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TMI Blog1995 (2) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... s M/s. Dayalal Brothers and M/s. Milan Enterprises, Jamnagar on job work basis and removed the excisable goods from the place of manufacture to the premises of the concerned parties. Shri Dayalal Siddhibhai is also a partner in the firms of M/s. Dayalal Brothers and M/s. Milan Enterprises, Jamnagar and was actually managing and controlling the three firms namely (1) M/s. Dayalal Siddhibhai, (2) M/s. Milan Enterprises and (3) Dayalal Brothers. 4. On the basis of information the Central Excise authorities conducted enquiry and investigation in respect of the manufacture and clearance of the excisable products, namely, copper rods from the factory of the appellants M/s. Dayalal Siddhibhai. During the investigation it was found that in the factory of M/s. Dayalal Siddibhai excisable goods, namely, copper and products thereof falling under erstwhile Item 26A or Chapter 74 of the Central Excise Tariff Act, 1985 (5 of 1986) as the case may be, were manufactured out of the raw materials procured from outside particularly from the sister concerns, namely M/s. Dayalal Brothers and M/s. Milan Enterprises. Appellants M/s. Dayalal Siddibhai out of the procured raw materials manufactured coppe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d supplied the same to their sister concern M/s. Dayalal Siddibhai for the manufacture of brass rods on job work basis. After completion of investigation since the authorities found that the raw materials received by the manufacturer, namely, M/s. Dayalal Siddibhai had not suffered duty and therefore, they were not entitled to the benefits of the various notifications, as aforesaid, proceedings were instituted against the manufacturer of brass rods, namely M/s. Dayalal Siddibhai and also the suppliers of the raw materials, the other appellants and the proceedings ultimately culminated in the impugned order of the Collector of Central Excise, Rajkot dated 27-2-1991 resulting in duty of Rs. 14,52,102.96 on appellants M/s. Dayalal Siddibhai besides the penalty of Rs. 1,00,000/- under the Act in addition to further penalty of Rs. 60,000/- and Rs. 75,000/- respectively on appellants M/s. Dayalal Brothers and Milan Enterprises. The above duty was levied on the appellants by the department for the period 15-7-1984 to 24-2-1987 by invoking the longer period of limitation under Rule 9(2) read with proviso to sub-section (1) of Section 11A of the Act. Penalty was levied on the suppliers of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 5371/91-B1) and (4) M/s. J.K. Enterprises (appellants in A. No. E/5369/91-B1). The Central Excise Authorities conducted simultaneously investigation in the above batch of cases also alongwith the investigation in the other cases referred to above and recorded statements from the various parties and the proceedings ultimately culminated in the impugned order of Collector of Central Excise, Rajkot dated 23-5-1991 levying a duty of Rs. 18,38,248.99 and penalty of Rs 1,50,000/- on appellants M/s. Mukesh Cast, Jamnagar and penalty of Rs. 35000/- on M/s. Mukesh Enterprises and penalty of Rs. 35,000/- on M/s. Mukesh Industries and penalty of Rs. 25000/- on each of the other two appellants, namely M/s. Jayant Industries and M/s. J.K. Enterprises. The authorities demanded duty in respect of the clearance of the goods for the period 30-11-1985 to 31-7-1987. 7. Shri S.P. Seth, the learned counsel appearing for all the appellants submitted inter alia, that - (1) the manufacturers of brass rods on job work basis are clearly entitled to the benefits of the various exemption Notifications No. 119/66-C.E., dated 16-7-1966, as amended, 174/84-C.E., dated 1-8-1984, as amended by Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in this context on the ratio of the ruling of the Supreme Court in the case of CCE v. Decent Dyeing Co. reported in 1990 (45) E.L.T. 201 and of the High Courts in the cases of Sulekh Ram Sons v. UOI reported in 1978 (2) E.L.T. (J 525) (Del.), Calcutta Paper Mills Mfg. Co. v. CEGAT reported in 1986 (25) E.L.T. 939 (Cal.) and Vapson Products Another v. UOI reported in 1987 (27) E.L.T. 608. (6) In regard to levy of penalty the impugned order was assailed as unsustainable on the ground that the manufacturers in the case were actuated by bona fides and were under the impression that the raw materials supplied to them were duty paid and therefore, the exemption notifications would clearly cover their case and therefore in the absence of any evidence indicating any intent on the part of the manufacturers or suppliers of the raw materials to evade payment of duty, penalty cannot be levied under the Act by invoking the longer period of limitation. Reliance was also placed on the ratio of the rulings of the Supreme Court in support of their plea. (7) Penalty under Rule 173Q read with Rule 9(2) of the Central Excise Rules, 1944 can be imposed only on the manufacturers and not on ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w materials in question are clearly recognisable as non-duty paid thereby disentitling the job workers to the benefits of the various notifications. 