2004 (96) ECC 455 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Bangalore

Dr. S.L. Peeran, Member (J) and Shri K.C. Mangain, Member (T)

Gautham Tincans and Other Metal Works & Ors

Versus

Commissioner of Central Excise, Hyderabad

Appeals No. E/154-157/2001

[Arising out of Ord-in-Origl. No. 2/2000 Adjn. (CE) dt. 31.10.00 passed by CCE, Hyd.]

Final Order No. 846-849/2004, dt. 5.5.2004

Duty/Penalty

Manufacture of 15 kg. Tins -- Whether used for packing oil and vanaspathi were manufactured in M/s. Kamal Industries or not? The factual position is that as per Panchanama drawn on 29.1.98 in the premises of M/s. Gautham, machines available were for manufacture of 3 gallon & 4 gallon containers and no machine was available for manufacture of 15 kg tins used for packing oil and vanaspathi whereas in factory of M/s. Kamal, all the machines necessary for manufacture of 15 kg. tins were available. At the time of the visit of the investigating officers to the premises of M/s. Kamal, they found that statutory Central Excise records like RG-1 of M/s. Gautham were found in premises of M/s. Kamal. Since manufacturing activity of 15 kg. tins was being done by M/s. Kamal, they were manufacturer and these 15 kg. tins were being cleared by them either in their own name or in name of M/s. Gautham. Instead of clearing these containers on payment of duty from their account, they cleared the same partly in the name of M/s. Gautham and thereby they saved themselves for payment of appropriate duty and remained within the exemption limit under SSI notification.

[Para 12]

Limitation

M/s. Kamal had clearly suppressed information about manufacture of 15 kg. tins in their unit and had fraudulently manipulated the records to show as if the 15 kg. tins so manufactured were actually manufactured in the factory of M/s. Gautham, in order to pay duty at lesser rates in view of the lower values of clearances illicitly maintained in this manner. Perpetuation of such fraudulent activities warrant the application of extended period of five years provided for in the proviso to Sec. 11A (1) of Central Excise Act, 1944.

[Para 13]

Abatement

Abatement of the duty -- Reduction in duty and penalty -- While confirming the demand, the Commissioner has not taken into account the duty paid by M/s. Gautham on the goods which should be abated from the total duty liability fixed on M/s. Kamal for 15 kg. tins manufactured in their factory.

[Para 14]

Differential duty

M/s. Kamal had manufactured 15 kg. tins both for themselves as well as for M/s. Gautham. Therefore, the differential duty is required to be paid by M/s. Kamal. Duty which has been paid in the name of M/s. Gautham (whether by M/s Kamal or by M/s. Gautham) is required to be deducted from the total duty demand as duty is levied on the goods.

[Para 14]

Penalty

The penalty imposed on M/s. Kamal, under Section 11AC of the Central Excise Act and also under Rule 173Q of the Central Excise Rules, 1944, is also required to be modified. The case is remanded to the Commissioner for re-quantification of the amount of duty chargeable from M/s. Kamal after giving abatement of duty already paid on the clearance in the name of M/s. Gautham and accordingly re-quantify penalty under Section 11AC of the Act and Rule 173Q of the Central Excise Rules, 1944. Shri Padam Raj Jain under Rule 209A as a Partner of M/s. Kamal is not justified and we set aside the same.

[Paras 14 & 15]

Remand

The case is remanded to the Commissioner for re-quantification of the amount of duty chargeable from M/s. Kamal after giving abatement of duty already paid on the clearance in the name of M/s. Gautham and accordingly re-quantify penalty under Section 11AC of the Act and Rule 173Q of the Central Excise Rules, 1944.

[Para 14]

Interest

U/s. 11B should be demanded on the duty short paid for a period after 28.9.96 after re-determining duty liability on M/s. Kamal.

[Para 16]

PRESENT :

Shri Habibullah Basha, Sr. Advocate and Shri R. Sudhakar, Advocate for the appellants.

Shri B.R. Jagdish, JDR for the respondent.

