TMI Blog2000 (5) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... 22-10-1990 number of incriminating documents were seized under the panchnama. On the scrutiny of the said records, documents, and subsequent investigation disclose that the above said units had suppressed the fact that the entire affairs were managed by a single family under the stewardship of S.K. Suratkal and all these units have mutual financial and commercial interest in the business of each other. He had played a parental role in their organisation called by them as Highland Group of Industries by acting on behalf of all other noticee units while dealing with third parties like purchasers, sellers, wholesale dealers, Govt. bodies etc. in the matter of commercial and financial interest of these units. All home clearances of all these units during financial year beginning from May 1987 are required to be clubbed together under clause 2 of Notification No. 175/86-CE dated 1-3-1986 as amended for the purpose of admissibility of grant of exemption of duty. On clubbing together all home clearances of these units during financial year from May 1987 it exceeded the stipulated limit of Rs. 1.5 or 2 crores as the case may be. Highland, Bombay floated Highland Vapi as soon as stipulated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nits under Rule 57-I of Central Excise Rules; confiscate land, building, plant machinery belonging to these units under Rule 173Q(2) of Central Excise Rules; and for imposing penalty on all the noticees under Rules 173Q(1) and 209A of Central Excise Rules, 1944. In the show cause notice dated 22-5-1992 at page 42 in paragraph 7, four units namely Epsilon, Vapi, Syntho, Vapi, Highland, Vapi were called upon to show cause to the Collector, Central Excise, Surat, (stationed at Baroda) as to Central Excise duties amounting to Rs. 74,61,625/- on the home clearance made by them from all the factories during the period May 1987 to March 1992 detailed in Annexure D should not be demanded and recovered from them under Rule 9(2) of Central Excise Rules read with sub-section (1) of Section 11A of the Central Excise Act, and Modvat credit of duty taken at higher rate in respect of duty paid goods received from among these units should not be debited in the RG23A credit accounts under Rule 57-I of Central Excise Rules; and why penalty should not be imposed on them under Rule 173Q read with Rule 9(2) and also under Rule 209A for Central Excise Rules and any land, building, plant and machinery, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under Section 37B has stipulated in the instructions issued that limited companies whether public or private are distinct entities, and hence two or more limited companies are eligible for separate exemption irrespective of the composition of the shareholders. Two or more partnership firm having some but not all partners common are eligible for separate exemption as per the Board instructions and binding on the department. The fact that some partners are common or close family relations cannot be a ground for clubbing and has cited 26 case laws from 1983 E.L.T. to 1998 (101) E.L.T. 695. There were other partners/directors also apart from the Suratkal family members namely Biwi Anjaria, Gajendra Shah, N.K. Hegde, S.M. Shetty. Each of the aforesaid companies or firms have separate SSI or income tax and sales tax registration and factory licence and machinery and electric and water connections. Each of the firms/companies had its own set of employees. The employees are liable to be transferred to another establishment of the same company or firm as per the letters of appointment and not from one firm to another firm. The auditors letter to Somnath Shetty was in respect of any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 256. He has wrongly presumed that S.K. Suratkal and his son had withdrawn from Epsilon capital account over and above their contribution as per the accounts annexed to page 257 of the paper book. The drawing of the amount of 12,000 and 20,000 was for financing a project of Syntho is ridiculous since the project of Syntho was to the tune of Rs. 60 lakhs, which was raised, from GSFC and banks. 7.Demand is barred by time and the larger period cannot be invoked in the present case as names of director or partners are mentioned in the 4 licences partnership deed or memorandum of application filed at the time of applying for the licence. The firms are within the same excise division and two of them are on the adjacent plots. Internal audit has taken place down the years and balance sheet has been filed. Search was on 22-12-1990, and thereafter there is no suppression of facts. He has prepared a chart showing the 12 allegations, explanation offered, and the case laws in support of it. He has also enclosed a tabular statement giving the address, date of incorporation, licence no., Central Gujarat Sales Tax no., SSI registration no., income tax no., electricity and water connection n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .K. Suratkal prescribed certain formats for daily production/despatch, weekly pending orders monthly raw material details, work order and follow up of payments collected at Bhandup office and put up for perusal of S.K. Suratkal for making easy availability of all the information for all the units, under the office memo which was kept at Bhandup office for his perusal. S.M. Shetty the partner of Highland Bombay and Epsilon, Vapi issued work order in format no. 8 to all the units, on the basis of the purchase orders received from customers at Bhandup office and used to give directions to all the units regarding the production particulars of goods. Highland Bombay issued letters to the customers of all the units for overdue payments under format H-10. V.V. Phadnis of Epsilon, Vapi but sitting at Bhandup office is managing the purchase of raw material, consumable, fuel of all the units under format nos. H-4 H-7. All the units send the monthly requirements to Bhandup office and V.V. Phadnis used to place orders for the supply of the same with the respective suppliers. Common inputs/raw materials were ordered in bulk required by more than one unit. Highland Bombay appointed area-wise d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of Epsilon, the turnover of Highland Bombay was expected to cross Rs. 2 crores, and to meet the several increasing demand, a private limited company Highland at Vapi was floated, and S.K. Suratkal, being the major partner of Highland was also declared to be the promoter to the Vapi Company. In the letter to Syndicate Bank, he was referred as the main promoter Epsilon, Syntho, Gujarat Indl. Chemical, Vapi were mentioned as the associated concerns wherein Suratkal family was partners/directors. Day today finances of all the units were managed from the office of Highland Bombay as per the common money receipt