ELECON LTD Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellants are aggrieved with the Order -in -Original at 16.2.85 passed by Additional Collector of Central Excise, Meerut. By this order, the Id. Addl. Collector has confirred duty amount of Rs. 51,891.84 on aluminium strips and Rs. 18,144 on paper covered aluminium strips. He has also confirmed out demand on 4732.420 kgs., of copper strips besides demanding interest at the rate of 17.5%. He has also imposed an penalty of Rs. 50,000 under Rule 173Q of the Central Excise Rules, 1944. The seized goods were directed to be released on payment of fine of Rs. 5,000. The facts of the case are that on 1.5.84, the Central Excise Officers visited the factory of M/s. Elecon, Partapur, Meerut and found the party engaged in the manufactue of aluminium strips (T.I.27) and paper covered aluminium strips (Conductors) (T.I. 68) without having obtained a Central Excise licence. They had only one Central Excise licence for the manufacture of copper strips falling under Item 26A. Scrutiny of the records of the factory revealed that the value of paper covers copper strips cleared from the factory exceeded Rs. 40 lakhs during the preceding financial year, 1983 -84. The assessee agrees to this fact in writing. On physical verification of stocks, one cane of fully manufactured paper covered aluminium strips was found stored in the garage of the factory in the rear and another such cane was found stored in the manufacturing section. Four coils of bar aluminium wire rod and two coils of bare aluminium strips were found stored in the factory. On demand, the assessee failed to produce Central Excise licence for the manufacture of aluminium strips and paper covered aluminium strips (conductors). All 99 kgs. of double paper covered aluminium strips (conductors) in two coils, 171.500 kgs. of aluminium wire rod in four coils and 93.900 kgs. of aluminium strips in two coils were seized under the reasonable belief that the same were liable to confiscation. Scrutiny of the papers contained in the file recovered from the factory indicated that M/s. Elecon received aluminium wire rods for fabrication in the name of M/s. Power Insulators at M/s. Elecon's, Partapur address. Firstly, they manufactured aluminium strips out of aluminium wire rods received and then subjected the same to the process of paper covering. They manufactured 4929.520 kgs. of copper strips and 6048 kgs. of aluminium strips and subjected the same to paper covering process between March '82 and April '84 at M/s. Elecon, Partapur and cleared the same from their factory in an irregular manner as per the chart enclosed with the show -cause notice. Vide C. No. IV -CE (9) CF/163/84/3851 at 8.10.84, the Asstt. Collector (Prev.) issued a show -cause notice to M/s. Elecon wherein the contravention of Section 6 of the Centrtal Excise & Salt Act, 1944 read with Rule 174 and of Rules 9(1), 52A, 53, 173G and 173F of the Central Excise Rules, 1944 was alleged and M/s. Elecon were asked to show -cause why a penalty should not be imposed on them under Rule 173Q of the Central Excise Rules, 1944, why 93.900 kgs. of aluminium strips, 99 kgs, of paper covered aluminium strips (conductors ) and 171.500 kgs. of aluminium wire rods should not be confiscated under Rule 173Q of the said rules and why duty amounting to Rs. 3796.16 involved on 4929.520 kgs. of copper strips and Rs. 51,891.84 involved on 6048 kgs. of aluminium strips and Rs. 18,144 involved on the paper covered aluminium strips weighing 6048 kgs (total duty Rs. 73,831.94) should not be demanded from them under Rule 9(2) of the Central Excise Rules, 1944.