Cases Cited :

1. Cosmic Dyes, 1994 (48) ECC 55 (SC) (Not applicable)...................................... [Para 7]

2. Haniff Shabir Brother v. Collector of Customs, 1997 (96) ELT 27 (Mad.) (Not applicable) [Para 7]

3. Limenaph Chemicals, 1997 (95) ELT 195 (Mad.) (Not applicable)....................... [Para 7]

4. Pushpam Pharmaceuticals, 2002 (80) ECC 6 (SC) (Not applicable).................... [Para 7]

5. Rainbow Industries, 1994 (48) ECC 117 (SC) (Not applicable)............................ [Para 7]

6. S.D. Kemexc Industries v. CCE, Calcutta, 1995 (75) ELT 377 (Tri.).................. [Para 13]

Per : K.C. Mamgain

These 4 (four) appeals are filed by the appellants against the Order-in-Original No. 2/2000 Adjn (C.Ex.) dated 31.10.2000, passed by the Commissioner of Customs & Central Excise, Hyderabad-II, Commissionerate.

2. On the basis of intelligence gathered that M/s. Gautham Tincans and Other Metal Works (hereinafter referred to as M/s. Gautham) did not have required machinery for manufacture of 15 kg. tins and such tins cleared from M/s. Gautham were actually manufactured in M/s. Kamal Industries (hereinafter referred to as M/s. Kamal) but despatched in the name of M/s. Gautham, of the Central Excise Officers visited the factory premises of M/s. Kamal and M/s. Gautham on 29.1.98 and verified the records of both the units.

Shri Sunil Jain, a partner in M/s. Kamal informed the officers that M/s. Gautham was a proprietary concern of his father Shri Padam Raj Jain. The officers recovered from the premises of M/s. Kamal statutory records pertaining to both M/s. Kamal & M/s. Gautham. They also noticed that electric welding machine for copper welding of tin sheets and air-compressor for conducting leakage test on the tins manufactured were available only with M/s. Kamal. During enquiry, statement of Shri Sunil Jain was recorded and he stated that M/s. Kamal was a partnership firm and his father Shri Padam Raj Jain and his brother Shri Adesh Jain were also partners therein, whereas M/s. Gautham was a proprietary concern of his father Shri Padam Raj Jain. He stated that only 15 kg. tins are manufactured in M/s. Kamal. In the case of tins supplied to Oil and Vanaspathi Industries, there would be single edge welding; that the welding was done by electric welding machine using copper wire; that the electric welding machine was available with M/s. Kamal only; that after the tin was manufactured, it was subjected to leakage test with the help of an air compressor; that an air compressor with testing facility was available only in M/s. Kamal. In M/s. Gautham, there was an old hand operated compressor, which was not in working condition for the last 5 years. After conducting investigation and recording statement from various persons, it appeared that the requisite machinery, i.e. welding machinery required for copper welding of tins, air compressor required to conducting leakage test for the manufacture of 15 kg. tins, was not available in M/s. Gautham. 15 kg. tins supplied to Oil and Vanaspathi Industries were actually manufactured in M/s. Kamal but were cleared on the account of M/s. Gautham to keep the clearance value of M/s. Kamal within exemption limit of SSI Notification 1/93-CE dated 28.2.93 & 38/97 dated 27.6.97. Therefore, show cause notice was issued to M/s. Kamal, alleging contravening the provisions of Rule 9(1), 52A, 173G, 173P and 226 of Central Excise Rules, 1944 read with Notification No. 1/93-CE dated 28.2.93 and 38/97-CE dated 27.6.97 as they manufactured and cleared 15 kg. tins without payment of duty and failed to account for all the 15 kg. tins manufactured and cleared to Oil and Vanaspathi Industries. M/s. Kamal had cleared 15 kg. tins under invoices of M/s. Gautham, with an intention not to include the value of these consignments in the progressive value of their clearances so as to remain within the limits of SSI exemption and to avail concessional rate of duty.

