G. Sankaran, Member (T)

1. This is an appeal against Order-in-Original No. 13/MP/83 dated 30-11-1983 passed by the Collector of Central Excise, Baroda. The facts of the case, briefly stated, are that Central Excise Preventive Officers of Bulsar Division paid a surprise visit on 30-1-1983 to the factory premises of M/s. Growel Chromates, a division of M/s. Grauer and Weil (India) Ltd., Bombay (hereinafter referred to as "the appellants") situated in plot No. 407, G.I.D.C., Vapi. It was found that Sodium Bichromate (falling under Item No. 14AA of the First Schedule to the Central Excise and Salt Act - GET, for short - and for which they held a licence) manufactured by them was removed on payment of duty under gate passes for captive consumption to their chromic acid sections situated adjoining their manufacturing premises, for the manufacture of chromic acid flakes (falling under Item No. 68 GET). The chromic acid flakes were found to be manufactured with the aid of power and removed under the delivery challans of the appellants without payment of duty. The officers detained 98 drums (4,900 kgs.) of chromic acid flakes lying in the chromic acid section for enquiries. On a subsequent visit on 2-2-1983, 126 drums (this included the 98 drums detained earlier), of chromic acid flakes (6,300 kgs. - valued at Rs. 1,89,000) in fully manufactured condition were seized in the belief that the goods were liable to confiscation as the appellants were not entitled to duty exemption under notification No. 46/81 dated 1-3-1981. The goods were subsequently released to the appellants against a bond. On investigation of the case, the department considered that the appellants had wrongfully availed themselves of duty exemption under notification 46/81 on the basis that the chromic acid section was not a "factory" within the meaning of the term in Section 2(m) of the Factories Act, 1948, though, according to the department, the said section, was part and parcel, of the appellants' factory. In due course, a notice was issued to the appellants on 14-7-1983 charging them with contravention of Central Excise Rule 173F read with Rule 9(1), Rule 173-B, Rule 173-C, Rule 173-G(2) read with Rule 52-A, Rule 173G(4) read with Rule 53. They were called upon to show cause why penalty should not be imposed on them, why the goods seized and subsequently provisionally released should not be confiscated and why they should not be called upon to pay duty on 1,52,950 Kgs. of chromic acid flakes valued at Rs. 44,95,475.00 illicitly manufactured and cleared during the period from September, 1981 to January, 1983. The show cause notice said that the chromic acid section was nothing but a part of the appellants' factory since it was served by common electric and water connections, the payments for the same and the salaries of the staff and workers were paid by the appellants and further the raw material was supplied by the appellants and the final product was removed on the delivery challans of the appellants.

In due course, on consideration of the written and oral submissions of the appellants, the Collector, by his impugned order No. 13/MP/83 dated 30-11-1983, held that the charges levelled against the appellants were conclusively proved. He imposed a penalty of Rs. 5,00,000/- on M/s. Growel Chromates of Vapi under Rule 173Q(1); he confiscated the chromic acid flakes valued at Rs. 1,89,000/- earlier seized and provisionally released under Rule 173Q(1) and ordered the appellants to pay a fine of Rs. 1,89,000/- in lieu of confiscation; he ordered that, on redemption, the confiscated goods should be properly accounted for by the appellants and cleared in accordance with law, if not already done and finally, he ordered M/s. Growel Chromates of Vapi to pay excise duty at the appropriate rates under item 68, GET on chromic acid flakes valued at Rs. 44,95,475/- illicitly manufactured and cleared without payment of the duty leviable thereon during the period from September,