ORDER-IN-ORIGINAL No. : 10 / D/2011-12
M/s. Bharat Pump Industries, Kailashpati Society, Street No. 4,
Opp. Plot No. 27, Dhebar Road (South), Rajkot (hereinafter referred to
as “the noticee No.1”) are engaged in the manufacture of Power
Driven Pump Sets for handling water, viz., Submersible Pumps (of V3,
V4, V5 & V6 bore sizes) and Open well pumps falling under CETSH
8413 of the Central Excise Tariff Act, 1985 and are not registered with
the Central Excise department. The noticee No. 1 was availing SSI
exemption benefit under notification No.8/2003-CE dated 01.03.2003,
for the power driven pumps manufactured and cleared by them.
Brief Facts of the case :
2.
Briefly stated the facts of the case are that on the basis of
specific information that the Noticee No.1 was engaged in the
manufacture and clearance of power driven pumps, which did not
conform to the Bureau of Indian Standards (BIS) and are not eligible for
SSI exemption under notification No. 08/2003-CE dated 01.03.2003, a
team of officers of the Head Quarter Preventive, Central Excise, Rajkot,
visited and searched the premises of the noticee No. 1 on 09.03.2010.
During the course of search, it was found that the noticee No.1 was
engaged in the manufacture of power driven pumps, viz., submersible
pumps and open well pumps of various sizes, specifications and
capacities, primarily designed for handling water [viz., V3, V4, & V6
bore-sizes submersible pumps and open well pumps] for which BIS
certification was not obtained by them. In the presence of panchas Shri
Bharatbhai G. Vekaria, authorized person of the noticee No.1 admitted
that they had not obtained the ISI Certificate from Bureau of Indian
Standards for their products, viz., submersible pumps and open well
pumps manufactured and cleared by them. He further admitted that
from 01.01.2007 onwards, the SSI exemption was not available to
power driven pumps under the notification No. 08/2003-CE dated
01.03.2003, if the same do not confirm to BIS standards.
3.
During the course of Panchnama drawn in presence of two
independent panchas , total four (04) number of pumps (submersible
& open well) totally valued at Rs. 12,200/-, not conforming to BIS
standards were found in the said factory premises of the noticee
No.1 , that the said power driven pumps were placed under seizure
under the reasonable belief that the same were manufactured with an
intent to clear without payment of duty by the Noticee No.1. The said
seized pumps were then handed over to Shri Gordhanbhai Jadavbhai
Vekaria, Partner of noticee No.1 under Supratnama dated 09.03.2010,
for safe custody.
3.
A statement of Shri Bharatbhai Gordhanbhai Vekaria, Authorised
Person of noticee No.1, was recorded under Section 14 of the Central
Excise Act, 1944 on 09.03.2010 . He stated that they were engaged in
manufacturing and clearing of V3 to V6 size submersible pumps of
‘BHARAT’ brand since the year 1992; that he and his father were
looking after the entire business of the noticee No. 1; that they were
manufacturing and clearing V3, V4, V5 & V6 bore sizes submersible
pumps and various open well pumps; that the noticee No. 1 was a
partnership firm and his father, mother and wife were the partners in
the said firm, but the entire function, i.e., purchase, sales and financial
transactions, etc., of the firm was being looked after by him and his
father Shri Gordhanbhai Vekaria; that he was not holding any post in
the firm and not getting any salary from the firm being a family
member; that their brand name “Bharat” was not a registered brand
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and they are not using any other brand; that they had not obtained
BIS certification for any of their products; that he was aware of the
provision that for the purpose of availing benefit of SSI exemption,
they were required to obtained BIS Certification from 01.01.2007; they
were clearing the pumps under the bills of job work; that the sales
were made without bills and on cash payment. He presented a cheque
totally amounting to Rs. 3,00,000/- towards their duty liability for the
said clearances.
4.