Duty amounting to Rs. 39,59,368 was also demanded from M/s. Kamal and penalty equal to duty evaded was also proposed under Section 11AC of the Central Excise Act, 1944. Penalty was proposed on M/s. Gautham, Shri Padam Raj Jain and Shri Sunil Jain under Rule 209A of Central Excise Rules, 1944. The case was adjudicated by the Commissioner of Central Excise under the impugned order who came to the conclusion that 15 kg. tins manufactured by M/s. Kamal were cleared under the invoices of M/s. Gautham without accountal in statutory central excise records of M/s. Kamal. He accordingly confirmed the demand of duty amounting to Rs. 39,59,368 payable by M/s. Kamal. He imposed a penalty of Rs. 20 lakhs under Rule 173Q and penalty of Rs. 19,12,685 under Section 11AC on M/s. Kamal Industries. He also imposed penalty of Rs. 5 lakhs on M/s. Gautham Tincans and Other Metal Works, penalty of Rs. 2 lakhs on Shri Padam Raj Jain, Partner of M/s. Kamal Industries and Rs. 2 lakhs on Shri Sunil Jain, Partner of M/s. Kamal Industries under Rule 209A of the Central Excise Rules, 1944. He also demanded interest under Section 11AB on the duty demanded and confirmed for the period after 28.9.96.

3. Shri Habibullah Basha, Ld. Sr. Advocate and Shri R. Sudhakar, Ld. Advocate appeared for the appellants and Shri B.R. Jagadish, Ld. JDR appeared on behalf of the Revenue.

4. Ld. Sr. Counsel pleaded that M/s. Gautham is a proprietary concern owned by Shri Padam Raj Jain. This concern is started in 1970 and they had obtained Central Excise Licence No. 7/70 which remained in operation up to 1974 for manufacture of metal containers. Thereafter, the unit was working without aid of power and availed exemption under Notification No. 94/70 till the end of 1987. The factory reverted to power and started manufacture of metal containers with the aid of power. Duty was paid availing exemption under Notification No. 1/93 as amended from time to time during the period from 1993-94 to 1995-96. In the year 1996-97, the unit did not avail exemption for the period from 1.4.96 till 31.8.96 but availed the concession under the SSI Notification from 1.9.96 which was disallowed by the Assistant Commissioner of Central Excise and duty was demanded for period from 1.9.96 to 31.3.97.

5. In the year 1984, M/s. Gautham purchased Spot Welding Machine but the same could not be installed as power capacity of the unit was not sufficient to run the Spot Welding Machine. It was therefore, transferred to M/s. Kamal Industries. The process of manufacture of metal containers by the unit without the aid of power is that initially the MS sheets are cut according to the shapes using shearing machine manually. Then corners of the sheets are notched using single notching machine, both the machines are hand operated. The sheets are thereafter embossed and the side panels are pressed using the panel pressing machine. Thereafter, with the aid of side locking machine, the sides of the sheets are locked and the tin is made into a square shape. Then by use of a body bending machine, the square body is bent at right angles. The top and bottom are embossed with the embossing press. The seaming is done using the seaming machine. All these operations are done manually using the above machineries. After this process, with the aid of soldering tin ingots the labourers solder the seams of the containers manually. No power is used at any point of time. The manufacture of metal containers for Oil and Vanaspathi Industries can be done totally without the aid of power. However, the unit was using power from the year 1988 onwards for machineries like panel press, side locking machine, top bottom embossing press, seaming machine, etc. As far as the air compressor is concerned, no power was used at any point of time at M/s. Gautham. It was always hand operated. During the year 1987 to 1993, the unit was claiming SSI exemption and paying the concessional rate of duty under relevant Notification No. 175/86 as amended. Thereafter, Notification No. 1/93 came into operation. The Excise Authorities visited the premises on 30.4.97 and after verification of records, disallowed the exemption availed from 1.9.96 to 31.3.97 vide AO No. 16/98 dated 31.5.99 by the Assistant Commissioner, Hyderabad-II and full duty was paid by M/s. Gautham. This clearly establishes that M/s. Gautham was manufacturing the goods in question.