9. The learned DR further urged that it is a settled law that the Central Excise Exemption Notifications should be strictly construed and liberal interpretation should not be adopted and there is no scope or room for either itendment or importing flexibility in regard to interpretation of the same. Therefore, when non-duty paid raw materials have been used in the manufacture and clearance of excisable goods, namely brass rods without payment of duty, the entire goods cleared without payment of duty would become confiscable in law for wrong availment of the notification with a consequential levy of penalty and duty. The learned DR further urged that the suppliers of the raw materials being only sister concerns also supplied the goods to their other con- cern on job work basis knowing fully well that the goods or the raw materials they supplied had not suffered duty and therefore, were privy to the commission of offence by the job worker in regard to wrongly claiming the benefit of exemption and clearance of excisable goods without pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of appellants M/s. Changla Cast, Jamnagar (A. No. 5361/91-B1) and 25.341 M.T. in the case of appellants M/s. Mukesh Cast, Jamnagar (A. No. 5368/91-B1) Taking the aforesaid entire quantity for the purposes of argument into consideration the maximum output namely, of brass rods that are capable of manufacture by any conceivable optimum standard would only be 24.075 M.T. for appellants M/s. Dayalal Siddibhai, 66.954 M.T. for appellants M/s. Changla Cast and 24.074 M.T. for appellants M/s. Mukesh Cast. This quantity is arrived only after making a provision of 5% towards burning loss which is loss generally accepted by the department in general cases. The learned counsel clarified that even though the raw materials were described as brass dross, it is taken as brass scrap out of which the brass dross for this quantity could have been manufactured. Shri Seth, the learned counsel, therefore, submitted that accepting the entire case of the department to be true on the basis of the entire quantity of raw materials received by the job workers, as alleged by the department in the show cause notice and also in the impugned order, the maximum quantity of brass rods that could have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not proved to have suffered duty and therefore the job workers referred to above would not be eligible to the various exemption notifications in regard to finished products namely, brass rods manufactured out of the same. The learned DR in this regard contended that the notifications in question do not envisage addition or admixture of any other item in addition to the raw material in the manufacture of the finished products and therefore, since admittedly the appellants job workers along with the raw materials in question procured or supplied from outside added some other material mainly zinc, brass burning scrap etc. on which duty was deemed to have been paid, we shall address ourselves to the question as to whether they become disentitled to the various notifications, as contended by the learned DR. In this context we would like to refer to the various rulings on this point. It is clearly well settled. The Supreme Court in the case of UOI v. TISCO, reported in 1979 (4) E.L.T. (J 61) in dealing with the similar situation has observed as under :- 22. Counsel for the respondent is right in the contention that the only question here is whether duty-paid pig iron is used along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Collector that this material was not incorporated in the finished product cleared from 15-7-1984. Therefore, in respect of the aforesaid issues, we set aside the impugned order and remit the matter to the original authority for working out the quantum of duty in the light of our findings and observations above after affording the appellants reasonable opportunity of the appeal being heard. 19. We shall now take the issue in regard to penalty. So far as the appellants M/s. Dayalal Siddibhai, Jamnagar and M/s. Changla Cast, Jamnagar, and M/s. Mukesh Cast are concerned, they are the job worker manufacturers who have manufactured and cleared the excisable products out of non-duty paid raw materials, therefore, they would be technically liable to penal consequences under the provisions of the Act. In this view of the matter, taking into consideration the fact and circumstances of this case the duty liability on the said appellants has been reduced substantially for the reasons indicated above and keeping in mind that the quantum of penalty should be commensurate with the gravity of offence of evasion of duty and following the ratio of the Supreme Court s rulings, we reduce the penal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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