D.C. Mandal, Member (J)

1. The facts of the case, in brief, are that M/s. Royal Paints, Baroda are holders of Central Excise L-4 licence for the manufacture of paints and varnishes falling under Item 14 of C.E. Tariff. They were manufacturing paints and varnishes with the aid of power. M/s. Royal Paints Products, Baroda were also manufacturing paints and varnishes, but without the aid of power. On 21.3.1975, the Central Excise Preventive Officers of S.R.P. HQrs. Office, Baroda paid a surprise visit to the premises of M/s. Royal Paint Products and found 67 drums of 20 Kgs. each, of synthetic oil bound distemper lying in the factory without markings. The drums were received from M/s. Royal Paints without any Central Excise Gate Pass. The said synthetic oil bound distemper weighing 1340 Kgs. valued at Rs. 6,700/- had been removed by M/s. Royal Paints from their factory without payment of Central Excise duty. The goods were seized by the Officers. It is alleged that further investigations made by the Department revealed that M/s. Royal Paints suppressed their production and diverted the same to M/s. Royal Paints Products, a non-power operated unit without accounting for in R.G. 1 Register and without payment of duty, and wrongly availed of the benefit of exemption Notification No. 116/74-C.E., dated 1.8.1974 in respect of accounted for goods, with intent to evade payment of duty. It was alleged that the goods valued at Rs. 89,577.80 as mentioned in paragraph 2 of the order-in-original were manufactured by M/s. Royal Paints, but were cleared under delivery challans of M/s. Royal Paint Products as their manufactures. It is also alleged that in addition to the goods valued at Rs. 89,577.80 mentioned above, M/s. Royal Paints had also manufactured and cleared excisable goods valued at Rs. 1,46,472.00, as detailed in para 3 of the Collector's order-in-original, during the financial year 1974-75, which value exceeded the exemption limit of Rs. 1,33,000/- laid down in the Notification No. 116/74-C.E., dated 1.8.1974, rendering M/s. Royal Paints ineligible for exemption from duty in respect of paints and varnishes manufactured by them. Show cause notice was issued to M/s. Royal Paints charging them with contravention of the provisions of Rules 173-B, 173-C, 173-F, 173-G, 9, 52-A and 53, and calling upon them to show cause against imposition of penalty and recovery of duty on (i) 67 drums oil bound distemper seized from the premises of M/s. Royal Paint Products, (ii) goods valued at Rs. 89,577.80 and (iii) goods valued at Rs. 1,46,472.00, as mentioned earlier. M/s. Royal Paint Products were asked to show cause against imposition of penalty under Rule 52A(5) of the Central Excise Rules. On adjudication of the case, the Collector of Central Excise, Baroda held the charges as established and passed the following orders :-

(i) Confiscation of 67 drums of oil bound distemper weighing 1340 Kgs. and valued at Rs. 6,700/-, with a redemption fine of Rs. 2500/-;

(ii) Ordered M/s. Royal Paints, under Rule 9(2) of Central Excise Rules, to pay Central Excise duty on the goods valued at Rs. 89,577.80 and Rs. 1,46,472/-;

(iii) Imposed penalty of Rs. 25,000/- on M/s. Royal Paints under Rule 173Q of Central Excise Rules; and

(iv) Imposed penalty of Rs. 1000/- on M/s. Royal Paint Products under Rule 52A(5) ibid.

Being aggrieved, the appellants have filed these appeals.

2. We have heard Shri Jain for the appellants and Shri Shishir Kumar for the respondent. The gists of the arguments of Shri Jain are as follows :-

(i) 67 drums of oil bound distemper were sent by M/s. Royal Paints without Gate Pass through mistake. There is a breach of Rule 52-A of the Central Excise Rules. Contravention of other Rules are not admitted. Gate Pass was subsequently issued vide No. 78 dated 29.3.1975 and debit entry was made in R.G. 1, and

(ii) So far as the goods valued at Rs. 89,577.80, vide para 2 of the Collector's order, are concerned, the same are the products of M/s. Royal Pai