TMI Blog1993 (1) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 30 lakhs during the year 1984-85 the appellants availed of the exemption from the payment of Central Excise duty in terms of Notification No. 77/83. In the year 1985-86 as well, the appellants availed complete exemption from payment of duty in terms of Notification No. 77/85 dated 17-3-1985 under which clearances upto the value of Rs. 25 lakhs during the financial year were exempt from the payment of duty. 2. On 31-12-1985 Central Excise Officers visited the appellants factory and took over certain records on the ground that as on 25-9-1982 the total value of the plant and machinery installed in the factory had exceeded Rs. 20 lakhs as borne out by the declaration given by the appellants to the Inspector of Factories, Banks and D.G.T.D. They also visited another unit by the name M/s. Llasar Co., a partnership firm consisting of three partners namely, Shri A.K. Kandasamy, the sole proprietor of M/s. Sri Ranga Industries, and his father and wife. Since Shri Kandasamy was having interest both in M/s. Llasar Co. and M/s. Sri Ranga Industries and the other two partners of M/s. Llasar Co. were close relatives of Sri Kandasamy, the officers concluded that the clearances effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise reported in 1985 (19) E.L.T. 441, in which it was held that existence of common partners and sharing of certain managerial personnel and facilities such as machinery, factory premises, telephone and staff by the two units would not be sufficient to warrant the conclusion that they were working for and on behalf of one and another. In support of his arguments he also cited the Tribunal s decision in the case of Kerala Lamp Works v. CCE, reported in 1988 (33) E.L.T. 771. He argued that there was no justification for treating M/s. Sri Ranga Industries as the manufacturer of goods produced by M/s. Llasar Go. since the two units were totally independent in so far as procurement of orders for finished goods/buying of raw materials and utilization of machinery was concerned. He stated that the Collector had chosen to club the clearances effected by the appellants as well as by M/s. Llasar Co. on the basis of certain presumptions. He added that for this purpose the Collector had mainly relied upon the appellants letters dated 2-1-1986 and 9-1-1986 which were given at the instance of Central Excise Officers. He contended that there was nothing in these letters to support the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which had been installed was worth Rs. 12,17,670. He added that the value of the machinery did not exceed Rs. 12,17,670 was again confirmed by the Director of Industries and Commerce, Madras in his letter dated 26-3-1983. He stated that even though the value of the plant and machinery indicated in the letter from the Director of Industries was arrived at after the verification carried out on 6-10-1982 the Collector had chosen to disregard the contents of the Director s letter. He added that the two boring machines valued at Rs. 8,34,930.90 P. which according to the Department were installed in April 1983 were in fact received much later and were installed in July 1983. He referred to the certificate dated 29-9-1984 issued by the Superintendent of Central Excise, Coimbatore II, Division wherein it was stated that M/s. Ranga Industries was brought under Central Excise control with effect from 7-3-1984 and prior to that it was not under licensing control since it was eligible for exemption under Notification No. 77/83 dated 1-3-1983. He contended that in Para 5(C) of Annexure I to the show cause notice dated 21-3-1987 it had been admitted by the Department that the vertical and horiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asar Co. and Shri Ranga Industries were a single unit behind the facade of three independent units. Shri Sharma added that on the basis of the letter dated 26-3-1983 from the Director of Industries, Madras wherein the value of plant and machinery installed in the appellants factory was shown as Rs. 12,17,670/- and bills dated 16-4-1983 in respect of the horizontal and vertical boring machines valued at Rs. 7,92,833/- the Collector had rightly inferred that with effect from 1-5-1983 the value of plant and machinery installed in the appellants factory was in excess of Rs. 20 lakhs. He stated that for these reasons and also in view of the fact that in the declaration filed before the DGTD on 25-9-1982 it was claimed that the value of plant and machinery installed in the factory was between Rs. 25 to Rs. 27 lakhs, the appellant was not eligible for the exemption in terms of Notification No. 77/83. He contended that the appellants having wilfully suppressed the facts in regard to the value of plant and machinery installed in the factory, the Collector had correctly invoked the proviso to Section 11A. In support of his arguments he cited the following case law :- (i) M/s. Balamurga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. However, having regard to the contents of the letter dated 2-1-1986 from Sri Ranga Industries and also the letter dated 9-1-1986 from Shri A.K. Kandasamy the Collector concluded that in the matter of receiving orders and executing them, the two firms behaved less like independent units and more as departments of the same Company. For this reason and also on the grounds that the documents contained in certain files referred to in the Annexure were indicative of regular meetings between Shri Kandasamy and the senior executives of Sri Ranga Industries, M/s. Llasar Co. and also M/s. Llasar Flow Control and other firms in which Shri Kandasamy was a partner, were indicative of the fact that M/s. Sri Ranga Industries, M/s. Llasar Co. and M/s. Llasar Flow Control were one single unit behind the facade of 3 independent units. 8. In support of his contention that M/s. Sri Ranga Industries and M/s. Llasar Co. were to be treated as one single unit and their clearances had to be clubbed for the purpose of determining the duty liability the learned JDR has relied upon the decision of the Tribunal in the case of Balamurgan Balamurli v. CCE, Madras reported in 1988 (38) E.L.T. 54. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces in our view the case law cited by the learned JDR cannot be of much assistance to the Department s case. 11. It is seen that in support of the findings that in the matter of receiving orders and executing them there was a great deal of flexibility between the two units and they acted more as a department of a single unit rather than as independent unit, no specific instances of orders received by M/s. Llasar Co. having been executed by M/s. Sri Ranga Industries or vice versa, have been cited either in the show cause notice or in the impugned order. Under these circumstances, we are of the view that merely on the basis of his own interpretation of the contents of the letters dated 2-l-1986 and 9-1-1986 from Sri Ranga Industries and Shri A.K. Kandasamy respectively, the Collector was not justified in arriving at the finding that in the matter of receiving and executing the orders, the firms behaved more like departments of the same unit. In our view the minutes of the meetings between Shri A.K. Kandasamy and certain senior executives of the firms with which he was associated in his capacity either as proprietor or partner could only be taken as indicative of common use of som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes listed were collectively valued at Rs. 25,39,495.79 and this list included two machines valued at Rs. 7,92,833/- which had actually not been received upto 6-10-1982 when the appellants factory was inspected by the staff of the DGTD. However, on the basis of the bill dated 16-4-1983 issued by M/s. Punjab Steel Corporation, Batala in respect of these machines the Collector arrived at the conclusion that they must have been received by the end of April 1983. He, therefore, held that the value of plant and machinery owned by Sri Ranga Industries had to be taken as having exceeded the limit of Rs. 20 lakhs prescribed in Notification No. 77/83-C.E. from 1-5-1983 onwards. In ground No. 25 of their appeal the appellants have claimed that the machines in question were installed in November, 1983 whereas during the hearing before us, the learned consultant had claimed that the machines in question were installed in the appellants factory in July, 1983. In this regard, it is seen from the General Ledger for 1983-84 filed by the appellants at page 56 of the paper book that there is an entry dated 27-5-1983 relating to freight charges for the vertical boring machine. We find that another ..... X X X X Extracts X X X X X X X X Extracts X X X X
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