HYDERABAD ELECTRODES Vs. COMMISSIONER OF C. EX., HYDERABAD

JUDGEMENT

(1.) IN the impugned Order -in -Original No. 28/99, dated 10 -12 -1999, the learned adjudicating authority demanded a sum of Rs. 80,93,797/ - under Section 11A(1) read with Rule 9(2) of Central Excise Rules, 1944 from M/s. Hyderabad Electrodes for the Welding Electrodes manufactured and cleared during the period from 1991 -92 to 1995 -96. A penalty of Rs. 75,00,000/ - has been levied on M/s. Hyderabad Electrodes under Rule 173Q of the Central Excise Rules, 1944. A sum of Rs. 4,56,709/ - has been demanded from M/s. Standard Electrodes (P) Ltd. under Section 11A(1) of the Central Excise Act, 1944. The goods valued at Rs. 4,50,055/ - seized from M/s. Standard Electrodes (P) Ltd. were held liable to be confiscated under Rule 173Q and Rule 226. A penalty of Rs. 2,00,000/ - was imposed on M/s. Standard Electrodes (P) Ltd. under Rule 173Q of the Central Excise Rules, 1944. An amount of Rs. 2,50,000/ - (Indian currency) seized from residential premises of Shri Kazim Ali, Managing Director of M/s. Hyderabad Electrodes and Managing Director of Standard Electrodes (P) Ltd. was confiscated absolutely under Section 121 of the Customs Act, 1962. A penalty of Rs. 10,00,000/ - was imposed on Shri Kazim Ali under Rule 209 of CER, 1944. The goods valued at Rs. 56,425/ - seized from M/s. Hyderabad Trade Corporation, Secunderabad were held liable for confiscation. A penalty of Rs. 10,000/ - was imposed under Rule 209A of the CER, 1944 on M/s. Hyderabad Trade Corporation. The Goods valued at Rs. 1,42,450/ - seized from M/s. Salman Agencies, Jambagh, Hyderabad were held liable for confiscation. A penalty of Rs. 20,000/ - was imposed on M/s. Salman Agencies under Rule 209A of the CER, 1944. The appellants strongly challenged the impugned order.

(2.) S /Shri. G. Shivadass, learned Advocate and M.S. Rajappa, learned Consultant appeared on behalf of the appellants. Shri L. Narasimha Murthy, learned SDR appeared for the Revenue.

(3.) THE brief facts of the case are as follows. M/s. Hyderabad Electrodes, Hyderabad (hereinafter referred to as M/s. H.E. in short) was started as a partnership firm since 1986 with Shri Kazim Ali and five others as partners. The firm was engaged in the manufacture of Welding Electrodes. This partnership was dissolved with effect from 31 -3 -1995. Afterwards Shri Kazim Ali became the sole proprietor of the M/s. H. E. This unit is defunct from August 1985. M/s. Standard Electrodes (P) Ltd. (hereinafter referred to as M/s. S.E.L. in short) was started in August 1995 with Shri Kazim Ali as the Managing Director. This unit is also engaged in the manufacture of Welding Electrodes. The Department initiated investigations against the appellants during December 1995. During the course of investigations, the Department effected seizure of Welding Electrodes and M.S. wire totally valued at Rs. 4,50,055/ - from the premises of M/s. SEPL. Cash amounting to Rs. 2,50,000/ - was seized from the residence of Shri Kazim Ali. Investigations were conducted with some dealers of the appellants. The Welding Electrodes lying at the premises of the dealers were also seized. A statement of Shri Kazim Ali was recorded on 4 -12 -1995. He stated that the raw materials required for the manufacture of welding electrodes are M.S. wire, Rutile sand and certain other chemicals. The value of the clearance of M/s. H.E. for the year 1992 -93 to 1994 -95 were Rs. 45.5 lakhs and Rs. 60 lakhs respectively. The sales of rutile sand are controlled by the Department of Atomic Energy. The appellants applied for and obtained allotments of Rutile sand which was duly supplied to them by M/s. Indian Rare Earths. As per the information furnished by M/s. Indian Rare Earths, the appellants were found to have purchased the following quantities of Rutile sand from M/s. Indian Rare Earths.