6. On 29.1.98, the officers of Central Excise Anti Evasion Wing, Hyderabad-II Commissionerate visited the factory premises of M/s. Gautham and M/s. Kamal and they seized certain records. Certain statutory records of M/s. Gautham were found in factory of M/s. Kamal. The Department came to the conclusion that electric welding machine and air compressor required for conducting leakage test for the manufacture of 15 kg. tins is not available in M/s. Gautham. Therefore, all the 15 kg. tins cleared from M/s. Gautham to Oil and Vanaspathi Industries are manufactured in M/s. Kamal Industries and not in M/s. Gautham. The officers also noticed that this fact evident from the less consumption of electricity by M/s. Gautham compared to the electricity consumption of M/s. Kamal.

7. The Counsel pleaded that M/s. Kamal and M/s. Gautham have separate entity. M/s. Kamal is a partnership firm and M/s. Gautham is a proprietary concern owned by Shri Padam Raj Jain who is a partner of M/s. Kamal. Both are situated at different places. M/s. Kamal is registered under the Central Excise Act and it has independent Sales Tax Registration Numbers and it is assessed independently for Income Tax purposes. It has a separate SSI registration and Capacity Certificates issued by the Commissioner of Industries. In the same way, M/s. Gautham is registered as an SSI unit with independent Sales Tax Registration, Income Tax Assessment and separate electricity connections and separate ESI coverage for their employees. The question of clubbing production of 15 kg tins of M/s. Gautham with the production of M/s. Kamal is totally untenable. The department has accepted that M/s. Gautham are manufacturing 4 gallon tins for Oil and Vanaspathi Industries which is equivalent to 15 kg. M/s. Kamal are manufacturing desired 15 kg. capacity tins with aid of power from 1986 onwards till end of 1987. The theory of the department that tins could not be manufactured without an electric welding machine is totally untenable. There is no evidence that M/s. Kamal manufactured all the 15 kg. tins cleared by M/s. Gautham. On the contrary, M/s. Gautham was manufacturing oil tins right from the year 1970 and supplying to all the oil and vanspathi manufacturers. The Commissioner has relied on the statement of Shri N. Sathyanarayana, Authorised Signatory of both the M/s. Kamal and M/s. Gautham that all 15 kg tins cleared under invoices of M/s. Gautham were manufactured in the factory of M/s. Kamal. The appellants have filed statutory 173B declaration, RT 12 returns monthly. There has been no suppression of any kind and everything was done with the knowledge of the Department. At no point, there was suppression of clandestine removal. Therefore, extended period cannot be invoked. He relied on the following decisions --

(i) 1997 (95) ELT 195 (Mad.), Limenaph Chemicals

(ii) 2002 (80) ECC 6 (SC) : 1995 (78) ELT 40 (SC), Pushpam Pharmaceuticals

(iii) 1994 (48) ECC 55 (SC) : 1995 (75) ELT 721 : 1995 (6) SCC 117, Cosmic Dyes

(iv) 1994 (48) ECC 117 (SC) : 1994 (74) ELT 3, Rainbow Industries.

He also pleaded that when there is no order of confiscation, penalty is not imposable. He relied on the decision in case of Haniff Shabir Brother v. Collector of Customs, 1997 (96) ELT 27 (Mad.).

8. Ld. Sr. Counsel also drew our attention to ISI Standards for Square Tins -- 15 kg for Ghee, Vanaspathi, Edible Oils and Bakery Shortenings -- Specification under IS 10325 : 1989 and also for methods of Test for Meal Containers under IS : 2471-1963. Drawing our attention to Paragraph 4.3.3 of IS 10325 : 1989, the Ld. Counsel stated that according to it the top and bottom ends shall be made of one piece and joined to the body by a single or double seam. Single seam shall be fully soldered, whereas double seam shall be lined with a non-toxic compound or fully soldered. He therefore, stated that for manufacture, soldering is required and it is not necessary to weld. Welding is required for manufacture of tins as per Paragraph 4.3.1 of IS 10325 : 1989 according to which body may be a two piece construction, soldered at the diagonal seams or a single welded seam construction. The welded seam shall be coated with a suitable lacquer on the inside and outside and the soldered seam shall be coated with a suitable side-strip lacquer on the outside only. Regarding the testing, he referred to Para 3.1 for Air Pressure Test of IS : 2471 -- 1963 and Para 4 for Hydraulic Pressure Test. Para 3.2.1 prescribes the two type of Containers. Type A-containers which have a small closure orifice situated on the top and Type B-containers which are double ended or in which the closure orifice extends over the whole or a large part of the top. For Type A containers, a pressure line from an air compressor is used and Type B containers are tested by means of hand equipment. Ld. Sr. Counsel also referred to IS 916 : 1989 for Square Tins, 18 Litre -- Specification and stated that as per IS : 787 -- 1956 the containers for packing oil and ghee were of 4 Imperial gallons capacity which were of 20 litres and 18 litres equivalent capacity. By IS 916 : 1989 these were of 18 litres and 18 litres capacity. By IS 10325 : 1989 these were 15 kg. square tins for ghee, vanaspathi, edible oils and bakery shortenings. He therefore, stated that it is not necessary that there should be electric welding machine or there should be power operated machine for testing leakage on which the Commissioner relied upon. He therefore, pleaded that no case is made out by the department.

