Per S.L. Peeran :

This appeal arises from order in appeal dt. 26.9.89 passed by Additional Collector, Pune.

2. The question that arises for consideration in this appeal is as to whether that the job work undertaken by the assessee of rubber lining on the tanks which is supposed to be anti-corrosive treatment for giving proper life than painting, would amount to a process of manufacture and therefore, the appellants are liable to pay excise duty? and as to whether there has been suppression by not declaring the activity to the department, thus attracting proviso to Section 11A? Whether 24 M.S. Tanks under seizure are liable for confiscation and release on payment of fine besides penalty? and as to whether the order passed by Addl. Collector confiscating land, building, plant/machinery under Rule 173Q (2) of Central Excise Rules, 44 is justified and as to whether they are liable to pay redemption fine of Rs. 25,000/- on that account?

3. By show cause notice dt. 20.9.88, the department alleged that the appellants had contravention of provisions of Central Excise Rules, 44 and Section 6 of the Central Excises & Salt Act, 44 in as much as they had failed to take out Central Excise Licence in respect of excisable goods falling under Chapter sub-heading 84.79 (erstwhile T.I. 68) manufactured and cleared during the period 1985 to 29.9.87 and they had failed to file classification list/price list and failed to maintain statutory records and failed to give intimation regarding the manufacturing activities to the department, and further we failed to determine duty and failed to clear the goods on payment of duty due under cover of gate passes, showing payment of duty during the above period. They were called upon to show cause as to why Central Excise Duty amounting to Rs. 3,89,389.20 in addition to duty of Rs. 10,000/- on seized goods should not be recovered from them under the provisions of Rule 9 (2) (ii) of Central Excises & Salt Act, 44 and penalty should not be imposed on them and the show cause notice invoked proviso to Section 11A of Central Excise Rules.

4. The statement of Shri S.V. Deshpande was also recorded on 29.9.87, who admitted that the process of rubber lining was carried out in their premises and that they could not get SSI registration. They had not filed declaration. They had received M.S. Tanks from M/s. Thermax Pvt. Ltd. and from their fabricators. They were carrying only rubber lining and merely collecting labour charges only. He also stated that they have recovered labour charges from April, 87 to Aug'87 and hence they had not recovered excise duty.

They filed the reply to show cause notice dt. 25.10.88 wherein they stated that they received M.S. Tanks from their customers for rubber lining as anti-corrosive treatment, which increases the life of the tank. They were making rubber compound for use in their factory, which is not sold nor used for trade compound or tyres. Since they were not manufacturing tanks, they requested that value of tanks should not be included in turnover and hence their value was less than Rs. 7.5 lakhs. Hence no duty was liable to be paid. They stated that they had Central Excise licence and they filed classification list for compounded rubber under chapter heading No. 40.05 and the same was duly approved. Ld. Addl. Collector on consideration of the submissions and the charges levied against them rejected their pleas and upheld the departmental allegations. He held such process carried out by them on the tanks amounted to a process of manufacture and hence such tanks lined with rubber were required to discharge duty. Ld. Addl. Collector had not determined under what tariff heading such goods are liable to be charged and there is no finding on the question of classification to be adopted. He also rejected the plea of valuation on the ground that they have not substantiated their case with any documentary proof. He held that there has been suppression in the case and hence larger period is