THERMOTECH AND PARDEEP KHANNA Vs. CCE

JUDGEMENT

(1.) Both these appeals have arisen out of common Order No. 6/99 (Adj) dated 11.8.99 passed by the Commissioner Central Excise under which Central Excise duty amounting to Rs. 58,39,070 has been demanded from M/s. Thermotech, besides imposing penalty of equivalent amount. A penalty of Rs. 5 lakhs has also been imposed on Shri Pardeep Khanna.

(2.) Shri Naveen Mullick, learned Advocate, submitted that the Appellant No. 1, a proprietorship unit of Mrs. Neera Khanna, manufactured air conditioners, coolers, heat convertors, transformers and washing machines; that the manufacturing activities were started in 1990 and the Appellant No. 1 was availing of the SSI exemption Notification; that they were also undertaking the trading activities in similar goods from the different premises; that till 31.3.1994, they had been manufacturing their goods under the brand name 'Thermotech' and Thermoking'; that they stopped manufacturing activities since March 1995 but the trading activities remained continued till March/April 1996. He further submitted that the Central Excise Officer visited the factory premises of M/s. Thermoking, proprietorship concern of Pardeep Khanna, and M/s. Flevel Intentional, a partnership firm of Pradeep Khanna, and his wife Neera Khanna; that both these units were engaged in the manufacture of electrical appliances; the Officers found the records pertaining to the Appellants; that the Department, after conducing enquiries from their buyers and Sales Tax Department issued a show cause notice dated 30.11.1998 for demanding duty amounting to Rs. 77.04,883 for the period from 1993 -94 to 1995 -96 on the ground that they had clandestinely removed the goods; that the Annexures A, B and C to the show cause notice were prepared on the basis of parallel invoices; that the Commissioner, under the impugned Order dropped the demand raised in Annexure 'D' and 'E' but confirmed the demand of Central Excise duty Rs. 58,39,070 after extending reduction of duty on duty -cum -sale price and imposed penalty of equivalent amount on Appellant No. 1 and a penalty of Rs. 5 lakh on Appellant No. 2.

(3.) The learned Advocate also submitted that the definition of term 'Manufacture' in U. P. Sales Tax Act is different from the definition Manufacture in the Central Excise Act; that as per U.P Sales Tax Act, "Manufacture means producing, making mining collecting, extracting, altering ornamenting finishing or otherwise processing, treating or adapting any goods but does not include such manufacture or manufacturing processes as may be prescribed"; that where each process or treatment on the goods may not amount to manufacture under Section 2(f) of the Central Excise Act, the same shall be considered and treated as manufacture under the provisions of U.P. Sales Tax Act; that on the appliances being purchased by them from the open market, they had undertaken the processes like affixing of brand name, painting etc, which amounted to manufacture in terms of U.P. Sales Tax Act and as such reference of Sales Tax Returns or the invoices carrying the O.C Stamp could not establish that all such goods in fact had been manufactured under Section 2(f) of the Central Excise Act; that accordingly the allegation of clandestine removal based on Sales Tax Returns could not form the basis for demanding Central Excise duty. He also mentioned that they did not have the capacity and infrastructure to manufacture such a huge quantity of the goods; that they had only five to six workers, working in one shift and having only 2 kVA power as certified by electricity department; that it is not understood as to how the Commissioner had still considered about their having electric connection of 5 kVA; that it appears that the firm taking the premises in 1997, got the electric connection converted to 5kVA.