9. Shri B.R. Jagadish, Ld. JDR for Revenue stated that the charges against the appellants are based on the confessional statement of Shri Padam Raj Jain, proprietor of M/s. Gautham and partner of M/s. Kamal, Shri Sunil Jain, partner of M/s. Kamal and Shri N. Satyanarayana, Supervisor and Authorised Signatory of both the factories. He also stated that besides this, M/s. Gautham had only old compressor which was not working for last 5 years and there was no testing facilities of 15 kg tins with M/s. Gautham for the last 5 years prior to 21.1.98. There was no leakage test conducting facility which was pre-requisite for 15 kg. tins Oil and Vanaspathi Industry. He also stated that production of 15 kg tins in M/s. Gautham is more than that of in M/s. Kamal. If the 15 kg. tins were tested without aid of power and not weld by using electric welding machine then the number of persons employed by M/s. Gautham should have been more than those employed by M/s. Kamal. The employees in M/s. Kamal are around 25 persons while the employees with M/s. Gautham is around 15 persons. Power consumption of M/s. Kamal is much higher as compared to M/s. Gautham. Shri N. Satyanarayana, Authorised Signatory of both the units stated that 15 kg. tins cleared under the invoices of M/s. Gautham were manufactured in M/s. Kamal. Shri Satyanarayana did not retract his statement dated 5.2.98. Electric coppor welding machine and air compressor are two machineries necessary for manufacture of 15 kg tins. These machines were not available for 15 kg. tins manufactured in M/s. Gautham as these were kept in M/s Kamal. Therefore, the conclusion of adjudicating authority is correct that the 15 kg. tins were manufactured in M/s. Kamal and cleared in the name of M/s. Gautham.

10. We have carefully considered the submissions made by both the sides. The only issue to be decided in this case is whether 15 kg. tins which are used for packing oil and vanaspathi were manufactured in M/s. Kamal or these were manufactured in both the units, namely M/s. Kamal and M/s. Gautham. The Commissioner in his order has come to the conclusion that all the 15 kg. tins used for packing oil and vanaspathi were manufactured in M/s. Kamal and these were partly cleared by M/s. Kamal in their own name and partly cleared in the name of M/s. Gautham so that M/s. Kamal may remain within the exemption limit provided under SSI notification availed by them.

11. We find that the appellants had contested the findings of the Commissioner on the ground that as per ISI specification, IS 10325 : 1989, it is not mandatory that these should be manufactured by copper welding of tin sheets but these tins can be manufactured by soldering. They also pleaded that M/s. Gautham had hand operated compressor and the officer has never tested whether it is working or not. Therefore, they wrongly concluded that M/s. Gautham had no leakage testing facility for the 15 kg. tins.

