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TMI Blog2000 (5) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... twear Industries and its partners and Shri S.K. Bagaria, ld. Advocate for M/s. Bata India Ltd. Shri R.S. Sangia, ld. JDR argued the case of the Respondent Commissioner. We deal with the Appeals as under : Re : Appeal No. E/1821-24/98-D - M/s. New Decent Footwear Industries and its three partners v. C.C.E., Kanpur. 3. Narrating briefly the facts of the case, ld. Counsel submitted that the appellants, M/s. New Decent Footwear Industries were a partnership concern having two units. One was located at 4/33, First Floor, Reshham Katra, Tajganj, Agra. This Unit (Unit No. I) was a Central Excise licencee for the manufacture of footwear. The second Unit located at 4/37, First Floor, Reshham Katra, Tajganj, Agra was only a 'declarant' unit and was not holding any licence or registration. On the basis of information collected by the Officers of Central Excise and after a visit to the two units on 25-2-1994, the Department issued a Show Cause Notice dt. 18-7-96 alleging, inter alia, excesses and shortages. On the basis of the records resumed by the Officers, the SCN alleged that on examination of RG. l Register for the period 1991-94 in respect of the non-power operated unit (Unit No. II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was a declarant unit. Notfn. No. 49/86 exempted shoes classifiable under tariff sub-heading 6401.19. This was on the basis of non-use of power. Footwear coming under Chapter sub-heading 6401.11 on the otherhand, related to footwear in the manufacture of which power is used. In the case of both the units it was the Head Office which procured the raw materials, mainly 'soles', for use by both the units. Both the units maintain RG 1 Register, though in the case of Unit No. II, being a unit not working with the aid of power, it did not maintain other registers. Registers relating to procurement of raw material and soles were common for both the units. However, outward registers were separate. Till January, 1992, the facilities available in the two units were somewhat different inasmuch as it was Unit No. I which functioned without the aid of power and Unit No. II which used power. This position got interchanged subsequently and proper intimation was sent to the Department. Appellant firm was supplying their goods, i.e., footwear, manufactured by both the units to M/s. Bata India Ltd. M/s. Bata India Ltd. had facilities for testing both the raw materials as well as the finished g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ham Katra, Tajganj housed both the Head Office of the appellants' firm as well as their Unit No. II where the goods were manufactured without the aid of power. The mere fact that the appellants had two units and a common Head Office (located at the same premises where one of the units also operated), does not make the movement of goods from the Head Office to Unit No. I, the movement of finished or semi-processed goods from Unit No. II to Unit No. I. Moreover, the appellants had requested for cross examination of labourers whose statements had been relied upon by the Department. This had been denied. Since such cross examination was very vital for establishing the appellants defence, denial of opportunity of such cross examination was violative of principles of natural justice. Ld. Counsel referred to the statement given by Shri Mohd. Suhail, partner stating categorically that all the processes such as cutting, stitching etc. carried on in Unit No. II were done without the aid of power. Further, pasting was done with the aid of coal and purchase slips evidencing purchase of coal had also been enclosed with the reply to the SCN. This would clearly show that no power had been used i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein it has been stated that footwear is to be reckoned as manufactured for purposes of Column 4 of RG 1 only as soon as uppers and soles are assembled and joined. Any testing carried out by the customers thereafter, cannot be considered to be part of manufacture. 9. In support of this contention, he relied on the following decisions namely : (a) 1997 (95) E.L.T. 513 (T) - Ajanta Biri Co. v. C.C.E, Calcutta II, (b) 1996 (82) E.L.T. 447 (S.C) - C.C.E Baroda v. Ojas Corporation. 10. The appellants also contend that the entire SCN is barred by limitation for the reason that the appellants had filed declarations with the Department from time to time and the declarations showed the details of the location and address of the two units and therefore there cannot be any allegation of suppression of fact that about the location of the two units. All the facts relating to the location of the two units and the goods they manufacture were very much within the knowledge of the Department and nothing new was to be disclosed by the appellants. 