TMI Blog1994 (3) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of interest free loan granted by the M/s. Alpha Toyo Ltd. to other four units and also in view of similar financial assistance among the other four units, notwithstanding the fact that all the five units are independently incorporated with separate licences viz. L-4 licence, ST and IT registration and having independent functioning in all respects of setting up of machinery, manufacture, labour, telephone, sales, purchase and other aspects of the managements. The show cause notice dt. 25-9-1991 issued for all the units is on the basis of 4th Annual Report of the year 1986-87, 5th Annual Report for the year 1987-88, 6th Annual Report for the year 1988-89 and 7th Annual Report for the year 1989-90 in respect of M/s. Alpha Toyo L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o asked to explain as to why penalty should not be imposed under Rule 173Q of Central Excise Rules. All the assessees filed their independent detailed replies denying the charges. The summary of replies is that mere management of funds by itself is not a sufficient to hold the other four units as dummy units, in the light of each unit being independently incorporated and having their independent functioning. In support of their plea, the appellants relied on a large catena of citations, which according to them settled the issue. The ld. Collector after going through their replies and giving them opportunity of hearing held that units were related persons and as all the units were under the same management and control in as much as M/s. Alph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were in existence and they were having independent businesses without any relationship among themselves and were having independent licences and without sharing of profits. As the units were having independent existence and there had been no occasion for any one to give any mis-statement or suppress any facts. The department had merely proceeded on the basis of annual report of the first unit namely : M/s. Alpha Toyo Ltd. There had been reference of interest free loan given to the other four units in the annual reports. The ld. senior advocate pointed out that this is not a ground at all to hold that a financial management would be a cause for clubbing the clearances. He pointed out that financial management is a different concept than fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Collector of Central Excise, [1991 (54) E.L.T. 333] (viii) Vivomed Labs. (P) Ltd. Others v. Collector of Central Excise, Aurangabad, [1991 (53) E.L.T 152 (Tri.) = 1991 (37) E.C.R. 729] (ix) Prabhat Dyes Chemicals v. Collector of Central Excise, [1992 (62) E.L.T. 469] On the aspect of the time bar ld. advocate relied on the rulings rendered in the case of Padmini Products v. Collector of Central Excise as reported in 1989 (43) E.L.T. 195 (SC) and Collector of Central Excise v. Chemphar Drugs and Liniments as reported in 1989 (40) E.L.T. 267 (SC). 3. Ld. JDR pointed out that the interest free loans were being given without time schedule for repayment. That clearly showed that the other four units were totally dependent on the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax evasion. Therefore, the courts have clearly distinguished on facts each of the cases and have now settled the issue by holding that mere evidence of Directors being common or utilisation of telephone, labour or machinery by itself is not a ground to consider an unit as a dummy unit of the other. It has been held that even if a unit is in existence, but if it is totally controlled in terms of money flow back, profit sharing, management control, and it had been created with a view to evade taxes by a series of acts of omission and commission, by manipulation of accounts and records then in such an eventuality, the clearances of a dummy unit can be clubbed. As rightly pointed out by the ld. senior advocate there is no definition of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and units set up as a facade to evade taxes. As pointed out by the ld. senior advocate, the ld. Collector has confused this aspect of the matter with the aspect of creation of dummy units. The ground taken by the Revenue in this case is already answered against them in the case of Jagjivan Das Co., Bhagwan Das Kanodia and Others, Prabhat Dyes and Chemicals, Bapalal Co. and Prima Control referred before us. The other judgments cited before us also deals on the same aspect of the matter. Applying the ratio of these rulings, we have to hold that the mere fact of management control or of grant of interest free loans is not sufficient to hold the four units as dummy units of M/s. Alpha Toyo Ltd., in the absence of any money flow back, prof ..... X X X X Extracts X X X X X X X X Extracts X X X X
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