Shri Gordhanbhai Jadavbhai Vekaria, one of the Partner of
noticee No.1 (hereinafter referred to as Noticee No. 2) in his statement
dtd. 12.03.2010 recorded under Section 14 of the Central Excise Act,
1944 inter alia, stated that they were engaged in manufacturing and
clearing of V3 to V6 size submersible pumps of ‘BHARAT’ brand since
the year 1992; that entire business of the noticee No. 1 was handled
by him and his son Shri Bharatbhai Gordhanbhai Vekaria; that due to
his old age, he was only supervising the business activities of the
noticee No.1 and all other work was being handled by his son Shri
Bharatbhai who was fully authorized to handle all the activities; that
Shri Bharatbhai was not taking any salary from the noticee no. 1; that
they were required to obtain BIS certification for availing benefit of SSI
exemption w.e.f. 01.01.2007, but procedure thereof being lengthy and
expensive, they have not obtained the same for their products; that
their sales remains limited within the area of Rajkot and nearby
villages, and due to lack of knowledge of excise laws, they have not
got registered with the Central Excise Department; that he agreed
with the contents of the Panchnama dated 09.03.2010 drawn at the
factory premises of the noticee No. 1; that he has also agreed with the
contents of the statement of his Son Shri Bharatbhai Vekaria recorded
on 09.03.2010; that they were preparing the sales invoices under the
guise of ‘job work’ to track the sales details; that within short period,
after taking stock of all the raw materials and after taking it on records
they will obtain Central Excise Registration and henceforth they will
make clearances of their finished goods after preparing Central Excise
Invoices and after payment of duty.
5.
Statement of Shri Mansukhbhai Mavjibhai Virparia, Partner of
M/s. Jalganga Electricals, Near ST Workshop, Gondal Road, Rajkot, was
recorded under Section 14 of the Central Excise Act, 1944 on
23.07.2010, wherein he, interalia, stated that he was one of the
partners in M/s. Jalganga Electricals which was engaged in
manufacture of the submersible pumps of various size and open well
pumps since 1998 and they were registered with Central Excise
Department since August, 2008; that they have purchased V6
Submersible Pumps from the noticee No.1 in the year 2009-10 . He
produced purchase invoices and ledger account of noticee No.1 for the
years 2009-10 towards their purchase ; that they have made payment
by cheque to the Noticee No. 1 as per details in their ledger account;
that they have purchased/received V6 Submersible Pumps in finished
condition only; that they have not carried out any manufacturing
process on the pumps purchased from the Noticee No.1; that they did
not get any goods manufactured on job work basis from noticee No.1.
6.
Statement of Shri Ashok Jinabhai Vekaria, Partner of M/s. Rotec
Pumps Pvt. Ltd., 3, Samrat Industrial Estate, Rajkot, was recorded
under Section 14 of the Central Excise Act, 1944 on 27.07.2010,
wherein he, inter alia, stated that he was one of the Directors in M/s.
Rotec Pumps Pvt. Ltd., Rajkot, which was engaged in manufacture of
submersible pumps of various size and open well pumps since 2003;
that they were registered with Central Excise Department since
November, 2009; that they have purchased V5 Submersible Pumps
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from noticee No.1 in the year 2009-10. He produced ledger account of
the noticee No.1 for the years 2009-10 towards their purchase ; that
they have made payment by cheque to noticee No.1 as per details in
ledger account; that the purchase invoices towards their purchase
from the noticee No.1 were not available with them as the same have
been submitted to their Chartered Accountant for audit purpose; that
they have purchased/received V5 Submersible Pumps in finished
condition only; that they have not carried out any manufacturing
process on the pumps purchased from the noticee No.1; that they have
not got any goods manufactured on job work basis from the Noticee
No.1.
7.
Shri Mansukhbhai Bhurabhai Bhesaniya, Power of Attorney
Holder of Smt. Kusumben Mansukhbhai Bhesaniya, Prop. of M/s. Shree
Sadgurukrupa Engineering, Yogeshwar Main Road, Kailashpati Society,
Atika, Dhebar Road, Rajkot in his statement dtd. 23.07.2010 recorded
under Section 14 of the Central Excise Act, 1944 inter alia, stated that
he was engaged in manufacturing and clearing of S.S. 410,
submersibles spares and also in trading of submersibles spares and
parts(assembly); that they were purchasing goods from the noticee
No.1 for trading purpose; that they were generally purchasing
Balancing Rings from noticee No.1. He produced the photocopies of
the invoices received from the noticee No.1, in support of such
purchases.
