1984 (2) TMI 336 - AT - Central Excise

Issues Involved:

1. Whether the term "excisable goods" will not cover exempted goods.
2. Whether the value of the exempted goods cannot be included for the purpose of determining the annual turnover of Rupees Thirty lakhs.
3. Whether the appellants manufactured the G.I. Buckets without the aid of power and are entitled to the benefit of Exemption Notification No. 179/77, dated 18-7-1977.

Issue-wise Detailed Analysis:

1. Whether the term "excisable goods" will not cover exempted goods:

Section 2(d) of the Central Excises and Salt Act, 1944 defines "excisable goods" as goods specified under the First Schedule as being subject to duty of excise. The appellants contended that excisable goods do not cover exempted goods. However, the Tribunal found that the goods in dispute were indeed excisable as they were mentioned in the First Schedule and subject to a duty of excise. The issuance of Exemption Notifications does not make these goods non-excisable. The Madras High Court in Tamil Nadu (Madras State) Handloom Weavers Co-operative Society Ltd. v. Asstt. Collector of Central Excise, Erode (1978 E.L.T. J 57) and the Delhi High Court in Vishal Andhra Industries v. Union of India (1983 E.L.T. 2265) held that once goods are exempted from excise duty, they do not cease to be excisable goods. Therefore, the Tribunal rejected the appellants' contention.

2. Whether the value of the exempted goods cannot be included for the purpose of determining the annual turnover of Rupees Thirty lakhs:

The appellants relied on a Division Bench decision of the Patna High Court in Madhav Mills (Pvt.) Ltd. v. Collector of Central Excise and Others (1982 ECR 218D), which held that the value of exempted goods should not be included for determining the turnover of Rs. 30 lakhs. However, the Tribunal found this decision unhelpful due to authoritative pronouncements by the Delhi High Court in Vishal Andhra Industries and the Madras High Court in Tamil Nadu (Madras State) Handloom Weavers Co-operative Society Ltd., which held that exempted goods do not become non-excisable and should be included for determining the turnover. The Tribunal concluded that the appellants failed to prove that their total value of excisable goods cleared did not exceed Rs. 30 lakhs and thus could not claim exemption under Notification No. 176/77.

3. Whether the appellants manufactured the G.I. Buckets without the aid of power and are entitled to the benefit of Exemption Notification No. 179/77, dated 18-7-1977:

The appellants claimed that G.I. Buckets were manufactured without the aid of power, supported by affidavits from Shri Satyanarayan Singh and Shri R.K. Agarwal. However, the Tribunal found these affidavits unreliable. The affidavit of Shri R.K. Agarwal was dated much later than the relevant period, and Shri Satyanarayan Singh's affidavit was inconsistent with the facts on record. The Tribunal noted that the factory was registered under the Factories Act and used power for manufacturing other products. It was deemed unreasonable to believe that power was not used for manufacturing G.I. Buckets. Consequently, the Tribunal held that the G.I. Buckets were manufactured with the aid of power, disqualifying the appellants from the exemption under Notification No. 179/77.

Penalty Imposition:

The Tribunal modified the penalty imposed by the Collector. While the Collector imposed a penalty of Rs. 2 lakhs under Rule 173Q and an additional Rs. 1,000 under Rules 9(2) and 210, along with confiscation of land, machinery, and buildings, the Tribunal reduced the penalty to Rs. 25,000 under Rule 173Q, finding the original penalty disproportionate to the duty amount of Rs. 1,83,074.35. The confiscation order was set aside as the department failed to prove habitual delinquency or mala fide intentions.

Conclusion:

The Tribunal rejected the appeal with modifications, affirming that exempted goods remain excisable, their value should be included in turnover calculations, and the appellants failed to prove non-use of power in manufacturing G.I. Buckets. The penalty was reduced, and the confiscation order was set aside.

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