1988 (10) TMI 148 - AT - Central Excise

Issues Involved:
1. Demand of Central Excise duty on cement paint.
2. Confiscation and imposition of redemption fine.
3. Imposition of penalties under various Rules of the Central Excise Rules, 1944.
4. Determination of the actual manufacturer of the cement paint.
5. Clubbing of clearances for duty liability.

Detailed Analysis:

1. Demand of Central Excise duty on cement paint:
The Additional Collector of Central Excise, Cochin demanded Central Excise duty on cement paint valued at Rs. 2,56,521.30 for the year 1980-81 and Rs. 3,16,310.70 for the year 1981-82 under Rule 9(2) of the Central Excise Rules read with Section 11A of the Central Excises and Salt Act, 1944. The Additional Collector concluded that the cement paint was manufactured by M/s. Mangalam Paints and not by M/s. Super Paints and Chemicals, of which Dr. M.I. Itty was the proprietor.

2. Confiscation and imposition of redemption fine:
The Additional Collector ordered the confiscation of 25 bags of cement paint bearing the address of M/s. Super Paints and Chemicals and imposed a redemption fine of Rs. 2,500/- in lieu of confiscation. This decision was based on the finding that M/s. Super Paints and Chemicals did not manufacture the cement paint, and the production was attributed to M/s. Mangalam Paints.

3. Imposition of penalties under various Rules of the Central Excise Rules, 1944:
Penalties were imposed on M/s. Mangalam Paints under several rules: Rs. 2,000/- under Rule 9(2), Rs. 1,000/- under Rule 52A, Rs. 2,000/- under Rule 226, and Rs. 10,000/- under Rule 173Q. Additionally, a penalty of Rs. 10,000/- was imposed on Dr. M.I. Itty, Proprietor of M/s. Super Paints and Chemicals, under Rule 173Q. The penalties were based on the findings that the firms were not operating independently and that M/s. Mangalam Paints was the actual manufacturer.

4. Determination of the actual manufacturer of the cement paint:
The Tribunal analyzed various pieces of evidence to determine the actual manufacturer. Key evidence included:
- Indenture dated 5.11.1980.
- Statements from Dr. M.I. Itty, Smt. Sicily George, Smt. Kathrene, and Shri K.P. Xavier.
- Various correspondence in the seized files.
- Absence of any declaration required under Notification No. 111/78-C.E. by M/s. Super Paints & Chemicals.
The Tribunal found that M/s. Super Paints and Chemicals did not manufacture cement paint and that M/s. Mangalam Paints manufactured the cement paint on their behalf.

5. Clubbing of clearances for duty liability:
The Tribunal upheld the Additional Collector's decision to consider the value of clearances shown in the name of M/s. Super Paints and Chemicals for computing the value of clearances of M/s. Mangalam Paints under Notification No. 80/80-C.E., dated 19-6-1980. The Tribunal rejected the appellants' argument that the two firms were independent entities, finding that the firms were essentially the same and managed by Dr. Itty.

Conclusion:
The Tribunal found no infirmity in the impugned order of the Additional Collector. The order was upheld, and the appeal was dismissed. The Tribunal concluded that M/s. Super Paints and Chemicals did not manufacture cement paint, and the product was manufactured by M/s. Mangalam Paints. The penalties, duty demands, and confiscation were justified based on the evidence presented. The ratio of the decisions cited by the appellants was not applicable to the present case due to differing facts.

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