TaxTMI 
TaxTMI 
2003 (12) TMI 391
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....ssembly of locks is undertaken by hand without using any power; that consequently no duty of excise is payable by the artisans in terms of exemption Notification No. 167/86-C.E. dated 1-3-1986; that the Appellant No. 1 also purchase locks from M/s. Key Locks (India) who manufacture locks under their brand name "Harrison" using power and clear the locks on payment of duty. 2.2 He mentioned that Central Excise Officers visited their premises on 29-9-2000, seized the stocks of locks and after recording statements of various persons including artisans, a show cause notice dated 23-3-2001 was issued proposing to demand duty on locks and imposing penalties; that the main allegation in the show cause notice was that the Appellant No. 1 undertakes the process of polishing, branding, packing and affixation of the M.R.P. and the goods become marketable at their premises and as such they are the manufacturers of the locks; the other allegation in the show cause notice was that the parts for the locks were supplied by M/s. R.P. Locks (RPL in short) through M/s. Remy Industries which used power in the manufacture of parts; that the Commissioner, under the impugned Order, has confirmed t....
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.... This decision has been affirmed by the Supreme Court as reported in 2001 (129) E.L.T. A85. (ii) Vijay Engg. Corporation v. Commissioner of Central Excise, Meerut - 2001 (132) E.L.T. 290 (T) (iii) Anand Engineering Corporation v. CCE, Bombay - 2002 (147) E.L.T. 1258 (T) (iv) CCE, Bombay v. Omega Packaging P. Ltd. - 2000 (126) E.L.T. 1096 (T) wherein it has been held that the fact that the components of metal con-tainers, purchased from open market, were manufactured with the aid of power, will not make the use of power by the assesses in absence of any evidence that they have used the power themselves or had sent certain components to others for being manufactured with the aid of power. He, therefore, contended that the impugned Order is liable to be set aside. 3.3 He also mentioned that the report of the Chartered Engineer, relied upon by the Adjudicating Authority, clearly shows that lock making is a cottag....
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....t to manufacture the locks worth Rs. 22 crores on which duty has been demanded; that Remy Industries is registered separately under the Sales Tax, Income Tax and has a separate existence and manufactures lock and parts in their own right and cannot be considered as dummy of RPL. 3.6 He also mentioned that the extended period of limitation for demanding duty is not invokable as M/s. RPL has been acting in bona fide belief that their actions have been entirely in accordance with law; that their case is squarely covered by Board's Circular No. 52/52/94-CX., dated 1-9-1994 wherein it has been clarified that if a brand name is not owned by any particular person, the use thereof will not deprive a unit of the benefit of the small scale exemption scheme and that this applies not only to locks but to all other goods specified in Notification No. 1/93-C.E. 4. Regarding Remy Industries, the learned Advocate mentioned that the charge against them is that they aided and abetted the duty evasion by RPL; that under Rule 209A of the Central Excise Rules, 1944, Penalty can not be imposed for abatement; that there is no allegation in the show cause notice they have violated any of t....
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....e manufactured by the artisans are not distinguishable. The learned Advocate finally submitted that the case against M/s. Key Locks (India) may be remanded as the Adjudicating Authority has passed the impugned Order against them without considering various submissions made by them. 6.1 Countering the arguments, Shri N.K. Bajpai, learned Advocate for Revenue, submitted that M/s. R.P. Locks, a partnership firm of Shri Anil Monga, Mrs. Shakuntala Monga and Mrs. Anil Locks Ltd., arrange for supply of parts of locks such as upper and lower plates, shackles levers, keys, etc., to large number of artisans for assembly of locks on payment of labour charges which are as low as Rs. 3 per piece of locks whereas the average price of locks ranges from Rs. 50 to Rs. 100 per lock; that most of the parts are supplied at their direction from the factory belonging to Remy Industries; that a number of artisans have stated that the said factory belongs to Shri Anil Monga; that a slip was produced according to which Shri Monga had asked one Sanjiv to issue parts of 700 locks to one Mukesh; that sometimes; these parts have also been supplied from the premises of M/s. R.P. Locks; that there are c....
