1991 (7) TMI 199 - AT - Central Excise

Summary

Issues:
1. Duty demand invoking longer period of limitation and imposition of penalty.
2. Allegation of manufacturing goods in the name of another firm.
3. Claim of separate legal entities for manufacturing activities.
4. Interpretation of Notification 175/86 for exemption.
5. Evidence of separate manufacturing units in the same premises.
6. Validity of declaration filed by M/s. Shankar Construction Co.
7. Allegation of suppression of information from the Department.

Analysis:

1. The appeal challenged the duty demand of Rs. 47,534.10 for the period 29-7-1987 to 1-11-1988, invoking the longer period of limitation, and a penalty of Rs. 50,000 imposed by the Additional Collector of Central Excise. The appellants contended that they were eligible for the benefit of Notification 175/86 and that M/s. Shankar Traders and M/s. Shankar Construction Co. were separate legal entities engaged in distinct manufacturing activities. The advocate argued that the Department had no grounds to claim that goods were manufactured in the appellants' premises for the other company. Reference was made to a similar case where the benefit of notification was allowed to both units under comparable circumstances.

2. The Managing Partner admitted that manufacturing activities were conducted in the same premises and expressed the intention to segregate the premises for separate manufacturing activities. However, the lower authority found that M/s. Shankar Construction Co. did not have its own premises, office, or electricity meter, and the manufacturing was managed by the working partner of M/s. Shankar Traders. The lower authority concluded that no reasonable person could believe in the existence of an independent manufacturing unit under such circumstances. The evidence indicated that R.C.C. Poles were manufactured in Shankar Traders' factory premises, supporting the lower authority's findings.

3. The declaration filed by M/s. Shankar Construction Co. showed a non-existent door number, and there was no evidence of separate manufacturing activities outside Shankar Traders' premises. The advocate admitted that the door number provided was fabricated by the appellants. The lease deed was also deemed unacceptable as the indicated door number did not exist. The Tribunal held that the appellants had suppressed information from the Department, justifying the invocation of the longer period of limitation. The duty demand was confirmed, but the penalty was reduced to Rs. 10,000 considering the small scale of the appellants' unit and the amount of duty evaded.