TMI Blog1995 (10) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries (P) Ltd. were dummy concerns and were floated by Shri Binod Kumar Maheswari with intent to evade payment of Central Excise duty by way of splitting the production and clearances in the names of three different firms. The Collector held that at the time of constitution of private limited company, the Directors are from the same Maheswari family and that they have admitted that Shri Binod Kumar Maheswari has interest in business of other companies i.e. M/s. Creative Products (P) Ltd. and M/s. Aparna Paper Processing Industries (P) Ltd. The major shareholding of the two private limited companies is held by Shri Binod Kumar Maheswari and his family. The production and other important happenings like storage and production etc. of the two private limited companies are reported in the same paper and sent to the Head Office. There are common shareholders who are from the same family and that Shri Binod Kumar Maheswari is a common shareholder of the Companies apart from the proprietary concern of M/s. Creative Printers and Packers. The Sundry Debtors and Sundry Creditors ledgers of M/s. Creative Printers and Packers, M/s. Creative Products (P) Ltd., and M/ s. Aparna Paper Processin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produces goods on the basis of orders placed on it in individual name. The company is registered as small scale industrial unit and has a separate [Municipal] Trade Licence. Plant and machinery of this company were purchased obtaining loan from State Bank of Patiala at Calcutta on hypothecation of machinery. The company is assessed separately under income tax and also registered under Sales Tax Act, both of West Bengal and Central Sales Tax. Company has separate auditors. The third company viz. Aparna Paper Processing Industry (P) Ltd. was registered in October, 1978 and had five shareholders. Shri Binod Kumar Maheswari being one of them with a share capital of only Rs. 1000/-. This company also obtained separate Central Excise Licence and orders are placed upon the company in its individual name and goods are cleared in the individual name. This company was also registered as small scale industry has a separate permanent assessment number under Income Tax and was also registered under Sales Tax Act, West Bengal and Central Sales Tax Act. The company obtained loan from Oriental Bank of Commerce, Calcutta on hypothecation of plant and machinery. The company has separate electric me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al) 2. V. Devaraj Anr. v. CCE, Coimbatore - 1992 (42) ECR 562 (Tribunal) 3. G.D. Industrial Engineers, Faridabad v. CCE, Chandigarh - 1983 (14) E.L.T. 1994 (Tribunal) 4. Alpha Toyo Ltd. v. CCE, New Delhi - 1994 (71) E.L.T. 689 (Tribunal) 5. Spring Fresh Drinks v. CCE - 1991 (54) E.L.T. 333 (Tribunal) 4. Ld. DR reiterated the departmental arguments and urged that appeal be rejected. 5. We have given careful consideration to the submissions made by both sides. The question that falls for determination is whether the appellants is the [manufacturer] in respect of the goods alleged to have been shown as manufactured by the two companies alleged to have been set up by him or whether each of the three separate companies - proprietary concern of the appellant, and the other two private limited companies in which the appellant is a Director, is a separate legal entity for the purpose of availing exemption under Notification No. 71/78, dated 1-3-1978 as amended under Notification No. 80/80, dated 19-6-1980. 5.2 Section 2 (f) of Central Excises and Salt Act, 1944 defines `manufacture to include any process incidental or ancillary to the completion of a manufactured product a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The unit which creates such a dummy unit, utilise the dummy unit for the purpose of tax evasion. It held that it is now settled that mere evidence of Directors being common or utilisation of telephone, labour or machinery by itself is not a ground to consider a unit as a dummy unit of the other. Common managerial control, common Directors and advances of industrial loans by the main unit or other units is not sufficient to make other units as dummy when there are independent transactions without any profit sharing, management control or money flow back, and units and their clearances are not clubbable. In case of Shri Packaging Corporation, Hyderabad v. CCE, Hyderabad [1987 (32) E.L.T. 94 (Tribunal) = 1988 (16) ECR 227 (Tribunal)], it was held that the proprietors of the two firms were closely connected and the two firms were functioning in practically adjacent premises. If they are able to establish that even materials commonly stored could be properly identified and segregated with reference to separate accounts kept thereof, it would not be proper to draw a conclusion merely on the ground of storage in a common place, that the two firms were in reality one. The Tribunal held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies, it must be shown that the purpose for which the two companies are alleged to have been floated by the appellant is served. That purpose obviously would be profit in the form of flow back of funds. There is no evidence in the case before us that the profits earned by the two companies which are alleged to have been floated by the appellant have flown back to the appellant as such. Nor is there evidence that seed-money for total shareholding came only from the appellant. Other factors could be that two companies are dummies in the sense that physically these did not exist and they are shown on paper. This could be proved through circumstantial evidence such as non-existence of machinery, or machinery so grossly inadequate as to be incapable of producing the goods or that goods in fact were not produced be them, which in fact had been created on paper to indicate the existence of the firms and that goods were in fact produced only by the appellant. No such evidence, however, has been produced. The mere fact that offices of the three companies are situated in same building and same room cannot go to prove that three companies are in fact not independent, neither can the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctric meters etc. Their workers were also common. They had single integrated, manufacturing facilities. Their purchases of raw materials were at a single point. On investigation, the purchase bills were found to be fake or manipulated. Stocks were not segregated. Their accounts were common. It was held that the fact that separate registration had been obtained in the name of two units with the Sales Tax Department is irrelevant and circumstantially established that two units on paper are in fact one and therefore clearances of two units have to be clubbed. 8. All the cases are distinguishable from the case before us, however. We find that the factory of the appellant, a proprietary concern, is located at No. 2, Hari Mohan Ghosh Road, Calcutta 24. The factories of two limited companies viz. M/s. Aparna Paper Processing Industry and Creative Products (P) Ltd. are situated at Rampur, Budge Budge Road, 24 Parganas, and are well demarcated from each other. Each unit has separate machinery obtained through loans from separate Banks. Each unit has separate electric meter, are obtaining orders separately and sell goods separately in their own name. Records are maintained separately. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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