1. This appeal had been originally preferred as a revision petition to the Government and had been 'transferred to this Tribunal under Section 35-P of the Central Excises & Salt Act, and is being disposed of as an appeal under this order.
2. On 21.1.1977 Central Excise Officers visited the premises of a firm by name, Auto Life Rubber Industries and an associate thereof by name, Raman Rubber (India) and noticed that these firms had been engaged in the manufacture of rubber cushion compound/tread rubber since 1974 without obtaining a Central Excise Licence. A statement was obtained from the proprietor of Auto Life Rubber Industries disclosing that goods valued at over Rs. 99,000/- had been manufactured without payment of Central Excise duty. Appellant had also received supplies of such manufactured product. 14.5 kgs. of such goods were recovered from the premises of Auto Life Rubber Industries. It was also found that this appellant had engaged Auto Life Rubber Industries for manufacture of 371 kgs. of cushion compound by supplying raw material therefor and paying charges for the conversion. 52 kgs. of such manufactured product as well as 93 types in which such cushion compound had been used were seized from the premises of the appellant.
3. Show cause notice was issued to all the three firms and an enquiry was held by the Collector of Central Excise, Chandigarh. So far as this appellant is concerned, it was contended in the said enquiry that the appellant was not a manufacturer of the rubber cushion compound, but had only supplied trimmings for being converted into cushion compound by Auto Life Rubber Industries who alone manufactured the same. It was, therefore, contended that the appellant had not contravened any of the provisions of the Central Excises & Salt Act. Certain other matters were also investigated in that enquiry with reference to the firm, Raman Rubbers (India) being a bogus firm in the floatation of which this appellant had also abetted Auto Life Rubber Industries. The Collector rejected the contention of the appellant that he was not the manufacturer with reference to rubber compound seized. So far as this appellant is concerned, the Collector ordered confiscation of the 52 kgs. of cushion compound seized as also the retreated 93 tyres and fixed fines of Rs. 300/- and 600/- respectively in lieu of confiscation thereof. Under Rule 173-Q of the Central Excise Rules, he imposed a penalty of Rs. 9,500/- and also demanded duty on the 371 kgs. of cushion compound from this appellant on the basis that the appellant was the manufacturer thereof through Auto Life Industries. On appeal to the Central Board, the order of confiscation with reference to the 93 tyres was set aside and the personal penalty was reduced to Rs. 2,500/- but in other respects the appeal was dismissed. It is against the said order that this revision had been preferred to the Govt. of India and had been transferred to this Tribunal as earlier mentioned.
4. Shri D.P. Varshney appearing for the appellant contended that the finding as to the appellant also having participated in the floatation of the bogus firm, Raman Rubber (India) Ltd., is improper and that the cushion compound purchased from Auto Life Industries or seized from the appellant could not be said to have been manufactured by the appellant, and there was, therefore, no case of liability on the part of the appellant to pay Central Excise duty thereon, and hence, the conclusion of the lower authorities about contravention of Rule 173-Q is incorrect. He, therefore, contended that the penalty levied as well as the order of confiscation should alsobe set aside. Shri M.L. Kapoor appearing for the Department, supported the order of the Board and contended that the appeal should be dismissed.
5. After having heard both sides and on a consideration of the respective contentions we had announced that the appeal was being allowed and that a detailed order would follow. This is the order containing the reasons for the said decision. So far as the alleged participation of the appellant in the floatation of the bogus firm Raman Rubber (India), it is pointed out for the appellant that the appellant firm came into existence in 1974 only whereas Auto Life Rubber Industries as also Raman Rubber (India) had come into existence much earlier and hence, the conclusion that the appellant had participated in the unlawful act of bringing into existence a bogus firm to assist Auto Life Rubber Industries, cannot be supported. No evidence has been produced as to how exactly the appellant is said to have assisted Auto Life Rubber Industries in order to enable the same to bring into existence Raman Rubber (India) as a bogus firm.
6. Admittedly, the appellant is carrying on business in retreading automobile tyres and in such work rubber cushion compound/tread rubber is being used by them. It is their contention that with reference to their end-cuttings obtained during the course of retreading work they had been utilising the services of M/s. Auto Life Rubber Industries to convert the same into cushion compound on payment of charges at Rs. 2/- per kg. as rolling charges. The appellants have produced documents to prove that in respect of such payments as well as purchases of cushion compound either from Auto Life Rubber Industries or Raman Rubber (India) Ltd. they had been making payments through Account Payee Cheques only, indicating that they were dealing with the said parties at arm's length. Such payments would also show that there could have been no collusion with a fraudulent intent.
7. The case with reference to the seized 52 kgs. of cushion corn-pound, as well as the order 371 kgs. of cushion compound, is that the appellants were not the manufacturers thereof, but that the manufacturers were only M/s. Auto Life Rubber Industries, who alone had engaged themselves in the manufacture of cushion compound. The case against the appellant appears to have been rested on he basis of Section 2(f) (iv) of the Central Excises and Salt Act. It is pointed out for the Department that in the said provision the workd 'manufacturer' is defined as including not only a person who employs hired labour in the production or manufacture of excisable goods but also any person who engages in their production or manufacture on his own account. The contention is that in supplying the raw material to M/s. Auto Life Rubber Industries and getting the same converted into cushion compound on payment of rolling charges the appellant was the manufacturer thereof as in the above definition. This conclusion does not appear to us to be acceptable. It has been held by the Allahabad High Court in Philips India Ltd. and Ors. v. Union of India (1980 ELT 263) that in order to bring a person within the ambit of this clause (dealing with the second category of persons comprising of those who do not directly employ their own labour but engage themselves in manufacture of goods on their own account) it would be necessary to prove that he gets the goods manufactured by others under his direction and control, and that if a person simply places orders for getting certain goods manufactured, though according to his specifications and details, such a person would not thereby become the manufacturer. It was held that even if the goods be manufactured in accordance with the requirements of the buyers and complying with his standards, that would not make him a manufacturer, unless the person engaged in the actual manufacture is only a dummy. In the present case it has been already seen that Raman Rubber (India) cannot be said to be a dummy for this appellant, whatever may have been the relationship between that firm and M/s. Auto Life Industries Ltd. The mere fact that the appellant supplied the raw material in the shape of cut-trimmings would not alter the situation. The fact, that the appellant supplied raw material and got back the finished products on payment of rolling charges, would not constitute the appellant the manufacturer of such goods.
8. We, therefore, hold that the appellant cannot be said to have been the manufacturer liable to pay the Central Excise duty. We, therefore, hold that contravention of Rule 173-Q of the Central Excise Rules or any other provision of the Central Excises & Salt Act has not been brought home to the appellant. The penalty imposed on him and the demand for duty on 52 kgs. of cushion compound are set aside. This appeal is, accordingly allowed.