Separate premises defence under central excise penalty failed for lack of proof of physical separation and tenancy.

Penalty under central excise law was upheld because the assessee failed to prove that trading and manufacturing activities were carried on in separate premises. The plea of distinct adjoining units was rejected for want of corroborative evidence: two entrances alone did not establish physical separation, the premises carried one property number, no intervening wall or other tangible separation was shown, and the alleged tenancy of part of the building remained unproved. On these facts, the trading and manufacturing operations were treated as having been conducted in the same premises without departmental permission, justifying the penalty.

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Issues: Whether the penalty imposed under Rule 173Q read with Section 38A of the Central Excise Act was sustainable when the appellants claimed that the trading activity was carried on separately by another person in adjoining premises.

Analysis: The claim of separate business activity was rejected for want of corroborative evidence. The existence of two entrances, by itself, was held insufficient to show that manufacturing and trading were conducted in distinct premises. The premises bore one property number, and there was no evidence of an intervening wall or other tangible material to establish physical separation. The assertion that one portion of the building had been taken on rent also remained unproved. On the facts found, the trading and manufacturing activities were carried on in the same premises without departmental permission, justifying the penalty.

Conclusion: The penalty was upheld and the challenge to the order failed.

Final Conclusion: The adjudication affirmed the departmental penalty on the basis that the appellants had not proved separation of the trading and manufacturing units and had used the same premises without permission.

Ratio Decidendi: A plea of separate use of adjoining premises to avoid penalty under the central excise law must be supported by tangible corroborative evidence; mere multiple entrances or unsubstantiated assertions of tenancy are insufficient where the facts show common premises.

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