1993 (8) TMI 159 - AT - Central Excise

Summary

Issues:
- Whether M/s. Universal Conveyors was merely a firm registered on paper?
- Whether the goods cleared in the name of M/s. Universal Conveyors were actually manufactured by the appellants?
- Whether the duty demanded from the appellants was justified?

Analysis:

1. The appeal challenged the order of the Addl. Collector of Central Excise demanding duty from the appellants for removing goods valued at Rs. 10,29,498.00 in the name of M/s. Universal Conveyors. The appellants argued that M/s. Universal Precision Tools and M/s. Universal Conveyors were independent entities. They highlighted the partnership deed, registration dates, and operational details of M/s. Universal Conveyors to establish their independence. The appellants contended that the lower authority's findings were based on conjectures and relied on a relevant judgment to support their case.

2. The Department argued that the sophisticated machinery used by M/s. Universal Conveyors indicated they could not have manufactured the goods without external assistance. They pointed out the lack of evidence regarding job work activities or payments to job workers by M/s. Universal Conveyors. Additionally, the Department highlighted the absence of evidence for electricity payments and the setup of M/s. Universal Conveyors at the premises of M/s. Universal Precision Tools. They contended that M/s. Universal Conveyors was established on paper to avoid exceeding the exemption limit and emphasized the lack of separate infrastructure for M/s. Universal Conveyors.

3. The Tribunal analyzed the evidence and concluded that M/s. Universal Conveyors was not functioning as an independent manufacturing unit during the relevant period. Investigations with various authorities revealed that the machinery of M/s. Universal Conveyors was inspected in November 1987 and installed at the premises of M/s. Universal Precision Tools. Moreover, M/s. Universal Conveyors lacked independent electricity connections and industrial estate allotments. The Tribunal found it implausible that a partnership would create a rival entity for their products. Therefore, in the absence of evidence showing independent manufacturing by M/s. Universal Conveyors, the lower authority's decision holding the appellants responsible for manufacturing the goods was upheld. The Tribunal reduced the penalty considering the circumstances and quantum of duty involved.

4. In conclusion, the Tribunal held that the duty demanded from the appellants was justified as M/s. Universal Conveyors was not operating as an independent manufacturing unit. The decision emphasized the importance of concrete evidence to establish separate manufacturing activities by related entities and highlighted the significance of operational independence in such cases.