1985 (6) TMI 112 - AT - Central Excise

Court decision: Premises as 'factory' under Factories Act. Duty exemption wrongly claimed. Penalty reduced.

The court held that the chromic acid section of the appellant's premises constituted a 'factory' under the Factories Act, 1948. Consequently, the ... Demand - Time limit - Show Cause Notice to allege fraud, collusion or suppression of facts Issues Involved:1. Whether the chromic acid section of the appellant's premises constitutes a 'factory' under Section 2(m) of the Factories Act, 1948.2. Whether the appellant wrongfully availed duty exemption under Notification No. 46/81.3. Whether the extended period of five years for demand of duty under Section 11A of the Central Excises and Salt Act was applicable.4. Whether the penalty imposed on the appellant was justified.5. Whether the confiscation and fine in lieu of confiscation of goods were appropriate.Issue-wise Detailed Analysis:1. Whether the chromic acid section of the appellant's premises constitutes a 'factory' under Section 2(m) of the Factories Act, 1948:The appellant contended that the chromic acid section was not a 'factory' within the meaning of Section 2(m) of the Factories Act, 1948, and thus, the chromic acid manufactured therein would not attract duty under Item No. 68-CET. The appellant argued that different manufacturing activities carried out in different sections of a premise might not be combined or aggregated. However, the court found that the chromic acid section was served by the same electricity and water connections, payments for which were made by the appellants, and the raw material was supplied by the appellants. The court concluded that the chromic acid section was an integral part of the appellant's factory premises and could not be considered independent. Therefore, the chromic acid section constituted a 'factory' under Section 2(m) of the Factories Act.2. Whether the appellant wrongfully availed duty exemption under Notification No. 46/81:Notification No. 46/81 exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act from the whole of the duty of excise, provided they are not manufactured in a factory. Since the chromic acid section was found to be a part of the appellant's factory, the exemption under Notification No. 46/81 was not applicable. The court found that the appellant wrongfully availed the duty exemption by treating the chromic acid section as not a 'factory.'3. Whether the extended period of five years for demand of duty under Section 11A of the Central Excises and Salt Act was applicable:The show cause notice alleged that the appellant had wrongfully availed the duty exemption by treating the chromic acid section as not a 'factory.' The court found that the appellant's actions were mala fide and that there was suppression of facts. Therefore, the extended period of five years for demand of duty under Section 11A of the Central Excises and Salt Act was applicable.4. Whether the penalty imposed on the appellant was justified:The court found that the appellant acted with mala fide intention and did not fulfill the statutory obligations merely by writing a letter to the Superintendent of Central Excise. The court held that the imposition of penalty was correct but reduced the amount from Rs. 5,00,000/- to Rs. 1,00,000/- considering the duty involved.5. Whether the confiscation and fine in lieu of confiscation of goods were appropriate:The court agreed with the appellant that once the goods were released provisionally against a bond and were not physically available for confiscation, the Collector could not confiscate the goods and impose a fine in lieu of confiscation. The proper course would have been to enforce the bond for breach of its provisions. Therefore, the court set aside the order of confiscation and imposition of fine in lieu of confiscation.Conclusion:The demand for duty by the Collector was confirmed. The penalty was reduced to Rs. 1,00,000/-. The order of confiscation and imposition of fine in lieu of confiscation was set aside. The Collector's order was upheld with these modifications, and the appellant was granted relief accordingly.