TMI Blog1997 (11) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... oval of the ground plan by the Central Excise officials and names of the partners were also indicated in the L-4. 6. On 9-9-1978, a show cause notice was issued by the A.C. for clubbing all the clearance of A1 and A2. Based on the personal inspection of the premises of the two firms on 22-10-1978, the A.C. dropped the proceedings on 2-11-1978 accepting A1 and A2 as independent units. 7. A3 obtained the L-4 licence on 12-2-1980 for the manufacture of PVC wires and polythene bags. 8. A4 was formed on 21-10-1983 and it also obtained a separate L-4 licence for the manufacture of wires, cables and PVC tubes. 9. All the four firms were registered separately as partnership firms with no common partners, though they were from the same family. 10. As the area of the premises was substantial i.e. 1.2. acres and sheds were available, A2 and A3 also functioned from separate sheds leased to them within the compound. Each shed had its own separate entry and exit, its own electric sub-meters and separate bonded space approved by the Central Excise officials. 11. On 6-5-1984 a show cause notice was issued by the A.C. stating that the three firms had partners from the same family, all u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of AC s inspection of the units, there was no suppression or wilful mis-statement. He , therefore, ordered that duty cannot be demanded for the period beyond six months. The duty demanded is Rs. 53,085.04. Despite holding that there was no suppression or wilful mis-statement, the Collector imposed penalty of Rs. 45,000/- (combined on all four firms put together). 15. On 20-1-1987, an appeal was filed before the CEGAT against this order of the Collector which is being heard today. 16. It is also pertinent to highlight that the Collector endorsed a copy of the adjudication order to the Income Tax Department. Similarly, a case was also registered in the Court of Special Judge for Economic Offences at Hyderabad. The development in these cases are also relevant. 17. On 11-4-1989, the Special Judge for Economic Offences dismissed the complaint as the offence was not established beyond reasonable doubt. While doing so, the Judge detailed various facts of the cases such as there being no common partners in any of the firms, separate sales tax registration, separate labour establishment, separate L-4 licence along with ground plan and machinery which was verified by the Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common sales corporation namely M/s. Vasavi Sales Corpn. The wire drawing for this company was also done by M/s. Vasavi Industries. It is further seen that the companies have relied upon the decision of the CEGAT in the case of M/s. Jagjivandas and Co. - 1985 (19) E.L.T. 441 to drive home that with regard to independent status of all the individual units a commonality of premises, telephone, persons, storage place, machinery and even telegraphic address are not evidences to hold the units as belonging to a single manufacture. It is seen from the abovesaid CEGAT decision that insofar as it related to common telephone, common office premises, usage of power drawn from a single source and common telegraphic address, they were held to be within the knowledge of the department. With regard to the location of the units in the same compound the Tribunal had taken into consideration the fact that the authorities had approved the plans. With regard to the common storage of goods, the Tribunal had not expressed any opinion except that this circumstance cannot be based for a finding. The usage of common trade mark or label was not a conclusive evidence. However, with regard to some machiner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad nosedived due to availment of exemption of each of the units as small scale industries. The AC s order had lost its relevance by passage of time as circumstance existed at that time no longer continue to exist. There had been a clear understanding among the various partners of these companies who incidentally belong to the same family to set a pattern for themselves to claim exemption independently. The units have all been stationed in the same compound and power is drawn from one source only. The wire drawing machinery and the PVC pellets manufacturing machinery were possessed by only one company namely M/s. Vasavi Industries and this company catered to the requirements of other companies. Only M/s. Vasavi Insultated Cables possessed machinery for manufacture of polythene bags and in fact it had supplied polythene bags required for packing wires and cables of all the units. In return, M/s. Vasavi Insulated Cables had not received any payments for the supply of polythene bags made to the other units. No Explanation has been offered to this allegation contained in Paragraph 22 of the show cause notice dated 6-6-1984. The documents produced by the consultant pertained only payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asavi brand by the buyers and not by the name of the manufacturer. In this connection, the argument of the Consultant that the Supreme Court decision in the Cibatul case is relevant needs critical examination. In the instant case, the brand Vasavi is used in common by all the units. It is not a case where the Vasavi brand is sought to be manufactured in a particular factory by placing an order to that effect. In the instant case all the four units are engaged in the manufacture of a common brand and these products are sold in the market under a common brand name namely VASAVI. Therefore, the Cibatul decision cannot be strictly applied to the instant case. 20. In view of the foregoing, it has to be concluded that for the purpose of computation of exemption under Notification No. 71/78 and subsequent Notification Nos. 80/80 and 83/83, the clearance of all the four units have to be clubbed as all of them in reality form a single unit. He further stated that the show cause notice dated 6-6-1984 related to the period of 5 years covering the period upto financial year 1983-84. As a result of the present finding, the amount of duty payable by M/s. Vasavi Industries shall have to be calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is also interesting to note that the Collector has himself now held that there was no suppression or wilful mis-statement and therefore dropped the demand for the period beyond six months but if such was the case how the units could be clubbed for the period of even six months and how the duty can be demanded on this basis and in any eventuality how can penalty be imposed if no mala fides were involved? It is also noteworthy that the Income Tax Appellate Tribunal has dismissed the appeal of the Commissioner of Income Tax stating that these firms cannot be assessed commonly as a single unit. 23. The department s contention that all the four units were using a common brand name is in our opinion not sufficient to hold that the units manufacturing goods of the same brand name were required to be clubbed. In fact entirely independent units can produce goods of the same brand name depending upon arrangement between them and the owner of the brand name and as far as we are aware there is no prohibition against such an arrangement and in any case this by itself does not constitute violation of Central Excise law. The Tribunal has in a series of judgments and orders laid down very cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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