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....assembled together by riveting or screwing process; that shackles are found to be electroplated which requires D.C. Power which in turn is obtained from electric power; that heavy machining like drilling, surface grinding besides accurate uniform machining pattern with decorative stamp finish would confirm the use of electric power; Riveting work required for assembling large scale manufacture is done by power tools and the screws required for assembling can not be manufactured without power operated machine tools. He contended that from the Chartered Engineer's Report, it appears that locks are made with the aid of power; that R.P. Locks have been controlling entire manufacturing activity right from the raw material stage to the finished stage; that they have made false vouchers showing that they purchase locks from others although the said locks were manufactured for them under the direct control by way of providing designs, finance and supply of raw materials. He also highlighted the fact that "Harrison" brand locks manufactured by M/s. Key Locks, which are not different from the locks assembled by artisans, have suffered incidence of duty; that Anil Monga had signed a return su....
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....pplication to the facts of the present case; that Circular No. 52/52/94-CX., dated 1-9-1994 is not applicable as "HARRISON" brand name is registered in the name of M/s. R.P. Locks; that the case laws relied upon by the Appellants also accept the principle that if inputs/components in the manufacture of which power is used are themselves excisable, exemption is available if no power is used as the stage of putting together the inputs of the components and bringing into existence a finished excisable commodity; that the fact that the principle is applicable even if the inputs/components are exempt clearly establishes that duty must be paid if they are excisable and not exempt. 8.1 The learned Advocate submitted in respect of charges against Key Locks (India) as under : 8.2 Regarding shortage of 4116 locks found short, he mentioned that RG 1 stage in respect of locks is reached when all the manufacturing processes have been completed, the locks have been packed and are ready for removal; that thus their claim that some of the goods, which were entered in RG 1 Register were still lying in the finishing room is not in accordance with the requirement of law; that further ....
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....es as it was raised to cater to the needs of artisans so far as it relates to the manufacturing of parts of locks; that R.P. Locks camouflaged and hide their manufacturing activities of parts of locks through M/s. Remy Industries; that penalty under Rule 209A is imposable on any person who "is in any way concerned in transporting ..... or in any other manner deals with any excisable goods"; that M/s. Remy Industries have supplied unbranded locks to M/s. R.P. Locks and have thus dealt with the goods; that Penalty is also imposable on Anil Monga as he projected his firm R.P. Locks as a trading firm whereas it is manufacturing locks; that penalty is also imposable on Shri Umang Monga as he was looking after the affairs of Remy Industries, being a partner; that penalty is imposable on Ravi Jain, authorised signatory of Key Locks (India) as he has been closely associated with day to day affairs of the firm. 10. In reply, Shri V. Lakshmikumaran, learned Advocate, mentioned that in Delhi Cloth & General Mills Co. Ltd. and Indian Cable Co. Ltd. relied upon by the learned Advocate for Revenue, the question of manufacture was not involved at all and as such the ratio of these decisio....
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....he artisans assemble the complete locks and supply the same to R.P.L. 11.1 As per Section 3 of the Central Excise Act, Central Excise duty shall be levied and collected on all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the Schedule to the Central Excise Tariff Act. A perusal of Section 3 of the Act reveals that the words "excisable goods" have been qualified by the words "which are produced or manufactured in India." Thus goods have to satisfy the test of being produced or manufactured in India before Central Excise duty can be levied and collected thereon. The Constitution Bench of the Supreme Court in Union of India v. Delhi Cloth & General Mills, 1977 (1) E.L.T. (J199) (S.C) has held that the word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new substance", and does not mean merely "to produce some change in a substance", however minor in consequence the change may be." The Supreme Court quoted a passage in Permanent Edition of Words and Phrases, Vol 26 from an American Judgment which runs thus : "Manufacture implies a change, but every change is not manufacture and yet e....
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.... of R.P. Locks, with the aid of power. It has been held by the Supreme Court in the case of Ujagar Prints v. Union of India, 1988 (38) E.L.T. 535 that "Duties of excise are imposed on the production or manufacture of goods and are levied upon the manufacturer or the producer in respect of the commodity taxed. The question whether the producer or manufacturer is or is not the owner of the goods is not determinative of the liability." Similar views were expressed by the Supreme Court in Britannia Biscuit Co. Ltd. v. CCE, Madras, 1997 (89) E.L.T. 22 (S.C.) and CCE, Baroda v. M.M. Khambhatwala, 1996 (84) E.L.T. 161 (S.C.). In Khambhatwala case, the respondents got goods produced by household ladies in their own premises out of the raw materials supplied by the Respondents who paid wages on the basis of number of pieces manufactured. The plea of the Revenue was that the goods manufactured by such household ladies must be taken as manufactured by the Respondents. The Supreme Court did not accept the said plea and held that "the respondents can not be considered as manufacturer of agarbatti, amlapodi and dhup, etc. manufactured in the premises of household ladies as described above withou....