P. NATARAJAN, PROP. JOTHI PRABHA Vs. CCE

JUDGEMENT

(1.) All these four appeals are directed against the order in Original SI No. 59/94 dated 18.7.1994 passed by the Commissioner of Central Excise, Coimbatore) by which the Commissioner has ordered clubbing of the clearances of all the other units, and confirmed a duty demand of Rs 17,10,073/ - on the proprietor of M/s Jothiprabha Industries, Coimbatore, under the proviso to Section 11A(1) of the CE Act, 1944,. He has also confirmed a duty of Rs 5,48,975.49 on the 1209 wet grinders clandestinely removed, under the proviso to Section 11A(1) of the Act, besides imposing consolidated penalty of Rs. 2,00,000/ - on P. Natarajan, proprietor of M/s Jothiprabha Industries under Rule ((2), 173 and 226 of the CE Rules, 1944. He has also confiscated 16 Nos of Wet Grinders seized from M/s Wash House equipments and 4 Nos from M/s Swathi Equipments under Rule 173Q of the CER, 1944 with option to redeem the same on payment of fine of Rs. 1000/ - each. He has also confiscated 69 Wet Grinders seized from M/s Dynamic Marketing Agencies, who are not in appeal before us, under Rule 173Q with option to redeem the same on payment of fine of Rs 25,000/ - besides imposing penalty of Rs 1000/ - on them under Rule 209A of the CER.

(2.) Brief facts of the case are that on the basis of intelligence, officers of the Headquarters, Preventive, Coimbatore along with other officers conducted searches at the factory premises as well as residential premises of the appellants herein and also at the premises of one M/s Mani Equipment, M/s Multi Commercial Traders and M/s Dynamic Marketing Agencies. Searches were also conducted at the units of M/s Dheen and Sons, Pune who were having dealing with the above appellants. All the above appellants are engaged in the manufacture of wet grinders. M/s Wash House Equipments Ltd. (M/s WHE for short) also manufacture washing machines. All the above units have SSI certificates and have filed necessary declaration with the Central Excise, Department for availing exemption in terms of Notification No. 11/CE -88 dated. Shri P. Natrajan is the proprietor of M/s Jothiprabha Industries (M/s JPI for short). He is also the power of attorney holder for all other units. The partners of all other units are very close relatives of Shri P. Natarajan. It was found on search of the factory premises of the appellants that only M/s JPI were fully equipped with machinery required for manufacture of wet grinders and the other units were deficient of machinery for the manufacture of wet grinders. It was also found during the search that M/s JPI received raw materials from other units and manufacturing activities were carried out in the other units without any documents. M/s WHE were also found manufacturing parts of wet grinders without any documents. 16 Numbers of wet grinders fitted with electric motor having brand name of "Jothiprabha" were found in the premises of M/s WHE and the power of attorney holder could not satisfactorily explain or produce any document in respect of these goods. Similarly four numbers of wet grinders were also found in the premises of M/s Swathi Equipments (M/s SE for short) and out of this, two were found fitted with the brand name of "Jothiprabha" and fitted with the motors of Swathi and Wash House equipments. In the other two grinders one was found fitted with Electric motor of Jothiprabha and other one without the brand name of any one. The officers also searched the premises of M/s Mani Equipments, whose proprietor is Shri Manikandan. Shri Natarajan, is the power of attorney holder of this Unit also. Search of the residential premises of P. Natarajan, Proprietor of M/s JPI resulted in seizure of some documents and private accounts pertaining to illicit removal of wet grinders and motors and also some name plates of various brand names. Search of the residential premises of M/s Wash House Equipments (M/s WHE) one of the appellants herein, did not result in recovery of any incriminating documents. The officers also searched the business premises of various other Commercial Traders such as M/s Dynamic Marketing Agencies, Belgaum and found wet grinders, washing machines and motors manufactured by M/s JPI, M/s WHE and M/s PE and M/s SE therein. M/s Dynamic Marketing Agencies could not produce any document or proof evidencing payment of central Excise duty for 69 wet grinders and hence the same were subsequently seized on 5.5.1992. Officers conducted investigations with suppliers of raw materials at Coimbatore, and recovered documents for the supplies made to M/s JPI and the other units. Statements were also recorded from the Shri P. Natarajan, proprietor of M/s JPI on three occasions. Statements were also recorded from various other persons such as partners of other appellants herein and also employees of Traders who were alleged to have purchased wet grinders from the appellants. In the above background show cause notice was issued to all the appellants herein and also to various dealers in wet grinders and the show cause notice culminated in the order of adjudication passed by the Commissioner as noted above. Aggrieved by the said order, the appellants have filed these appeals.

(3.) Shri PS Raman, learned Counsel appeared for all the appellants and the appeals were finally heard on 15.7.2003 and the order was reserved. After the hearing was over, Shri Rajaram, R. Advocate of the M/s Raman Associates, vide his letter received by the Registry on 23 July 2003 submitted copies of various case laws in support of the appellants and these case laws along with the covering letter have been placed in the file as per the orders of the Members in the Noting sheet, dated 24.7.2003. Shri Raman, learned Counsel referred to the grounds of appeal in appeal No. E/5401/1994) filed by P. Natarajan, Proprietor M/s JPI, (Appeal No. E/5401/1994) and submitted that the impugned order has fastened the entire liability on the appellant herein and has dropped even penalty proceedings against the others and the impugned order is not consistent with the allegations made in the show cause notice inasmuch as duty has been proposed to be demanded from all the appellants herein while it has been confirmed on the appellant. He has submitted that all the appellants have replied to the show cause notice stating that they were not dummy units and they were capable of manufacturing wet grinders and in fact they had manufactured the goods in question. He has pleaded that clubbing the clearances of all the other units was totally unwarranted. He has also contested the classification adopted by the lower authority in classifying the goods. According to him, wet grinders are classifiable under heading No. 8479 instead of 8509 inasmuch as wet grinders are to be classified as machinery and mechanical appliances having individual functions, not specified or included elsewhere in Chapter 84, not specified or included elsewhere in Chapter of the CETA. His contention is that Wet grinder is used for making pasty for preparation of 'Idly' and it falls outside the scope of heading 8509 and it has to be classified as 'machinery and mechanical appliances having individual functions, not specified or included elsewhere in Chapter 84 of the CETA. 3.2 He has further pleaded that all the appellants are SSI Units having their own premises and are separately registered under the Sales Tax Act and the Income Tax Act and necessary declarations have also been filed under Notification No. 11/88 dated 15.4.1988 and there is separate balance sheets for all the units and all the Units are equipped with the machinery required for the manufacture of the goods in question and were capable of manufacturing the goods in question. He has further pleaded that simply because Shri P. Natarajan looked after the affairs of the other appellants and he was the power of attorney holder of the other appellants, that cannot be reason to hold that the other units were dummy units. He has pleaded that P. Natarajan has only lent a helping hand to their family members in running the affairs of the company and the other units are owned by his family members and the law does not prohibit that family members cannot undertake and run the same type of activity. He has further pleaded that there was no financial flow back among the various units. Further, there is neither any allegation in the show cause notice nor in the finding reached by the lower authority that the said Natarajan was the person getting financial flow back from the profits etc., nor has he enjoyed the fruits of the other units. He vehemently argued that when the units are in fact in existence, how can it be concluded that they are dummy unit? The learned Counsel has also invited our attention to the following case laws in support of his plea for setting aside the order: