Collector of Central Excise Vs. Jandial Shoe Factory - Court Judgment

Excerpt:
1. this is an appeal filed by the department against the order-in-appeal dated 29-7-1986 passed by the collector of central excise (appeals), new delhi.2. the point to be considered in this case is whether the respondents were entitled to exemption from payment of duty under tariff item 36 of cet in terms of notification no. 88/77, dated 9-5-1977 as amended.3. the respondents are engaged in the manufacture of footwear falling under t.i. 36 of cet. show cause notice was issued to the respondents based upon the report of the central excise officers who searched the factory premises on 23-10-1981 on the ground that they were not entitled to exemption since visiting officer found 63 workers engaged in the manufacture of footwear and also found that electric motor of 2 h.p. was installed in.....

Judgment:
1. This is an appeal filed by the Department against the Order-in-Appeal dated 29-7-1986 passed by the Collector of Central Excise (Appeals), New Delhi.

2. The point to be considered in this case is whether the respondents were entitled to exemption from payment of duty under Tariff Item 36 of CET in terms of Notification No. 88/77, dated 9-5-1977 as amended.

3. The respondents are engaged in the manufacture of footwear falling under T.I. 36 of CET. Show cause notice was issued to the respondents based upon the report of the Central Excise Officers who searched the factory premises on 23-10-1981 on the ground that they were not entitled to exemption since visiting officer found 63 workers engaged in the manufacture of footwear and also found that electric motor of 2 H.P. was installed in addition to pasting machine of 1/2 H.P. Since total power used in the manufacture of footwear was found to be 2.5 H.P. including one pasting machine installed with 1/2 H.P. motor in the precincts, which was under the control of the Contractor, one Shri Bahadur Singh Karan Singh and being utilised in the manufacture of footwears on behalf of the party, the exemption in terms of Notification No. 88/77 as amended cannot be extended to the party. The Superintendent (Technical) adjudicated the case dropped the proceedings on the ground that power used was not more than 2 H.P. in the manufacture of footwear and the party was entitled to avail exemption from payment of duty in terms of aforesaid Notification. An appeal was filed by the Department against that order before the Collector (Appeals) and the Collector (Appeals) has decided the issue in favour of the party upholding the order of the Superintendent.

4. The Department has taken the plea before us as can be seen from ground of appeal that number of workers engaged in the manufacture of footwear were more than 49 and the power used was also more than 2 H.P.and the authorities below have not taken note of number of workers since list of workers prepared on the spot discloses that there were 63 workers engaged in the manufacture of footwear.

5. Shri Mohan Lal, learned JDR appearing for the Department submitted that the partner of the respondents' firm in his statement on 23-10-1981 has admitted that number of workers found in the factory were 63 and the power used was also more than 2 H.P. In view of this admission and in view of the fact that 1/2 H.P. pasting machine of the contractor was installed in the precincts of the factory premises of the respondents, the respondents' factory was not entitled to exemption in terms of Notification 88/77-CE. He contended that pasting machine of 1 /2 H.P. of the contractor was also within the precincts of the respondents' factory even as per finding of the Collector (Appeals) and since the same was being used in the manufacture of footwear by the respondents the exemption cannot be extended to the party in terms of Notification.

6. Shri Vivek Kohli, learned Advocate appearing for the respondents submitted that the respondents are entitled to avail exemption in terms of Notification 88/77 subject to fulfilment one of the conditions specified therein and it is clear from the record that they have fulfilled the condition that power installed and used in the manufacture of footwear by the respondents did not exceed to 1.75 H.P.As per panchnama as horse power of the machinery installed is 2 and it has been duly certified by the Executive Engineer of the State Electricity Board that power installed in the manufacture of footwear by the party did not exceed to 1.75 H.P. on actual measurement and on verification and same has been considered by the authorities below in granting the benefit of exemption in terms of above Notification.

7. We have carefully considered the submissions made by both sides and perused the records. To avail benefit of exemption in terms of Notification 88/77 it is sufficient if the party fulfils one of the conditions specified therein as it was rightly argued on behalf of the respondents. Relevant Notification 88/77, dated 9-5-1977 as amended reads as follows :- "In exercise of powers conferred by Sub-rule (1) of Rule 8 of Central Excise Rules, 1944 and in supersession of the notification of the Government of India in the Department of Revenue and Banking No. 103/76-Central Excises dated the 16th March, 1976, the Central Government hereby exempts footwear falling under sub-item (1) of Item 36 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) from the whole of the duty of excise leviable thereon: (i) such footwear is produced by or on behalf of a manufacturer in one or more factories, including the precincts thereof, wherein not more than 49 workers are working, or were working on any day of the preceding 12 months; or (ii) the total equivalent of power used in the manufacture of such footwear by or on behalf of a manufacturer in one or more factories does not exceed 2 H.P. Explanation. - For the purpose of this notification, where footwear, manufactured by a manufacturer, is affixed with the brand name or trade name, registered or not, of another manufacturer or trader, it shall not merely by reason of that fact, be deemed to have been manufactured by or on behalf of such other manufacturer or trader." 8. On a careful consideration of the records we find that apart from the fact machinery installed in the unit was of 1.75 H.P. as it was certified by the Executive Engineer of the State Electricity Board, the competent technical authority and 1/2 H.P. pasting machine did not belong to the respondents. It is clear from the fact that it belonged to the independent contractor and it is not even the case of the Department that the contractor was solely employed by the respondents or that 1/2 H.P. machinery belonged to the contractor was being exclusively used for the manufacture of footwear by the respondents.

The Collector (Appeals) has observed in his order that contractor Shri Bahadur Singh Karan Singh was providing job work to many others and hence same could not be deemed as being used by the respondents for the manufacture of footwear by them. Since the respondents have fulfilled one of the conditions of the exemption Notification 88/77 as amended, we do not find any infirmity in the order passed by the lower authorities in granting exemption in terms of aforesaid Notification.

In the view we have taken we uphold the impugned order and accordingly appeal filed by the Department is hereby dismissed.