8.
In view of the above facts, it appears that the said Noticee No.1
was engaged in manufacture and clearance of power driven pumps,
i.e., submersible pumps of V3, V4, V5 and V6 type and open well
pumps, which do not conform to BIS specifications, that the noticee
No.1 had neither obtained Central Excise Registration for manufacture
of the said submersible pumps and open well pumps nor has
maintained any records regarding its production , that the said noticee
in order to wrongly avail the benefit of SSI exemption notification No.
08/2003-CE dated 01.03.2003, had suppressed the production and
clearance of submersible pumps of various type and open well pumps
and have only shown to have manufactured and cleared the parts &
kits of submersible pumps, with a clear intention to evade the payment
of Central Excise duty on the power driven pumps which do not
conform to BIS specifications/standards.
In view of the above facts, it appears that the said Noticee No.1
has contravened the provisions contained in the Central Excise Act
and Rules .
9.
Noticee No. 2 was knowingly concerned in the acts of
manufacturing, keeping, storing etc. of the excisable goods which he
knew or had reasons to believe that the same were liable to
confiscation under the said Act or the rules framed there under. These
acts on his part had made him liable for personal penalty under Rule
26 of the Central Excise Rules, 2002.
10.
Hence a Show Cause Notice No V.84(4)-09/MP/D/2010 dated
23.08.2010 was issued asking them as to why :
a. Central Excise duty of Rs. 2,85,455.05 (Rs. Two lacs, Eighty
Five thousands, Four hundreds, Fifty Five & Five Paisa only)
(including Education Cess & S &HE. Cess) as detailed in the
“Annexure- ‘X” & ‘Y’ to this notice, should not be recovered
from them under the proviso to Section 11A of the said Act.
b. The interest of Rs. 56,976/- (Rupees Fifty Six Thousand
Nine Hundred Seventy Six Only) on the aforesaid duty
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amount should not be recovered from them under Section
11AB of the said Act.
c. The penalty under Section 11AC of the said Act read with
Rule 25 of the said Rules should not be imposed upon
them.
d. Against the above duty demand, the amount of Rs.
3,00,000/- already deposited through cheque by the
noticee no. 1, should not be adjusted against Central
Excise duty mentioned at (i) above and against interest
mentioned at (ii) above.
e. the 04 Nos. of power driven pumps totally valued at Rs.
12,200/- placed under seizure under the Panchnama dated
09.03.2010 drawn at their factory premises should not be
confiscated under Rule 25 of the Central Excise Act, 2002;
The above Show Cause Notice was also issued to the Noticee
No. 2 asking them to explain as to why;
(i) Personal penalty should not be imposed upon them under
Rule 26 of the said Rules.
DEFENCE AND PERSONAL HEARING:
Shri J.V Busa the consultant of the noticee no.1 has filed their
defence reply vide their letter dtd.14.09.2011 wherein they stated
that they deny all the allegations made in the SCN stating that pump
manufactured by them i.e. submersible pumps and openwell pumps
were without motor , that party was actually manufacturing only
‘pump kit’ which is supplied to pump manufacturers who subsequently
attach the motor to make it power driven pumps.. He also added that
since their product could not be considered as PD Pump there was no
requirement for getting the BSI certification to avail the benefit of
exemption Notification No.8/2003. That the 4 pump kits seized on
09.03.2010 are not power driven pumps , that they have only sold mini
openwell kits which do not have any rewinding motor so as to connect
with electric power.