12. To decide the issue whether manufacture of tins of 15 kg. is being done only in M/s. Kamal or in both M/s. Kamal and M/s. Gautham, we have to go by the factual position of the activity undertaken and not by what theoretically can be possible. We have seen from the records that on the date of visit of the officers to the unit of M/s. Gautham and M/s. Kamal, the manufacturing process of 15 kg. tins used for packing of oil and vanaspathi was explained by Mr. Sunil Jain in his statement dated 29.1.98. He stated in reply to Question No. 17 that in case of tins supplied to Oil and Vanaspathi Industries, whether from M/s. Kamal or M/s. Gautham edge welding was required to be done using an electric welding machine and using copper wire. No other procedure is followed. He also confirmed that electric welding machine was available only with M/s. Kamal. Shri Padam Raj Jain, Proprietor of M/s. Gautham, in his statement dated 4.2.98 stated that 15 kg. tins cannot be manufactured in M/s. Gautham without the use of power. In appeal petition, in Para 4 of the statement of facts, the appellants M/s. Gautham have stated that "in the year 1984, M/s. Gautham purchased Spot Welding Machine. However the same could not be installed, as power capacity of this unit was not sufficient to run the Spot Welding Machine. It was therefore, transferred to M/s. Kamal Industries."

We find that as per Panchanama drawn on 29.1.98 in the premises of M/s. Gautham, the machines available were for manufacture of 3 gallon & 4 gallon containers and no machine was available for manufacture of 15 kg tins used for packing oil and vanaspathi whereas in the factory of M/s. Kamal, all the machines necessary for manufacture of 15 kg. tins were available. It is not in dispute that M/s. Kamal were manufacturing 15 kg. tins used for packing of oil and vanaspathi. To know whether 15 kg. tins were manufactured by M/s. Gautham, we have to see the actual process which is being done by particular unit for manufacturing of tins and not what is mentioned in the ISI specifications. Shri Sunil Jain in his statement dated 28.9.98 in reply to the question No. 8 explained the process of manufacture of tins and containers in M/s. Kamal as well as M/s. Gautham. He has no where mentioned that soldering and testing are being done in M/s. Gautham. We also find that Shri Satynarayana, authorised signatory of both M/s. Kamal and M/s. Gautham, who was working there for the last 20 years and was Production Supervisor in both the units had clearly mentioned in reply to question No. 3 that 4 gallon, 3 gallon and 1 gallon tins are manufactured by M/s. Gautham whereas in reply to question No. 7 he stated that 15 kg. oil and vanspathi tins are manufactured in M/s. Kamal, besides manufacture of 3 gallon & 4 gallon tins. We also find that at the time of the visit of the investigating officers to the premises of M/s. Kamal, they found that statutory Central Excise records like RG-1 of M/s. Gautham were found in premises of M/s. Kamal. It was explained to the officers that the work of M/s. Kamal and M/s. Gautham is looked after jointly by the sons of Shri Padam Raj Jain, Proprietor of M/s. Gautham. The Commissioner has also given a finding that electricity consumed for manufacture of tins in M/s. Kamal is much higher than that of in M/s. Gautham. Similarly number of workers in M/s. Kamal are more than in M/s. Gautham. From these facts, it is clear that the manufacturing activity of 15 kg. tins was being done in M/s. Kamal. M/s. Gautham were manufacturing only 4 gallon, 3 gallon & 1 gallon tins for packing biscuits. Since manufacturing activity of 15 kg. tins was being done by M/s. Kamal, they were the manufacturer and these 15 kg. tins were being cleared by them either in their own name or in the name of M/s. Gautham. They were required to clear these goods on payment of appropriate Central Excise duty. Instead of clearing these containers on payment of duty from their account, they cleared the same partly in the name of M/s. Gautham and thereby they saved themselves for payment of appropriate duty and remained within the exemption limit under the SSI notification.

13. It was contented by the appellants that extended period is not applicable for demanding duty as the audit party has checked the records of M/s. Gautham and accordingly the appellants have paid the full duty for the year 1996-97 on the order of the Assistant Commissioner of Central Excise. M/s. Gautham and M/s. Kamal were filing their returns and maintaining their RG 1 register which were checked by the officers on the date of their visit and they found that the stocks were tallying. We find that the Commissioner has examined this issue and has observed in Para 46 of the impugned order which is as under --

