TMI Blog1986 (11) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... iti Ram (Karta of the HUF), Smt. Prema Wati, Sh. Subhash Chander, Master Navin and Master Dinesh. Km. Saroj and Subhash Chander are also individually members of the partnership. It is seen from the order of the Board that in Shakti Engg. Works, the shares are as follows:- Sh. Walaiti Ram (Individual) 60 P Kumari Saroj 20 P Subhash Chander 20 P In M.G. Industries, the shares are as follows :- Sh. Walaiti Ram (Karta of the HUF) 10 P Kumari Saroj 45 P Subhash Chander 45 P Both the units are engaged in the manufacture of goods falling under Item 68 C.E.T. The Units are Small Scale Sectors with capital investment from time to time on Plant Machinery of less than Rs. 10 lakhs each. They are also engaged in the manufacture of castings under Item 25. Under Notification No. 89/79 C.E., dated 1.3.79 goods falling under Item 68 C.E.T. cleared for home consumption on or after the first day of April in any financial year by or on behalf of a manufacturer from one or more factories are exempted, from the whole of the Central Excise Duty in the case of first clearance up to an aggregate value not exceeding Rs. 15 lakhs. This Notification also prescribes conditions in respect of the capital invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited supra) the turnover of the two firms had to be clubbed. The penalties were, however, set aside. The present appeals are against the order of the Board. 6. Sh. C.L. Beri, Advocate for M/s. Shakti Engg. Works submitted that the two firms are distinct and separate legal entities. He contended that Sh. Walaiti Ram was a partner in Shakti Engg. Works in his individual capacity while in the other (M.G. Industries) he was representing the joint family. Shri Beri placed reliance on the ruling reported in 1983 (14) E.L.T. 1994 (G.D. Industries v. C. C.E., Chandigarh). In that case the Tribunal relying on Section 3(42) of the General Clauses Act, 1897 held that a partner of the firm was not the same person as the firm itself. In that case the question arose whether the value of the goods cleared from each of the three factories solely owned by the appellants could be aggregated. In an elaborate judgment the Tribunal came to the conclusion that a person who happens to be a partner in a plurality of firms cannot be said to own the sum total of powerlooms possessed by the firms nor can a plurality of partnership firms treated as one entity because of a common partner, if a person is a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en issued. M.G. Industries have been issued a separate Central Excise Licence. Each of the appellants fulfilled all the conditions of the Notification. The decision of the Hon ble Supreme Court in cases relating to the Company Law would not be applicable to the present facts. He urged that the ratio of profits between the two firms was distinct and different. The shareholders constituting a company are not the same as partners in a partnership. Shri Jain referred to the ruling on 1970 (77) ITR 10 :- When the Karta of a Hindu Undivided Family joins a firm as a partner, even though he contributes his share from out of the family funds, the other members of family do not ipso facto become partners of that firm. Shri Jain urged that this decision proceeded on a different footing and the question of representation was considered. The learned Consultant cited AIR 1966 SC 1295 (State of Punjab v. Jullundur Vegetables Syndicate). That was a decision under the Sales-Tax Act. It is observed that a firm is an independent unit for the purpose of assessment. According to Shri Jain, the Collector had given directions to the Asstt. Collector in respect of valuation which was not proper as it woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors which make out that these are two distinct legal entities. Of course, it is open to the department to establish that these units have been created with a view to evade tax liability or that in reality there were no two firms. We must say that such a proof is wanting in this case. We may also observe that there is no such allegation in the show cause notice or a finding to that effect. These aspects of the case persuade us to hold that these two units are distinct legal entities. 11. The main ground on which the authorities below have come to the conclusion that the clearances should be clubbed is on the basis that one of the partners was described as Karta of joint family. This factor, according to the Department will have no material bearing and that the two units should be considered as the same manufacturer for the purpose of clubbing the clearances. In this connection we have to state that an ordinary partnership is composed of distinct individuals who enter into a contract to carry on business either for a limited time or during their pleasure. Section 5 of the Partnership Act lays emphasis that the relationship of partnership arises from contract and not from status. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of any in the Excise Law, the Tribunal ought not to enlarge the scope. But the fallacy in the argument is that there is no definition of a person under the Central Excise Law then recourse has to be had to the General Clauses Act which would include an association of persons as well. The decision in Bhagyalaxmi Co. [1965 (55) ITR 660], at Page 664 contains the following observations:- A contract of partnership has no concern with the obligation of the partners to others in respect of their shares of profit in the partnership. It only regulates the rights and liabilities of the partners. A partner may be the Karta of a joint Hindu family; he may be a trustee; he may enter into a sub-partnership with others; he may, under an agreement, express or implied, be the representative of a group of persons; he may be a benamidar for another. In all such cases he occupies a dual position. Qua the partnership, he functions in his personal capacity; qua the third parties, in his representative capacity. Thus this decision shows that Shri Walaiti Ram has a dual capacity in that he has an individual share in Shakti Engg. Works whereas he represents his branch of the HUE in M.G. Industries. 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in plurality of firms cannot be said to own a sum total of the powerlooms possessed by the firms nor can a plurality of partnership firms treated as one entity because of common partners. The ratio of that decision would, therefore, squarely apply. Hence having regard to the legal, position and the authorities cited above, we are of the view that the two firms are distinct and independent firms and their clearances ought not to be clubbed. 15. Shri R.K. Jain argued that in respect of the value certain directions have been issued by the Appellate Collector to the Assistant Collector and to that extent the order would be invalid. He also raised a question of time-bar. But in the light of our findings on the main issue these questions do not strictly arose. However, we must observe that being a quasi-judicial function, the Appellate Collector should have directed the Assistant Collector to give his findings on the value rather than prescribing the mode of working out the same. 16. However, on the question of time-bar, in the absence of any finding that the goods were removed clandestinely or without the knowledge of the department, the finding cannot be supported. 17. In the result ..... 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