They also submitted that they have supplied submersible pumps
and openwell pumps kits to pump manufacturers viz. M/s. Jalganga
Electricals & M/s. Rotec Pumps Pvt. Ltd. etc. who subsequently
attach the motor and clear the product finally on payment of Central
Excise duty at appropriate rate. They also submitted the affidavit filed
by two of their clients, Shri Ashokbhai Jinabhai Vekariya, Director of
M/s Rotec Pump Pvt Ltd and Shri Mansukhlal Mavjibhai Virparia, Partner
of M/s Jalganga Pump to the effect that they were purchasing pump
kits from the assessee and finally clearing their final product after
winding of Motor, on payment of duty. They further submitted that in
the case of M/s Jalganga Electricals, the Commissioner(Appeals), has
held that if the pumps manufactured by the noticee were of BIS
standards and specifications, the condition contained in the notification
8/2003-CE stands satisfied. They also added that the Departmental
stay petition against the issue, was rejected by CESTAT , Ahmedabad.
They have also obtained a certificate from a private agency, ‘Labh
Consultancy’, to the effect that their products confirms to the ISI
standards. They further added that the Show Cause Notice demanding
duty on their job work income as detailed in the Annexure X attached
with the SCN , is not proper and needs to be set aside since the job
work income is noting but repairing income earned by them. They also
argued that it can be very well verified from their purchase bill files
that they have not purchased any winding wires and cables during the
period under reference, and the same was required for manufacture of
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Power Driven Pumps. They once again reiterated their stand that they
were actually manufacturing only ‘Pump Kits’ and not P D Pumps. The
noticee also added that the benefit of cum duty price should be
extended to them in view of the settled legal position as laid down by
CBEC Circular No 803/36/2004- CX dtd 27.12.2004. They also placed
reliance upon the decision of Hon’ble Supreme Court in the case of
Govt. Of India Vs. MRF Ltd. Reported in 1995 (77) ELT 43 (SC) and
Shrichakra Tyres Ltd Vs. Collector of Central Excise, Madras reported
in 1999 (108) ELT 361 (Tri. LB)
The noticee no. 1 was given an opportunity for personal hearing
and the consultant of the Noticee, Shri J.V Busa , appeared for
Personal hearing on 15.09.2011 and submitted their detailed written
submission and reiterated the facts stated in their defence submission
dated.14.09.2011 and he further requested for 10 days time to submit
Chartered Engineers Certificate to prove their stand that Pump Kit was
distinct from P.D. Pumps. They finally submitted certificate of
Chartered Engineers and photographs regarding their product on
23.09.2011.
FINDINGS :
I have carefully gone through the records of the case, SCN issued
and submissions made by the noticee in written reply as well as during
personal hearing. I find that the limited issue to be decided in the case
in hand is – whether the Turbine pumps manufactured and cleared by
the noticee no – 1, are to be considered as power driven pumps or
otherwise and whether they are covered under the purview of Notf.
8/2003-CE requiring them to obtain BIS certification.
The noticee no 1 has argued that since the goods cleared by
them were submersible and open well pump kits , wherein no motor
was fitted, the same cannot be considered as Power Driven pumps
requiring the BIS certification as contained in Notification 8/ 2003-CE
as amended. There is no force in this argument because the fact
remains that they had manufactured and cleared pumps for the
purpose of drawing water, which could only be run with the aid of
power. Hence even though the said pumps were not fitted with motor,
they are rightly classifiable under CHSH 8413. It has been held by the
Hon’ble Tribunal in the case of Commissioner of Central Excise ,
Ahmedabad Vs Jyoti Electrical Motor Ltd reported in 2003 (162) E.L.T.
1117 (Tri-Del) that “………. The power driven pumps even when they
are cleared without motor are classifiable under the heading 8413……”
Since the noticee has not disputed the fact that the pumps
manufactured by them were intended for drawing water and could only
be run with the aid of power, there is no force in their argument that
they are not covered under the purview of Notf. 8/2003-CE requiring
them to obtain BIS certification. They were rightly required to obtain
BIS certification in terms of entry no (xl) in the SSI Notification.