11. Having regard to the above submissions. ld. Counsel pleaded for allowing the Appeals of M/s. New Decent Footwear and its three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r two units as per their convenience to avoid payment of duty and for irregularly availing the benefit of Notfn. No. 49/86. Ld. JDR also drew attention to the fact that though the appellants had claimed use of charcoal instead of power in their Unit No. II, there was no satisfactory evidence of their actual purchase or use as claimed by the appellants. He then referred to the findings in the impugned order and contended that the Commissioner had rightly concluded that the appellants were trying to make artificial distinction between the two units by claiming that they were maintaining two separate RG 1s though for all other purposes like Sales Tax, Income Tax, Audit, Inward Register, Wages Register and Packing note book, they were jointly maintained. Further, since the manufacturing process includes other processes which are incidental or ancillary to the completion of the manufacturing of the product, testing conducted in the R D Unit of M/s. Bata India Ltd. was very much part of the incidental or ancillary processes in the manufacture of footwear. As regards the invoking of the extended period under Section 11A(1) proviso, the evidence on record showed that the declaration file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Head Office which was also located at the same premises as Unit No. II. Appellants have contended that there is no evidence to show that goods manufactured at Unit No. II were sent to Unit No. I for completion of certain processes with the aid of power. The contention of the appellants that the Outward Register maintained at their Head Office located at the same premises where Unit No. II was also located contained entries relating to movement of raw material from Head Office to Unit No. I does not explain the finding of the Commissioner that out of the total number of footwear despatched to M/s. Bata India Ltd. only 1000 pairs had been cleared after payment of duty and a balance of 11,900 pairs were cleared without payment of duty claiming that they were manufactured without the aid of power. Further, finding in the Commissioner's order that the date of despatch indicated in the Outward Register did not tally with the dates mentioned in the challans is not controverted by the appellants. The failure on the appellants' part to clearly distinguish between the movement of stores and raw material from their Head Office to Unit No. I from despatch of footwear manufactured wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty liability the appellants have not been able to specifically show that the Computation of duty liability as per Chart 'D in the impugned order suffers from any factual error excepting to claim that the Commissioner has not read the Balance Sheet correctly and he has overlooked different schedules in the Balance Sheet which were meant for different purposes. In the absence of any specific material to show that the computation was made on any factually incorrect data, we confirm the said duty demand. 15. As regards the penalty of Rs. 10 lakhs imposed on the appellant, we are of the view that having regard to the quantum of duty evasion, the amount of Rs. 10 lakhs is not disproportionate. However, we do not find any justification for imposing further penalties on Rs. 1 lakh each on the three partners. Accordingly, the penalties of Rs. 1 lakh each on S/Shri Mohd. Suhail, Mohd. Zubair and Mohd. Tariq are set aside and their Appeals to the said extent, allowed. Re : Appeal No. E/2491/98-D - M/s. Bata India v. C.C.E., Kanpur : 16. By the impugned order dated 23-8-98, Commissioner of Central Excise, Kanpur had levied a penalty of Rs. 5 lakhs on the appellants, M/s. Bata India Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udication proceedings. The adjudicating authority did not however accept their pleas. 19. Ld. Counsel further contended that the imposition of penalty on a person under Rule 209A pre-supposes existence of knowledge on the part of such person or reason on his part to believe that the goods acquired by him or dealt with by him are liable to confiscation under the Central Excise Act or the Rules made thereunder. To come to a conclusion that the person concerned had done any of the acts or things mentioned in Rule 209A, the adjudicating authority has to first satisfy himself that there was evidence to connect him with the said act or things and mens rea on his part. Penalty cannot be imposed merely on the basis of surmises or conjectures. In this connection, Counsel referred to the finding of the Commissioner to the effect that there was no reason to believe that they were not knowing...... . The above finding itself showed that the Commissioner had no material before him to connect the appellants about the alleged mis-statement or suppression of facts by M/s. NDF or any knowledge thereof on their part. Ld. Counsel therefore pleaded for setting aside the penalty imposed on the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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