance that the appellants were manufacturing the goods of other company in their own premises. The Ld. Advocate pleaded that under similar circumstances in the case of "Kinjal Electricals v. Collector of C. Ex.", reported in 1989 (43) E.L.T. 327 (Tri.) the Special Bench of the Tribunal has held that the benefit of the notification would be available to both the units. He has further pleaded that the longer period of limitation could not be invoked as the appellants were under the bonafide impression that they were eligible for the benefit of Notification 175/86. In this connection he pointed out that M/s. Shankar Construction Co. have filed a declaration under Notification 1/78 for exemption from licensing control and had given their address therein as 'Survey 68DI' Shankar Traders, he has pleaded, have also given their address as '68D'. On a query from the bench he, however, clarified that so far as the town panchayat is concerned no door number as '68DI' has been given and this number has been given on their own for the reason that part of the premises was being taken on lease basis from Shankar Construction Co. by Shankar Traders. He has pleaded that inasmuch as Shankar Construction Co. on record had revealed their manufacturing activities to the Department, no mala fide can be attributed to them. He has cited the ruling of the Hon'ble Supreme Court in the case of Padmini Products v. Collector of C. Ex., reported in 1989 (43) E.L.T. 195 (SC) and he has pleaded that in that case also the manufacturers were under a bona fide impression, that they were eligible to the benefit of a particular notification and the Supreme Court, taking note of the bona fides of the appellants, held that the longer period of limitation could not be enforced.
(2.) HEARD Shri P. Sundararaju, Ld. SDR.
(3.) WE observe that Shri Basavaraj who is the Managing Partner of both the firms in his statement had admitted that the manufacturing activities Were carried on in the same premises and that, they had the intention to segregate the premises with two separate portions for their manufacturing activities when the Supdt. visited the factory and found manufacturing was being carried out in the same premises. In this connection the findings of the lower authority are reproduced below for convenience of reference - "M/s. Shankar Construction Co. has no premises of its own, is claimed to manufacture RCC Poles in the premises of M/s. Shankar Traders on lease basis, has no office, has no electricity meter and even the work is also managed by the working partner of M/s. Shankar Traders. As discussed above, M/s. Shankar Construction Co. also belongs to some group of persons who are the owners of M/s. Shankar Traders. Thus, M/s. Shankar Construction Co, may be an independent company on paper, but in reality, no such separate manufacturing unit exists. M/s. Shankar Traders have accepted that all the goods cleared in the name of M/s. Shankar Construction Co. have been manufactured in the premises of M/s. Shankar Traders only. They have also accepted that they had intention to separate the premises of both the units, but due to certain reasons could not do so before the Supdt. (Prev -I), visit to their premises. Whatsoever M/s. Shankar Traders have to say in this regard, but no reasonable person can believe that any independent company can function and manufacture in this way in the premises of another company being fully dependent on them and carry on their business through their premises and under the management of the working partner of that company." The Ld. Advocate is not able to produce any evidence before us that in fact two separate units existed in the same premises. On the contrary it has been admitted that the facilities of Shankar Traders were being utilised by M/s. Shankar Construction Co. and the evidence on record clearly shows that manufacture of R.C.C. Poles by Shankar Construction Company was done in the factory premises of Shankar Traders. There is no evidence that under the Factories Act two separate units had been recognised under the same door number. In view of this, it has to be held that the goods manufactured in the name of M/s. Shankar Construction Co. were being manufactured in the same factory premises as that of Shankar Traders. We, therefore, uphold the finding of the lower authority in this regard. In regard to the limitation, we observe that M/s. Shankar Construction Co. in their declaration had shown the door no. which was not in existence at all. There is no indication in the declaration filed that M/s. Shankar Construction Co. were utilising the manufacturing facilities of the appellant -company and there is nothing on record to show that there was any manufacturing activities of Shankar Construction outside the manufacturing premises of M/s. Shankar Traders which was being utilised by them. In fact the indication of the address in the declaration filed was misleading. There is no reason as to why the appellants should have shown an address which was non -existent in the town panchayat records. The Ld. Advocate has admitted that in fact in none of the official records the door No. 68DI as such exists and this was purely the appellant's own creation. The lease deed entered is also prima facie, not acceptable, since the premises indicating the door no. was not in existence and no demarcation in regard to the factory premises is shown in the lease deed as such. In view of the above we hold that the appellants had suppressed the information from the Department for the relevant Central Excise purposes and the lower authority was right in invoking the longer period. The ratio of the discussion cited earlier apply to the facts of this case. We, therefore, confirm the duty demanded in terms of the impugned order. We, however, observe that the appellants are a small scale unit and the duty evaded is of the order of Rs. 47,534.10. In the facts and circumstances of the case, we therefore hold that the ends of justice would be served if the penalty is reduced to Rs,10,000/ - (Rs. ten thousand) and we order accordingly.;

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