book and payment book. Wherever S.K. Suratkal is a partner or a director, financial powers are vested with him, and wherever his family members are so, it was vested with them. S.K. Suratkal has handled the bank correspondence for grant of loan, enhancement of credit facility. S.K. Suratkal and his son Kiran S. Suratkal had withdrawn money over and above their contribution from Epsilon capital account for the project of Syntho, and thus withdrawal of money from one unit and complete control over bank operation establishes that S.K. Suratkal used to make common finance arrange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the flowback of profit and financial assistance in the business of each other, though not directly. Highland Bombay is holding the 4 units at Vapi though physically they are situated in different places with separate registration but with common administration and financial control. The impugned order having considered all these aspects cannot be disturbed on the contention of the appellant. The invocation of the larger period is proper and correct in the light of the suppression of the material facts of the mutual and commercial interest in the business of each other from the department by not declaring the total activities managed by the same family or person and availed the small scale concession not admissible to them. The imposition of penalty is proper and correct in the light of the facts and circumstances as contended above. 11.Perused the show cause notice, reply, impugned order and the appeal memorandum and the documents available on record from annexure 1 to 42 in the appeal file and also the synopsis produced in this case. The appellant have taken the preliminary objection that the Collector has demanded duty from 4 firms/companies at Vapi by holding that Highland Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt places having different state registration like SSI income tax, sales tax. Accordingly being holding companies/firm the complete administration control and financial assistance by Highland, their clearance value are correctly liable as per the provision of notification 175/86 dated 1-3-1986 as amended. In paragraph 30 it is clearly held that in the present case all the basic requirements for clubbing the clearances of units are forthcoming. There are also evidence of financial assistance and control over the production and sales of goods of other units of Highland, Bombay. There is frequent money transfer, payment of bills or charges of one unit by another, though it does not reflect direct flowback of profit being bank transaction, it is true that such frequent money transfer are flowback of profit and financial assistance in the business of each other. In the above background, the case law cited by the ld. Counsel for the appellant require consideration. 13.In 1997 (92) E.L.T. 451 (S.C.) in the case of Gajanan Fabric Distributors v. CCE, Pune it is held in paragraphs 2, 3 and 4 that "the Collector recording the finding and same upheld by the Tribunal that all seven units exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department. 15.The alternative stand is also taken by the appellants that the demand is barred by time and the extended period cannot be utilised in the instant case as there was no suppression on the part of the appellant with an intent to evade payment of duty by them, and the department is well aware of the constitution of the units with the names of the directors/partners in the L4 licence Partnership deeds memorandum of association filed at the time of obtaining the licence and the internal audits have taken place down the years and the balance sheet have been filed. After the search has taken place on 22-10-1990 there can be no question of suppression. The show cause notice and the impugned order discloses that the appellants have failed to file the price list and failed to determine and pay the proper Central Excise duty on the excisable goods prior to the removal from the factory. As per the show cause notice there is a suppression by the appellants regarding the fact that the entire affairs of the units are managed by a single family under the stewardship of S.K. Suratkal and all these units have mutual financial and commercial interest in the business of each other and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled for information from the units for his own information and convenience, winch is not conclusive to indicate that the empire has been erected by SKS and all activities were conducted from his office. The documents under seizure did not indicate that Highland played a parental role. A single instance showing the correspondence of recoveries of payment to third parties cannot lead that all units constitute one entity. S.K. Suratkal has in his reply defended that he is a qualified technologist having master degree of science and technology, and well experienced, being employee of different unit right from 1961 to 1977, and from 1978 onwards working as director in M/s. Mastra Dye Chem Pvt. Ltd., and is getting a salary of Rs. 9,460/- The directors and partners in all units belong to the family of Suratkal, Shetty, Hanjaria, Shah and Hegde families. There is no question of suppressing of facts and all the units are situated at Vapi and all the relevant documents have been supplied from time to time to the Central Excise department and balance sheet is also produced before them and the Central Excise department have audited the statutory records and there is no suppression of fact o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of plant and machinery and purchase of raw material to the finished products. As per the decision in the case of G.D. Industrial Engineers, Faridabad v. Collector of Customs, Chandigarh in 1983 (14) E.L.T. 1994 it is held that the appellants were not bound to appraise the excise authorities of the position of the firm/company if already known to the department from the documents furnished to them. As per 1994 (71) E.L.T. 59 in the case of Gammon Fur Chemis v. CCE, Bangalore it is held that the allegation of suppression of facts cannot survive inasmuch as the information and details which are alleged to have been suppressed by the appellant are in normal course not required to be disclosed to the concerned excise authorities as there is no provision in law to disclose such information. The information known to the department are not required to be disclosed at every stage of activities of the manufacture and non-disclosure of such information at every stage cannot be taken as suppression of facts or wilfully withholding of the information with an intent to evade Central Excise duty. So the extended period cannot be made applicable. In respect of the goods supplied one unit to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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