The noticee has further argued that they have supplied the
submersible pumps and open well pumps kits to pump manufacturers
who subsequently
attach the motor and clear the product finally on
payment of Central Excise duty at appropriate rate. They have
submitted the affidavit filed by two of their clients to the effect that
they were purchasing parts from the assessee and finally clearing their
final product on payment of duty. The said affidavits filed by their
clients are clearly an after thought in as much as, the statements were
recorded as early as July 2010 wherein they confessed that they have
received pumps in finished condition and have not carried out any
manufacturing activity. The filing of affidavit in September 2011, after
a lapse of more than a year is clearly an afterthought. The noticee
has further relied upon the CESTAT’s order dismissing the
5
departmental stay petition, however the same is not relevant in the
present case since the facts of the case are not identical since, in the
case cited, the party was having BIS Certification for some of their
brands and moreover, the order in question is only a stay order. As
this is only a stay order and not final order, it can’t be said to be
laying any law.
The noticee has argued that the duty demanded on income
shown as ‘job work’ income should be set aside since the same is
nothing but the income earned by them for repairing of pumps.
However, there is no force in this argument and it is clearly an after
thought since Shri Bharatbhai Gordhanbhai Vekaria has clearly
confessed in this statement dated 09.03.2010 that such job work bills
were raised only as per the direction of their accountant for accounting
purpose. And in reality they were not doing any such labour work and
when any of their customers were insisting on bills, they were raising
such a bill. And that the said bills were all fictitious bills reflecting the
cost of the pumps sold by them. Since this statement has never been
challenged, there is no force in the argument put forward now, stating
that they were carrying out repairing activity.
The noticee has requested for the benefit of cum duty price, and
I find that in view of the settled legal position, they are rightly entitled
to the benefit of cum duty price. Hence the duty demanded is
accordingly being reworked out as shown in Annexure – X.
It is also clear that these acts of contravention on the part of the
noticee No. 1 has been committed with sole intention to evade
payment of duty. The noticee No. 1 suppressed the fact of the
manufacture of pumps which did not conform to the standards
specified by the Bureau of Indian Standards(BIS) from the department
and cleared the said pumps without payment of duty, with an
intention to evade Central Excise duty by suppressing the material
facts although they were aware about the specific provision of law.
They have thereby rendered themselves liable to penal action under
Section 11AC of the said Act read with Rule 25 of the Central Excise
Rules, 2002 for the acts and omissions as described above.
Further the noticee No. 2 being the partner was knowingly
concerned in the acts of manufacturing, keeping, storing etc. of the
excisable goods which he knew or had reasons to believe that the
same were liable to confiscation under the said Act or the rules framed
there under. These acts on his part had made him liable for personal
penalty under Rule 26 of the Central Excise Rules, 2002.
In view of the above, I pass the following order.
ORDER
(i)
I order confiscation of the seized 4 (four) Nos. of pumps
(submersible and open well) not confirming to the BIS standards,
valued at Rs. 12,200/-,seized under panchnama dated 09.03.2010
under Rule 25 of the Central Excise Rules, 2002. However, I give an
option to M/s. Bharat Pumps Industries, Rajkot to redeem the goods
within 30 days of receipt of this order on payment of fine of Rs. 3,000/(Rs. Three Thousand only) under the provisions of Section 34 of the
Central Excise Act, 1944.
(ii)
I confirm the Central Excise duty amounting to Rs.2,67,908/(Rupees Two Lakhs Sixty Seven Thousand Nine Hundred and Eight
only), after giving the benefit of cum-duty price, under the provisions
of Section 11 A (1) of the Central Excise Act, 1944, as per Annexure X,
6
attached to this OIO. As the amount of Rs. 3,00,000/- (Rupees Three
Lakh only) has already paid I appropriate the same against the duty
confirmed.
(iii)
I order to charge and recover the interest of Rs. 48106/- (Forty
eight thousand one hundred and six only) under the provisions of
Section 11 AB of the Central Excise Act, 1944.
(iv)
I impose a penalty of Rs.2,67,908/- (Rupees Two Lakhs Sixty
Seven Thousand Nine Hundred and Eight only) upon M/s. Bharat Pumps
Industries, Rajkot under the provisions of Section 11 AC of the Central
Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002.As
provided under proviso to Section 11AC of the Central Excise Act,
1944, an option to pay only 25% of the penalty amount is available to
the party, if the amount confirmed hereinabove for recovery, is paid by
them within thirty days of the receipt of this order.