(2.) THE appellants have denied that they are engaged in the manufacture of aluminium strips and paper covered aluminium strips. They also denied that they had received aluminium wire rods for fabrication in the name of M/s. Power Insulators or that they manufactured aluminium strips out of such rods or that they undertook the paper covering of 6048 kgs. of such strips from March '82 to April '84. As regards the details of job bills issued as given in the charge enclosed with show -cause notice, they had given various explanations inasmuch as the few entries in several pages of the file seized by the Department. They denied the entries in those bills. Likewise, they have explained regarding other entries also. They also explained with regard to the challans issued by the other parties to them. The Ld. Collector has taken into consideration each and every plea made by them and had recorded a detailed finding. In the findings, he has discussed the reason as to why their explanation is not sustainable and how there are several contradictions and how pleas cannot be accepted. He has held that the presence of papers in the name of M/s. Power Insulators 189, Thapar Nagar, Meerut at the premises in Industrial Estate, Partapur, Meerut (which was the declared premises for assessee) further shows that the documents were falsified in the name of M/s. Power Insulators to conceal a part of transactions undertaken by the assessee with a view to evading Central Excise duty. He has also held that it is significant to note that a large number of papers in the said file are on a letter pad in the name of M/s. Power Insulators and there is no indication whatsoever on such documents that their office was located at B -12, Partapur Industrial Estate, Meerut which were the same premises which housed M/s. Elecon's factory, the assessee. He has also held that it is also noteworthy that in the letter pad of M/s. Elecon available at page 3 of the said file the office of M/s. Elecon has been shown at 189, Thapar Nagar, Street No. 5, Meerut. Therefore, in the circumstances when even M/s. Elecon's office is shown at Thapar Nagar, Meerut it is just not believable that M/s. Power Insulators which had no unit in Partapur Industrial Estate, Meerut could have their office at the factory of M/s. Elecon at Partapur Industrial Estate, Meerut. He has held that such state of affairs betrays mala fides on the part of the respondent party and proves that their intention was to hide certain transactions of the assessee under the name of M/s. Power Insulators, Thapar Nagar, Meerut in order to avoid the ambit of Central Excise Duty. He has also observed that the Letter dt. 21.2.84 from M/s. Sai Electricals, Meerut at page 15 of the said file purports to place an order for supply of aluminium strips and while originally the letter was addressed to M/s. Power Insulators, there is an interpolation in ink giving the address of Industrial Estate, Partapur. This also shows that the actual manufacturing work in respect of aluminium strips was done at Industrial Estate, Partapur where the factory of M/s. Elecon and not of M/s. Power Insulators was located. Likewise, the Ld. Collector has discussed various aspects of the matter and has concluded that there is no satisfactory explanation as to why such letters including those wherewith raw materials were sent by customers were recovered from the factory of assessee and why should the customers address such other concerns by giving the address of the assessee at Partapur. He has also found that many of the documents in the said file as recovered from the assessee which are in the name of M/s. Power Insulators. He has held that it is noteworthy that no relatable account of M/s. Power Insulators have been shown to est blish a nexus between the manufacturing activity of M/s. Power Insulators at Thapai Nagar, Meerut with the said documents recovered in the said file from the assessee. He has held that even when the Central Excise Officers contracted Smt. Nirmal Jain, Proprietor of M/s. Power Insulators, Thapar Nagar, Meerut on 2.5.84 and recorded her statement, she failed to show or even allude to any account or records of M/s. Power Insulators which could be relatable to the documents in the name of M/s. Power Insulators which were contained in the said file recovered from the assessee. Ld. Additional Collector has held that no evidence has come forth to indicate that the transactions described in the documents contained in the said file recovered from M/s. Elecon related to the manufacturing activity by M/s. Power Insulators. He has noted the statement dt. 21.5.84 of Shri B.K. Jain on behalf of M/s. Sai Electricals (one of the customers) mentions that a person comes and collects the material for manufacture and M/s. Sai Electricals did not know as to actually where such material was taken for fabrication and manufacture. Therefore, Ld. Additional Collector has held that this statement further mentions that the customer was not aware as to whether the manufacturing activity was done at Partapur or at Thapar Nagar. He has held that despite their declared ignorance of the place of manufacture, M/s. Sai Electricals had been sending the materials for fabrication to the address of Industrial Estate,Partapur, Meerut which is evidenced from challans of M/s. Sai Electricals dt. 22.2.84 and 23.3.84 (available at pages 16 and 35 of the said file). Therefore, he has concluded that these challans bear an eloquent testimony to the effect that all materials for fabrication from customers were received at the factory of M/s. Elecon in Partapur Industrial Estate, Meerut. He has also recorded that M/s. Sai Electricals are located at Victoria Park in Meerut City and M/s. Power Insulators are also located in Thapar Nagar, Meerut City and both the said premises are within the main city at a small distance from each other. Therefore, he has held that it is not explained as to why M/s. Sai Electricals addressed their challans for supply of raw materials for fabrication to the Industrial Estate, Partapur which far away from Meerut City proper. Likewise, Ld. Collector has discussed in great detail each and every plea taken by them and found the same to be not acceptable. It is therefore not required for us to extract the various findings given by the Addl. Collector but it is sufficient to show a view of the findings recorded by Addl. Collector.

(3.) WE have heard Shri Bipin, Ld. Advocate for the appellant and Shri K.K. Jha, Ld. SDR for the Revenue.