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TMI Blog1992 (3) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... its said to be in one compound and noted against each of them certain details and drew spot mahazars also. The statement of the licencees were also taken. As a result of these details gathered, the Department alleged that the production was going on only in M/s. Michael Match Works and that no indication whatsoever at all of any production was carried on in the remaining seven factories. It was alleged that ovens for melting wax and that dipping plates were found to be not only not in use but also in a totally dilapidated condition. Therefore it was inferred that these could not have been in use at any time. It was alleged that there was no stock of the essential raw materials namely, Chlorate or Sulphur in these factories and there was no place even to store them. The essential equipments like frames for wax dipped matches, racks for keeping chemical dipped frames, frames for side painting were not found. It was further alleged that the dipping plates found in the respective premises were too rusted to suggest their having been used in the recent past. It was alleged that all the seven factories were using the common labels of Double Bull , Tractor Chep and Tractor which had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count and the stock in his factory was in order. All the equipments necessary for manufacture of matches were there in his factory. All manufacturing process of matches were carried on in his factory and the same had been noticed by the inspecting officers and noted in the Mahazar. He denied any connection with other seven units. He contended that he had started his factory in the year 1979 at door No. 91/2, Ilayarasanendal Road, Kovilpatti till 1985 and on the date of inspection he had shifted it on 18-6-1985 to building No. 91, Gandhinagar Road, Kovilpatti and hence contended that the duty demanded for the clearances of seven units from him for the period 1-4-1985 to 31-3-1986 is unsustainable. He contended that during the period 1-4-1985 to 17-6-1985 his factory was not functioning. He contended that his factory had been inspected on 12-9-1985 by the officers and the show cause notice having been issued on 11-11-1986 was barred by time. He contended that all the matches cleared from his unit had been cleared on payment of duty and that he had not contravened any provisions of Central Excises Salt Act and Central Excise Rules. 4. Shri S. Kalasamy, Proprietor of M/s. Angel Mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR for the Revenue. 8. Shri N. Venkataraman, Learned Advocate submitted that the appellants have made out a miscellaneous application No. 73/92-D to permit additional ground to raise a plea of applicability of Notification No. 42/81, which again provided benefit to the licencees and have made alternate prayer for the grant of the same. The Learned SDR objected to allowing the miscellaneous application as the prayer required evidence and appreciation and in absence of it, the relief cannot be granted. Learned Advocate contended that on admitted facts the Notification 42/81 could be gone into, as the same applied to units which did not use power in manufacture of matches. As admittedly there was no use of power, the benefit was available to them. In support of his contention, he relied on the ruling rendered in the case of Jute Corpn. of India Ltd. v. Commissioner of Income-tax as reported in 1991 (51) E.L.T. 176 (S.C.) and Dy. Commissioner (CT), Coimbatore Division v. TVL Pankaja Mills as reported in 1989 (43) E.L.T. 259 (Mad.). He contended that in all the units the relevant statutory registers had been maintained and the units were under physical control. There was constant insp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of attorney was executed by M/s. Jaya Vilas Match Works to Xavier Jayapaul only for the purpose of appearing and giving the statement to the authorities on their behalf. He also relied on the following rulings : (i) Seshasayee Paper Boards Ltd., Salem v. Asstt. Collector, Central Excise - 1979 (4) E.L.T. J 238 (Mad.); (ii) L.M.L. Ltd. v. Collector of Central Excise, Kanpur - 1991 (51) E.L.T. 434 (Tri.) = 1991 (32) ECR 63; (iii) Collector of Central Excise v. Chemphar Drugs Liniments - 1989 (40) E.L.T. 276 (S.C.) (iv) Ambica Spinning Mills v. Collector of C. Ex. -1991 (51) E.L.T. 357; and (v) R. Suresh Jayaseelan v. Collector of Central Excise -1990 (48) E.L.T. 37. 11. Smt. J.M.S. Sundaram, Learned SDR countering the arguments of the appellants Counsel, contended that although all the seven units were not dummy but yet only A. Rathinam, proprietor of M/s. Michael Match Works is the manufacturer on be half of the other units. She contended that only one process in match making is vital and that is dipping and this process was carried out only in Michael Match Works. All the eight units being situated in only one compound, therefore the Department s conclusion of manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units were exclusively sold through the two agencies, namely, Nirmala Match Works and Nirmala Enterprises owned by Xavier Jeyapaul, brother of Antony. Once the matches leave the factory premises to the trading companies, to the man of the street, its identity is lost as to the factory from which it was produced. The submission of counterfoil of cheque books of Nirmala Agencies and Nirmala Enterprises will in no way substantiate the claim that the units were financially independent. Financial independence means each unit must have purchased the raw material, paid wages, etc. independently, must have sold the products and collected the sale proceeds and accounted for it separately. The submission of counterfoil points out nothing in this direction. It is also significant that out of the eight units, five are owned by close relatives of Shri Antony and the whole manufacturing operation in fact was managed by Shri Antony. 20. It was also argued that each unit has its own Arms Act Licence, separately purchased raw materials and account for it and therefore there can be no allegation of centralised production. In this connection, it is to be noted that licence under Arms Act is a must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per gross boxes of 50 matches, subject to the condition that clearances from the said factory during such financial year does not exceed 150 million matches and also subject to the following other conditions, namely :- (i) the total production of matches in a calendar month during the aforesaid period by the said factory does not exceed 15 million matches; (ii) the total clearances, if any, of matches for home consumption from the said factory during the preceding financial year, did not exceed 150 million matches: Provided that - (a) the amount of exemption shall be increased by 50 paise per gross boxes of 50 matches if bamboo is used for the splints or for both splints and veneers; (b) if the splints of such matches are made of bamboo and the matches are packed in boxes of 40 matches, the rate of duty shall be four-fifths of the rate applicable to matches of identical description produced in the same factory but packed in boxes of 50 matches and if such packing in boxes of 50 matches is not done, it shall be four-fifths of the notionally determined rate for matches packed in boxes of 50 matches; Provided further that the exemption contained in this notification shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has merely relied upon certain circumstances dealt in paras 16 to 23 of the order. During the course of hearing the learned counsel for the appellant produced extracts of the statutory registers duly signed by the Central Excise authorities in regard to the issue of gate passes and the register relating to the clearances of matches allowed under the Physical Control Scheme and also the R.G, 3 register evidencing clearances made before and after the date of inspection at periodical intervals, (underlined by us). This aspect was put to the learned D.R. who, after due verification, accepted that such clearances were allowed from the various match units by the authorities, as evidenced by the statutory registers. The extracts of these registers have also been filed by the appellants and form part of the records. To avoid duplication we are not verbatim reproducing the same, since the Department is not disputing the fact that the ex tracts represent the entries in the statutory registers duly signed by the departmental authorities periodically relating to the clearances from the appellant s factories. Therefore, when the statutory authorities themselves in the statutory registers have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the persons charged with the contraventions of the Act, we are inclined to give the benefit of doubt, following the ratio of the Bench ruling in the case of Moorthy Match Works/Ashok Match Works cited supra. There fore, we set aside the impugned order dated 12-3-1987 and allow the appeals (E/Appeal Nos. 285, 286, 287 and 288/87-MAS). The findings given in para 4 of S. Avudayammal (Vasuki Match Works) (supra) is reproduced hereinbelow. 4. We observe that the authorities in the present case on a surprise check had a genuine reason for suspicion on finding that the boxes of other unit were being used for filling the matches in the appellant s unit. The question that falls for our consideration is whether this factor is alone enough to fasten the liability of duty on the appellants at a higher rate holding that all the matches manufactured in Surendran Match Works were in fact manufactured in the appellant s unit in the past. We observe that mere suspicion cannot take the place of proof and probabilisation of evasion has to be done by bringing on record either documentary evidence or evidence of the persons who may be concerned with the operations of the manufacture of matche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture of matches more so when the officers had visited the units often as required under the physical control system. There is nothing on record to show that the other licensee i.e. Surendran Match Works was not capable of manufacturing the matches as alleged. It is further observed that at the time of licensing of the units the authorities are required to satisfy that the applicant is capable of manufacturing products for which they have sought the licence and also had the necessary verification done about the machinery etc. in stalled. In the above background, therefore, it cannot be held that all the matches as alleged were manufactured at the appellant s unit. This is again one of the type of cases which we have come across earlier where the authorities have been con tent in making seizure on a particular day and have not followed up with further investigation to establish the evasion. We find no reason why no statements were recorded from the employees and no further efforts were taken to ascertain the facts regarding the operations of the two units and to establish that the unit of M/s. Surendran Match Works was only a front dummy unit set up to evade payment of du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tches etc. and did not pursue the matter further to get the facts as to the nature of the operations which were being carried on a regular basis in the 3 units. They have been even remiss in not recording a statement from the proprietor of M/s. Manohara Match Works, who was in the facts and circumstances of this case an important link. No reason has been given as to why this could not be done. A suspicion cannot take place of proof. Since the appellants were being visited with large duty liability, it is for the authorities to prove the case beyond any reasonable doubt, (underlined by us). In the present case the authorities should have ascertained as to who were actually doing the operations of manufacture of matches. No effort appears to have been made in this direction. It is observed the units have been licensed by the authorities and it is only after they were satisfied that the appellants had the necessary infrastructure for the manufacture of matches that the licenses had been is sued. Further, the Central Excise control over the match units is fairly rigid, being physical control, and it is not on record and nor it has been pleaded that on earlier visits by the officers the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nohara Match Works and the licensee of M/s. Manohara Match Works is nothing but her own son of the licensee of one of the factories. There is every reason to conclude that all these three factories jointly produced matches outside their licensed premises and doing the further processes of box filling and clearing the matches at the concessional rate." It is clear that the learned lower authority has gone by the only single instance of the visits by the officers to the appellants units and who found the absence of the dipping of the chemical mixture etc. and the signs thereof, (underlined by us) The appellants before the lower authority had pleaded that the dippings were done in the units and dipping plates were clean because they had cleaned them after the day s work. The learned lower authority, however, has taken the nature of the manufacturing operations being carried out on the day of the visit by the officers along with the circumstance that the appellants were related to the proprietor of M/s. Manohara Match Works in whose premises the raw materials and records had been kept and, therefore, concluded that for the past 3 years the appellants had not been manufacturing any ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ials. The fact of the units being located in one compound is no reason to deny the benefit, so long as each was a different unit and having separate licence and separate business. The trading agents buying manufactured goods from all the units also cannot be a criteria nor their being related to each other could be one to deny the exemption. In fact, it is contended by the appellants that the seven licencees belong to Thevar Community and whereas A. Rathinam of Michael Match Works, on whom the liability is saddled, belongs to Nadar Community and thus they are not related. There is no examination on this plea at all by the Learned Collector. The detection of the offence by the officers is on 12-9-1985 while the demand said to be raised is for the period 1-4-1985 to 31-3-1986 as contended by the appellants. There is no finding on this plea. Therefore, the demands if they had been confirmed, for a period after the date of first mahazar i.e. 12-9-1985 would not be sustainable under the proviso to Section 11A of the Act. The Department could raise demands only for the period prior to 12-9-1985. The licencees had contended that there was no work in Nirmala Match Works and some others fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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