POLY RESINS Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) BOTH these appeals are directed against order -in -original No. 13/2000 dated 31 -12 -2000/12 -2 -2001 passed by the Commissioner of Central Excise, Chennai -I, by which the Commissioner has demanded total duty amount of Rs. 66,59,608/ - (Rupees Sixty six lakhs, fifty nine thousand, six hundred and eight) pertaining to different periods as detailed in the show cause notice, under Rule 9 of the CE Rules, 1944 read with proviso to Section 11A(1) of the CE Act, 1944, besides imposing mandatory penalty of Rs. 18,90,559/ - (Rupees Eighteen lakhs, ninety thousand, five hundred and fifty nine) under Section 11AC of the Act apart from imposition of penalty of Rs. 10,00,000/ - (Rupees Ten lakhs) under Rule 173Q of the CE Rules, on the appellants Company. He has also ordered for appropriation of Rs. 6,00,000/ - (Rupees Six lakhs) already paid by the appellants Company, besides imposition of penalty of Rs. 3,00,000/ - (Rupees Three lakhs) on the partner Shri Shabbir D. Bootwala. He has also charged interest under Section 11AB of the Act. While ordering so, he has also allowed the appellants Company to avail the Modvat credit of duty paid on the inputs used in the manufacture of finished product cleared.

(2.) THE brief facts of the case are that appellants M/s. Poly Resins situated at Kodungalyur, Chennai (hereinafter referred to as M/s. PR) who are a partnership concern, are engaged in the manufacture of synthetic Polymers of Vinyl Acetate falling under heading No. 39.05 and Acrylic Polymers falling under heading No. 39.06 of the CETA, 1985. The partners are S/Shri Shabbir D. Bootwala, Shabbir A. Gadly and Flazza Y. Lehri. There is another partnership firm by name M/s. Reliable Corporation (hereinafter referred to as M/s. RC) situated at the same place viz. Kodumgalyur, Chennai who are also engaged in the manufacture of the similar goods. The partners of M/s. PR are Ms. Rubab Bai D. Bootwala, Ms. Batul Bai A. Gadly, Mr. Hyder Bhai Y. Lehari, Mr. Yunus Y. Lehari and Mr. Huzefa S, Bootwala. The goods manufactured by both the above concerns are marketed by M/s. Southern Enterprises. M/s. National Chemical Industries and M/s. Resins and Adhesives. Both M/s. PR and M/s. RC have separate manufacturing premises with separate Central Excise and Sales Tax and Income Tax Registration. On the basis of intelligence the officers of Headquarters Preventive searched the premises of both these units and their marketing firms simultaneously and seized several records and documents under a mahazar. Certain records were also obtained from the respective concerns by way of issue of summons. Synthetic Polymers and Adhesives are manufactured by both the concerns through a process known as Emulsion Polymerisation. Jt was seen from the records that M/s. RC had purchased Purewat Portable Deminerall -ser DM -60 from M/s. Pure Water Systems Pvt. Ltd. under invoice No. PWS/050/88 -89 dated 20 -1 -89 but the same was installed and put into use in the premises of M/s. PR even though initially it was erected and commissioned in the premises of the purchaser i.e. M/s. RC. The service report available with M/s. IEL Mansel Services Ltd. dated 8 -7 -72 available in office machinery file from July 91 to December 93 of M/s. PR vide serial No. 3 of their letter dated 2 -2 -1989 revealed that DM plant purchased by M/s. RC are actually being used by the other unit. The appellants have explained this by stating that transfer of this item is part of the exchange programme between M/s. RC and M/s. PR. Evidence collected by the officers revealed that Metering pump and boiler purchased by M/s. RC was being used in the other premises viz. premises of M/s. PR and this arrangement was only an exchange programme between the two units. One of the partners of M/s. RC viz. Shri Huzefa in his statement dated 23 -7 -98 had stated that metering pumps are not required for the manufacture of synthetic polymers and adhe -sives. Certain finished goods with the brand name of "Super Cryl" of M/s. PR was also found in the premises of M/s. RC on the date of visit of the officers. It was in these circumstances a joint show cause notices No. 11/98 dated 29 -10 -1998 was issued to M/s. PR and M/s. RC and to various partners on the allegation that there was financial flow back between the two concerns by way of sharing manufacturing facilities, fuel, electricity/ raw material, consumables etc. and M/s. PR were required to show cause among other things, why the clearances of both the units should not be clubbed and consequently why differential duty amounting to Rs. 58,57,843/ - should not be demanded from them, besides imposition of penalty under Section 11AC and Rules 173Q and 226 ibid. Partner of M/s. PR Shri Shabbir D. Bootwala and partner of M/s. RC Shri Huzefa were also called upon to explain as to why penalty should not be imposed on them under Rule 209A of the CE Rules, 1944 apart from imposition of penalty and also asking them as to why penalty should not be imposed on the partners. Another show cause bearing No. 12/98 dated 15 -12 -98 was also issued jointly to M/s. PR and M/s. RC demanding duty of Rs. 8,02,065/ - from M/s. PR in terms of Section 11A(1) of the Act, being the differential duty for the goods cleared between the period 1 -6 -98 and 12 -9 -98. Both the show cause notices were decided by the same impugned order as noted above, after considering the reply furnished by the appellants. Aggrieved by the said order the appellants filed these appeals.

(3.) SHRI Arvind P. Datar, learned Counsel appeared for the appellants. He has pleaded that the allegations in the show cause notices was that M/s. RC is only a dummy unit created for the purpose of escaping the duty liability while clearing the goods manufactured by M/s. PR. He invited our attention to para 12 of the show cause notice bearing No. 11/98 dated 29 -10 -98 whereby only M/s. PR has been called upon to show cause to the Commissioner of Central Excise, Chennai -1 Commissionerate. He submitted that M/s. RC should have been put on notice as to why their turn over should not be added to the turn over of the other concern i.e. M/s. PR. He has pleaded that in the show cause notice, though copy has been marked to M/s. RC they have not been specifically called upon to explain as to why their turn over should not be added to the turn over of the other concern i.e. M/s. PR. He has also referred to para 11 of the same show cause notice wherein it is stated that Shri Shabir D. Bootwala, partner of M/s. PR would be liable to penal action under Rule 209 while in para 14 of the said show cause notice Shri S. Husefa, partner of M/s. RC has been asked to show cause as to why penalty should not be imposed on him. The learned Counsel also invited our attention to the order of the Tribunal in the case of Dawn Fireworks Factory and Ors. v. CCE, Madurai reported in 1999 (31) RLT 104 wherein it was held that non issue of show cause notice to all the units whose clearances are proposed to be clubbed vitiates the proceedings. He has also pressed into service the order of the Tribunal in the case of Expo Combines v. CC, Bombay reported in 1995 (75) E.L.T. 513 wherein it was held that mere marking of a copy of SCN without specifically asking the parties to show cause cannot be regarded as show cause notice. He has also invited our attention to the order of the Tribunal in the case of SKN Gas Appliances v. CCE, New Delhi reported in 2000 (120) E.L.T.