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TMI Blog1998 (2) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Duty of Central Excise at the appropriate rate under erstwhile T.I. 14D should be levied and collected on Synthetic Organic Dyes valued at Rs. 73,88,950.32 on the basis that prices charged by UC from buyers at the final stage of transaction as mentioned in para 3 of the show cause notice illicitly manufactured and removed during 1978-79 and 1979-80 was the real assessable value invoking the proviso to Section 11A(1) of the Central Excise Act, 1944. 468/90 UC Period : 1978-79, 79-80 and 1980-81 Show cause notice : Dated 27-2-1982 Demand of Rs. 2,46,488.29 confirmed under Section 11A of the Act Period : 1-4-1981 to 31-3-1982 Show Cause Notice : dated 27-2-1982 2. The three concerns referred to above are partnership firms engaged in the manufacture of Synthetic Organic Dyes (for short, SOD) having their factories situated in the same premises and holding separate Central Excise licences. They were clearing the goods on payment of Central Excise duty on approved prices. Each of the concerns was availing benefit of SSI exemption Notification No. 71/78 for clearances of the value of rupees five lakhs during the period 1978 to 1981. The premises of the concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instructions of his wife who was ostensibly looking after those concerns. Some employees of SD were actually sitting in the premises of UC and attending to work. Hence, the clearances of UC and the clearances shown as having been made by SD and LD must be regarded as clearances by a manufacturer and clubbed. In this view, each of the concerns is not entitled to exemption to the extent of Rs. 5 lakhs. Out of the whole clearances in the names of the three concerns, only clearances of the value of Rs. 5 lakhs are exempt and duty should have been paid on the excess clearances. Duty reckoned on this basis is payable. 4. Diaries of 1977 and 1979 were seized from the residence of Shri J.P. Goenka. The figures shown in the diaries were the accounts of batches of dyestuff manufactured and cleared by UC. This is clear from the fact, that figures of export shown in the diaries tallied in most cases with the clearances for export disclosed in the excise records of UC. Entire quantity of SOD shown in the diaries as manufactured was not shown therein as disposed. The balance quantity must have been cleared and sold, but the same was not reflected in the excise records. They were clandest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns during the years 1978-79, 1979-80 and 1980-81 can be treated as made by "a manufacturer" for the purpose of Notification No. 71/78 and clubbed. (b) Whether the Collector was justified in adopting the sale price in the last sale by the manufacturer and not the sale price in the first sale, as the basis for determination of assessable value. (c) Whether UC had made any clandestine clearances as alleged. (d) Whether show cause notice in regard to the year 1981-82 was barred by time. 8. The particulars of and relationship among partners of the three concerns are as follows :- Concern Partners Relationship Person managing UC (1) J.P. Goenka J.P. Goenka (2) G.P. Birla (HUF) (3) Gayitri Devi Birla Mother of G.P. Birla and wife of B.P. Birla (4) Shrikant Benefit Trust established by J.P. Goenka's father - Trustee is J.P. Goenka - Beneficiary is Shri-kant s/o J.P. Goenka SD (1) B.P. Birla Father of G.P. Birla Wife of J.P. Goenka Concern Partners Relationship Person managing (2) Lakshmikant Benefit Trust Established by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are located in a part of the premises of UC, on monthly rental. (b) Trading concerns referred to in the preceding paragraph were under the direct control of J.P. Goenka. (c) SOD cleared in the names of UC, SD and LD were shown to have been sold to some of the trading concerns referred to in the preceding paragraph. (d) Most of the raw materials, machinery and empty drums were shown to have been purchased by SD and LD from UC. Receipt of these articles were acknowledged by J.P. Goenka or V.P. Patel. (e) J.P. Goenka admitted that sometimes marks on drums containing SOD were obliterated and replaced by marks of UC. (f) L.C. Kedia stated that rent of his residence was paid by UC. (g) L.C. Kedia stated that affairs of LD and SD were managed by the Chemist and Mrs. Vijaya Goenka and trading activities of these units were managed by J.P. Goenka. (h) L.C. Kedia was preparing sale invoices of M/s. Venus Dyechem, M/s. Jupiter Dyechem, SD, LD at the request of J.P. Goenka or Mrs. J.P. Goenka and sometimes looked after SD at the request of Mrs. J.P. Goenka. (i) L.C. Kedia stated that M/s. Veekay Enterprise run by his brother V. Kedia was operate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and machinery by UC to SD and LD were not for consideration. He also stressed that premises involved are different and SD and LD are using parts of premises of UC on rental arrangement and not gratis. Relying on the decision in J.N. Marshall Pvt. Ltd. - 1997 (96) E.L.T. 149 (Tribunal), he contended that there is no evidence of financial control on the part of UC over SD or LD or financial flow from UC to SD and LD or vice versa and hence clubbing cannot be resorted to. The Revenue rebutted these submissions and contended requisite conditions warranting clubbing have been established. Analysing various decisions referred to, the Bench in J.N. Marshall Pvt. Ltd. observed as follows :- ".......... regard must be had to all the circumstances established in a given case but emphasis must be on common control of production and sales or on management control and special financial relationship existing between the units or profit sharing or financial flow back. If the combination of circumstances create a pattern indicative of the clearances from the plurality of units being made by "a manufacturer" clubbing is warranted." 14. Sometime in 1978, UC shifted to the present premises. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was established by J.P. Goenka's father-in-law, with J.P. Goenka and his wife as trustees and Priyanka, daughter of brother-in-law of J.P. Goenka as beneficiary. SD and LD are ostensibly under the management of J.P. Goenka's wife as power-of-attorney holder of the trusts. The dealings of the three concerns were with a few selected trading concerns. Venus Dyechem and Century Traders, supposed to be under the management of J.P. Goenka's wife operate in the residence of J.P. Goenka. Uma Traders, Veekay Enterprise and Vijay Trading Corporation of which the proprietors are wife and brother of L.C. Kedia, employee of J.P. Goenka operate in the residence of L.C. Kedia which UC had obtained on lease Jupiter Dyechem operated by J.P. Goenka operates in the residence of L.C. Kedia wife and bother of L.C. Kedia reside with L.C. Kedia. Hema Trading Corporation and Sonal Dyechem said to belong to wife of V.P. Patel, employee of UC are said to operate in the residence of V.P. Patel. The source of raw materials and machinery for SD and LD was UC. Receipt of these articles was acknowledged by J.P. Goenka or V.P. Patel who had ostensibly nothing to do with SD or LD. J.P. Goenka was, according to L. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er price and finally sold back to UC. The sales can be illustrated thus : UC First Trading Sale to Trading Sale to SD sale to concern concern ---> UC ---> LD ---> A ---> B last sale to independent wholesalers According to the Revenue, almost all these trading concerns were paper concerns brought into existence by J.P. Goenka and there was no physical movement of goods from the manufacturer to the trading concerns and back to UC and the transactions were make-believe, manipulated to suppress the real price realised by the manufacturer, and depress the assessable value. The first price realised was in the first sale by manufacturer to the trading concerns who purported to sell to UC or other trading concerns at higher price and in the latter case, the second set of trading concerns sold to UC at still higher price and UC sold to independent wholesalers at yet higher price, which sales are referred to in the show cause notice and the order as last sales. Learned Counsel contended that all the sales were genuine sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troi. None of the parties was able to show payment of octroi on goods ostensibly sold by UC, SD and LD to trading concerns and the sale back to UC. This clearly leads to the inference that there was no physical movement of goods across the octroi border as a result of the transaction which clearly shows that the transactions were paper transactions. 18. The reply to the show cause notice dated 27-2-1982 denied that the goods sold by the manufacturer were received by them in the same condition without any processing. It was further stated that dyestuff is manufactured by coupling two or more different primary or secondary amines and other chemicals under controlled conditions and such dyestuff is sometimes mixed or blended by processes like Dilution, Solubility, Toning and Stabilisation. Dilution is the adjustment of the depth of colour. Solubility is improving the stability of the dyestuff. By toning is meant bringing the colour to a particular tone depending on the requirement of customers. Stabilising means improving the keeping quality in the colour. Other processes are also carried out to improve the appearance of the dyestuff by adding various types of solvents. The repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who was most interested in the result of the case cannot carry any weight, particularly in the absence of any corroborative evidence. 20. Apart from offering the aforesaid explanation in the reply to the notice and filing an affidavit, appellants did not attempt to substantiate the explanation to any extent. We have already drawn the inference that there was no physical movement of the goods from the manufacturer to various trading concerns and back to UC. First and second sales in many cases were on the same day. These circumstances also improbabilised the case of different processes being carried out after the alleged first sale by the manufacturer at several stages by the trading concerns and UC. There are the tell-tale circumstances relating to the trading concerns and their close association with UC or J.P. Goenka or employees of UC. The circumstances already adverted to coupled with the absence of any evidence produced by the appellants in proof of the explanation offered as already indicated clearly supports the finding of the Collector that sales by the three units to trading concerns with further sales to trading concerns and finally to UC were all stage managed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of duty. No inference of non-accounting and non-payment of duty could have been arrived at without such comparison. Hence, the confirmation of the part of the demand referable to goods alleged to be illicitly manufactured and cleared is set aside. The case has to go back to the adjudicating authority to enable confirmation of demand based on the other findings of the Collector confirmed by us. 22. We find no error in the imposition and quantification of penalty in the order dated 29-12-1984. Appeal E/468/90-A 23. The appeal arises on order dated 16-11-1989 passed by the Additional Collector in respect of the period from 1-4-1981 to 31-3-1982. By this order demand of duty of Rs. 2,46,488.29 has been confirmed. The demand was made as a consequence of clubbing and adoption of the prices of the last sales as the basis for determination of assessable value. Learned Counsel for the appellant did not address separate arguments on the merits of the appeal. Both sides stated that the merits of this appeal have to be decided following our finding in the appeals against the earlier order. Our finding on the merits of the two aspects referred to follow from the finding in app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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