(v)
I impose a penalty of Rs. 1,00,000/- (Rupees One Lakh only) upon
Shri Gordhanbhai Jadavbhai Vekaria, Partner under the provisions of
Rule 26 of the Central Excise Rules, 2002.
(T. SAMAYA MURALI)
ASSISTANT COMMISSIONER
CENTRAL EXCISE DIVISION –I
RAJKOT.
F. No. V.84(4)-09/MP/2010-11
Date : 29.09.2011
To
(1)
M/s Bharat Pumps Industries,
Kailashpati Society,
Street No.4, Opp. Plot No.27,
Dhebar Road (South),
Rajkot.
(2)
Shri Gordhanbhai Jadavbhai Vekaria,
C/o M/s Bharat Pumps Industries,
Kailashpati Society,
Street No.4,
Opp. Plot No.27,
Dhebar Road (South),
Rajkot.
Copy to:
1. The Assistant Commissioner (AE), Central Excise, HQ, Rajkot
2. The Superintendent, AR-III, Central Excise Division-I, Rajkot.
3. Guard File/Spare copy.
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In view of the above, I pass the following order.
ORDER
(vi)
I order confiscation of the seized 4 (four) Nos. of
pumps(submersible and open well) not confirming to the BIS
standards, valued at Rs. 12,200/-,seized under panchanama dated
09.03.2010 under Rule 25 of the Central Excise Rules, 2002. However,
I give an option to M/s. Bharat Pumps Industries, Rajkot to redeem the
goods within 30 days of receipt of this order on payment of fine of Rs.
3,000/- (Rs. Three Thousand only) under the provisions of Section 34 of
the Central Excise Act, 1944.
(vii) I confirm the Central Excise duty amounting to Rs.2,67,908/(Rupees Two Lakhs, Sixty Seven Thousand Nine Hundred and Eight
only), after giving the benefit of cum-duty price, under the provisions
of Section 11 A (1) of the Central Excise Act, 1944, as per Annexure X,
attached to this OIO. As the amount of Rs. 3,00,000/- (Rupees Three
Lakh only) has already paid I appropriate the same against the duty
confirmed.
(viii) I order to recover the interest at the applicable rate on the duty
so arrived at after giving the benefit of cum-duty price, under the
provisions of Section 11 AB of the Central Excise Act, 1944.
(ix)
I impose a penalty of Rs.2,67,908/- (Rupees Two Lakhs, Sixty
Seven Thousand Nine Hundred and Eight only) upon M/s. Bharat Pumps
Industries, Rajkot under the provisions of Section 11 AC of the Central
Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002.As
provided under proviso to Section 11AC of the Central Excise Act,
1944, an option to pay only 25% of the penalty amount is available to
the party, if the amount confirmed hereinabove for recovery, is paid by
them within thirty days of the receipt of this order.
(x)
I impose a penalty of Rs. 1,00,000/- (Rupees One Lakh only) upon
Shri Gordhanbhai Jadavbhai Vekaria, Partner under the provisions of
Rule 26 of the Central Excise Rules, 2002.
(T. SAMAYA MURALI)
ASSISTANT COMMISSIONER
CENTRAL EXCISE DIVISION –I
RAJKOT.
F. No. V.84(4)-09/MP/2010-11
Date : 29.09.2011
To
(1)
M/s Bharat Pumps Industries,
Kailashpati Society,
Street No.4, Opp. Plot No.27,
8
Dhebar Road (South),
Rajkot.
(2)
Shri Gordhanbhai Jadavbhai Vekaria,
C/o M/s Bharat Pumps Industries,
Kailashpati Society,
Street No.4,
Opp. Plot No.27,
Dhebar Road (South),
Rajkot.
Copy to:
01.The Assistant Commissioner (AE), Central Excise, HQ, Rajkot
02.The Superintendent, AR-III, Central Excise Division-I, Rajkot.
03.Guard File/Spare copy.
9