"46 M/s. Kamal have mentioned in their written reply dated 8.12.99 to the show cause notice that ever since the inception of M/s. Gautham in 1984, the internal audit and revenue audit groups, and other field officers visited the unit periodically for inspection and for audit and that no allegation of the type leveled in the show cause notice was raised by the said groups. While reiterating this point in their written brief submitted during the personal hearing held on 25.8.2000 they contended that in view of the regular visits of Central Excise Officers to both the units, none of the ingredients of the proviso to Section 11A could be alleged and as also in view of the fact that returns were filed every month by both the units, normal period of limitation of six months alone could be invoked in the show cause notice. In this connection M/s. Kamal relied upon the order of the CEGAT in the case of M/s. S.D. Kemexc Industries v. CCE, Calcutta, 1995 (75) ELT 377 (Tri.). From the reasons and findings recorded hereinabove, it could be seen that M/s. Kamal had clearly suppressed information about manufacture of 15 kg. tins in their unit and had fraudulently manipulated the records to show as if the 15 kg. tins so manufactured were actually manufactured in the factory of M/s. Gautham, in order to pay duty at lesser rates in view of the lower values of clearances illicitly maintained in this manner. Perpetuation of such fraudulent activities warrant the application of extended period of five years provided for in the proviso to sub-section (1) of Section 11A of the Central Excise Act, 1944. Hence, reliance placed on case law relating to M/s. S.D. Kemexc Industries v. CCE, Calcutta, 1995 (75) ELT 377 (Tri.) is unacceptable, as the facts of this case are clearly distinguishable from the facts of the case cited. I, therefore, do not have any hesitation in upholding the application of period of five years for confirmation of the excise duties demanded in the show cause notice."

We agree with the findings of Commissioner. The case laws relied upon are not applicable as there was perpetuation of fraudulent activity by the appellants.

14. We find that in appeal petition, it is also pleaded that if it is considered that all 15 kg. tins were manufactured by M/s. Kamal, then 15 kg. tin cleared in the name of M/s. Gautham were on payment of concessional rate of duty. While confirming the demand, the Commissioner has not taken into account the duty paid by M/s. Gautham on the goods. Therefore, payment of duty by M/s. Gautham should be abated from the total duty liability fixed on M/s. Kamal for 15 kg. tins manufactured in their factory. Accordingly the penalty is also required to be modified. We agree with this pleading. We find that M/s. Kamal had manufactured 15 kg. tins both for themselves as well as for M/s. Gautham. Therefore, the differential duty is required to be paid by M/s. Kamal. However, the duty which has been paid in the name of M/s. Gautham (whether by M/s Kamal or by M/s. Gautham) is required to be deducted from the total duty demand as duty is levied on the goods. Accordingly we also agree that the penalty imposed on M/s. Kamal, under Section 11AC of the Central Excise Act and also under Rule 173Q of the Central Excise Rules, 1944, is also required to be modified. We therefore, remand the case to the Commissioner for re-quantification of the amount of duty chargeable from M/s. Kamal after giving abatement of duty already paid on the clearance in the name of M/s. Gautham and accordingly re-quantify penalty under Section 11AC of the Act and Rule 173Q of the Central Excise Rules, 1944.

15. In the appeal petition, it is also pleaded that penalty of Rs. 2 lakhs has been imposed on Shri Padam Raj Jain as a Partner of M/s. Kamal. In the statement of Shri Sunil Kumar, it has been clearly mentioned that Shri Padam Raj Jain is not in any way concern with day-to-day operations of M/s. Kamal. We find that the pleading of the appellants is correct that Shri Padam Raj Jain was not looking after day-to-day operation of M/s. Kamal. Therefore, imposing individual penalty on him under Rule 209A as a Partner of M/s. Kamal is not justified and we set aside the same.

16. Accordingly we set aside the order of the Commissioner in Para 49 (i), (ii), (iii), (v) & (vii) and direct the Commissioner to re-determine the duty liability on M/s. Kamal and also penalty under Section 11AC of the Act and Rule 173Q of the Central Excise Rules, 1944 on M/s. Kamal. We also direct that interest under Section 11B should be demanded on the duty short paid for a period after 28.9.96 after re-determining the duty liability on M/s. Kamal.

17. The appeals are disposed of in the above terms.

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