TMI Blog1989 (11) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... hes 2 ii) Bench grinder 1 2. M/s. Premier Agro Corporation i) Hand grinder 1 3. M/s. Priya Corporation i) Lathes 5 ii) Drilling machines 3 iii) Air compressor 1 iv) Electric grinder 2 3. The officers who inspected these three Units observed that the Units M/s. Premier Corporation and M/s. Premier Agro Corporation were not equipped with sufficient machineries for the manufacture of electric motors and monobloc pump and found that the actual manufacturing activities of electric motors and monobloc pumps were taking place at M/s. Priya Corporation only and the finished goods have been painted, labelled and marketed in the name of other two Units only from M/s. Priya Corporation. Further it was noticed that name plates pertaining to the three Units were kept in a steel almirah at M/s. Priya Corporation which indicated that the finished - motor/monoblocs manufactured at M/s. Priya Corporation are affixed with the three different name plates and invoiced accordingly, so as to avail the exemption under Notification No. 80/80-CE and 2/81-CE. In view of these observations and due to the fact that Shri P.V. Jagadesan, Proprietor of M/s. Priya Corporation who is a Partner of other Unit was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order demanding duty of Rs. 1,68,083.77 from M/s. Priya Corporation and levying a penalty of Rs. 25,000/- holding that the electric motors/monoblocs were manufactured and cleared by other two Units has to be taken as the clearances by M/s. Priya Corporation as the other two Units were created to wrongfully avail the exemption under Notification Nos. 71/78 and 80/80 by fragmenting the main Unit viz. Priya Corporation. 5. Shri A.K. Jain, the learned Advocate appeared for the appellants and the respondents is represented by Shri K.D. Tayal, learned Departmental Representative. 6. Shri A.K. Jain, the learned Advocate for the appellant has raised the following points of dispute at the time of hearing: a) Manufacture and clearances by the three different entities cannot be clubbed for the purpose of assessment. b) Demand is time barred. c) Monoblocs cannot be classified as part of electric motors. 7. The third point i.e. classification of monoblocs as part of electric motors or otherwise cannot be considered at this stage as objected by the learned DR in view of the fact that this was neither an issue before the adjudicating authority nor was a ground taken by the appellants in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemptions to Small Scale Industries; Tax avoidance by legal means was permissible as per law existing there and the ratio of Mc Dowell case cannot be made applicable to the cause of action much prior to the decision. In support of this proposition he drew our attention to the cases of M.V. Valliappan and Others v. I.T.O and Others [1988 -170 ITR (Mad.) DB 238 283 286) wherein it explained the Mc Dowell judgment that legal effect of a transaction cannot be displaced by probing into the substance of the transaction and in the case of Pyare Lal Sharma v. Managing Director and others [Judgment Today 1989 (3) L 35 (139) (SC)] in which the Hon ble Supreme Court held that none can be penalised on the ground of a conduct which was not penal on the day it was committed. 10. As regards second issue, Shri Jain submitted that raising demand under show cause notice dated 8-1-1985 for the period 1979-80, 1980-81 and 1981-82 is clearly time barred in the absence of allegation of clandestine removal in the show cause notice and for the removal it is settled principle of law that extended time limit can be applied on removal without the knowledge of the Department. The removal was well within the k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, we have to take overall evidence to consider whether they are one and the same or not for the purpose of assessment under Central Excise Act. In the present case it is evident and admitted that the entire affairs and management including all the three Units are controlled by Shri Jagadesan. He is predominant in all the three Units viz. M/s. Priya Corporation, M/s. Premier Corporation and M/s. Premier Agro Corporation. He is running Priya Corporation as a sole Proprietory concern, Premier Corporation as Partner with his brother Shri V. Radhakrishnan and managing Premier Agro Corporation as husband of Smt. Sarojini who is Proprietrix of the concern. The appellants case is when all the Units are situated in different premises with separate registrations of Sales Tax, Income Tax, etc., the clearances of these three Units cannot be clubbed and each unit is entitled to get exemption as the production of each Unit falls within the exemption limit. On the other hand the Department has made out a case after detailed inspection in all three Units that the electric motors and monoblocs were manufactured at M/s. Priya Corporation only. Only a part of machining of casting covers is done at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the machinery capable of producing electric motor was available and in other two premises, there was not sufficient machinery or labour capable of producing electric motors independently. Though it is a fact that they are having separate Sales Tax assessments, Income-tax assessments and separate registrations, but the perusal of assessment orders of Commercial Tax Department produced by the Consultants also revealed that the units have not maintained the Statutory records of production-cum-stock account. Moreover, the Commercial Authorities also observed that the units have avoided to furnish the required particulars when asked for. It has also been pointed out in the said order that purchases shown were not supported by purchase vouchers. All this goes to show that these 2 separate units were created to wrongfully avail the exemption under Notification Nos. 71/78 and 80/80 by fragmenting the main unit viz., M/s. Priya Corporation. 15. The statements given by Shri P.V. Jegadesan, Smt. Sarojini and V. Radhakrishnan substantiates the position that entire show in all the three Units was run by Shri P.V. Jegadesan only, and brother Shri V. Radhakrishnan was employed in other concern ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax and whether the transaction is such that the judicial process may accord its approval to it. It is neither fair nor desirable to expect the Legislature to intervene and take care of every device and scheme to avoid taxation. It is up to the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of emerging techniques of interpretation to expose the devices for what they really are and to refuse to give judicial benediction. Accordingly it is clear that any colourful device to avoid tax is not part of tax planning and while interpreting the statutes it is the duty of the Government to expose each tax avoidance and refuse approval or benefit. 17. In view of the above, we have taken that the appellants have adopted the dubious method in not disclosing the true facts to the Department and file ..... X X X X Extracts X X X X X X X X Extracts X X X X
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