TMI Blog1996 (2) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... aw materials and finished product were common and raw materials were used as per the requirement in their products, there was no separate stock of raw materials, kept two common workers - (chemist and supervisor) and other staff were common who worked in both the factories. It was also noticed that both the units were looked after by Shri Satish Chand Sampatraj, partner of M /s. Indodyes Chemical Industries and husband of Smt. Kusum Satischand, one of partners of M/s. Rang Udyog. He was assisted by Shri Raj Kumar Mohanlal, one of the partners of M/s. Indodyes Chemical Industries. The statement of some workers were recorded. It was alleged that M/s. Rang Udyog and M/s. Indodyes Chemical Industries had contravened the provisions of Rules 223, 226 read with Rule 173G(4) and Section 11A inasmuch as they did not properly store the excisable goods in their factories. A show cause notice was issued to the appellants on 31-5-1990 asking them to explain as to why the clearances of the excisable goods effected from their units should not be clubbed together in view of the facts and why a penalty should not be imposed on them. After considering the submissions made before the Collector, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 returns and separate L.4 -licence, separate books of accounts; that all these facts were within the knowledge of the Department and therefore, the extended time limit of five years could not be invoked. The learned Counsel submitted that inter-relationship of partners of both the units is not a relevant factor to determine whether both the units were one and the same; that even if some of the partners have relationship with some of the partners of the other unit, it cannot be said that partnership firms could not conduct their business separately; that the Hon ble Supreme Court in the case of Asstt. Collector v. M/s. Jayantilal Balubhai and Others reported in 1978 (2) E.L.T. (J 317) had held : If a person owns a factory and is also a partner in two other factories the production attributable to these two partnership factories cannot be said to be the production or manufacture by or on behalf of the same person. The production of the first factory of which he is the owner is by or on behalf of that person. But the production of two units is by or on behalf of two separate partnership of which he is only a partner. The learned Counsel therefore, submitted that in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the visit of the officers in October, 1987, the factory of M/s. Rang Udyog was closed and therefore, some workers might be working with M/s. Indodyes Chemical Industries: that it was inconsequential whether one chemist was looking after both the units or one unit; that this was not a relevant consideration for clubbing the two units which are separate legal entities. The learned Counsel submitted that this can also be said about an employment of a common excise clerk. On the question of common stock of raw materials, the ld. Counsel submitted that it was clear from the Panchanama that important raw materials were stored separately. The ld. Counsel submitted that the scrutiny of their records did not indicate that the records were being manipulated; that separate account for the two factories was maintained but as some construction work was going on in the factory, therefore, some of the raw materials came to be stored just opposite to the raw materials of the other firm; that the statement of the chemist cannot be relied who stated that he did not know whose or on whose account the production was being accounted for as it was not his job. 7. On the question of common machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he units to the other did not involve payment of any interest, it was reflected in the book of accounts of both the firms and will involve payment of compensation to the lending firm. No adverse inference can be drawn from the common orders placed on suppliers in Bombay for procurement of raw materials as long as the materials received by each of the units were received and accounted for separately. Both the units are separately registered with Water Pollution Board. Common inspection note recorded by Inspector of Water Pollution Board for his own convenience cannot be a circumstance which would lead to a conclusion that the two units were a single entity having a common effluent treatment plant. Thus there is no evidence that the two units were in reality owned and controlled by the same person or body of persons or the two units were only a facade to avoid avail of the exemption. 10. In the case of Bhawan Das Kanodia Others v. CCE, Bombay reported in 1987 (32) E.L.T. 204 (Tri.) = 1992 (38) E.C.R. 279, this Tribunal had held - Four separate legal entities who created a fifth legal entity can continue to function independently even though there was some pooling of resources a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partners in the two partnership concerns were related to each other or were common; (b) that there were common workers in the two units; (c) that the same person was directing and controlling both the units; and (d) that the stock of raw materials of both the units was placed at one place and machineries were common. 17. On analysis of each of the above factors, we find that all these issues were discussed and commented upon in the judgments cited and relied upon by the aprellants. We also observe that the appellants were two partnership firms having separate income tax registration as well as sales tax registration. Both the units were registered as SSI unit. One very important factor in deciding whether the units are one and the same, is the common source of expenses from one common fund or from one firm only and flow-back of funds from one to the other? On examination of the entire evidence, we find that there is no allegation that either of the appellants was funding the expenses of the other nor there was any evidence to show that there was flow-back of profits or money or sale proceeds from one firm to the other. Having regard to the above discussions, the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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