TMI Blog2001 (2) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... n passed in adjudication of the show-cause notice [SCN], dated 5-1-1988 issued by the Collector to the aforenamed three units and two individuals, namely Sh. V.R. Sharif and Sh. P.V. Jain. The gist of the allegations raised in the SCN was that M/s. Niton Industries had created the facade of two other units viz. M/s. Inventa Valve Industries (Bombay) Private Ltd. and M/s. Niton Valve Industries Private Ltd. with intent to evade payment of Central Excise duty on their product viz. industrial valves by unduly availing the benefits of SSI Exemption Notifications [Notification No. 105/80-C.E., dated 1-3-1980 as amended by Notification No. 77/83-C.E., dated 1-3-1983 as amended by Notification No. 77/85-C.E., dated 1-3-1985 as amended by Notification No. 175/86-C.E., dated 1-3-1986 as amended by Notification No. 216/86-C.E., dated 2-4-1986] and had manufactured and cleared from their factory premises, without payment of duty and in contravention of Central Excise Rules, valves totally valued at Rs. 4,76,10,750.12 in excess of the exemption limits prescribed under the Notifications, during 1982-83, 1983-84, 1984-85, 1985-86, 1986-87 and 1987-88 (upto 1-11-1987). The SCN, by invoking the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Niton Co. Smt. S.P. Jain s role in the management was quite similar. Her husband, Sh. P.V. Jain was Director of both the companies, Sh. V.R. Sharif s wife, Smt. N.V. Sharif was also Director of both the companies; (c) All the machinery required for complete manufacture of valves were not installed in any one of the units and whatever machinery installed in any of the units was shared by all the three units. Niton Firm s work of shaping i.e. T-slotting of spindle (as essential part of valves) was done on the shaping machine of Inventa Co. while the welding work of Inventa Co. was done on the welding machine of Niton Firm; (d) The workers/staff of each unit worked for all the units and a common staff register was maintained by the three units; (e) The three units had a common storage of their raw materials and each unit s requisition slips for raw materials were issued in the name of Niton Firm; (f) The components of valves manufactured in the three units were conveniently interchanged without maintaining any record for the purpose and the units maintained a common Serial number register for the valves manufactured by them; (g) The brand name NITON was common fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er control and had not kept any records; (n) Niton Firm and Inventa Co. were holding Central Excise licence and paying duty on their product at concessional rate of duty under Notification No. 175/86-C.E. (as amended). Their RG-1s showed NIL stock of fully manufactured valves at the time of the officers visit (1-11-1987); (o) Niton Firm floated the two other units with intent to evade payment of duty by remaining within exemption limits prescribed under SSI Bank account finance, Income Tax account, Provident Fund account, Employees State Insurance Scheme account and Workers union. 4.2 The other relevant submissions/contentions of Niton Firm were :- (a) that there was no question of common storage of raw materials, with Niton Co. upto January, 1987 since the company took possession of gala No. B-8 only in January, 1987; (b) that the raw materials issued to the different units were correctly accounted for; (c) that the requisite machinery for manufacture of valves was installed in each unit; however, certain processes, for which it was not economical to instal machinery in any particular unit, used to be got done by another unit on job work basis; Niton Firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm contended that they, being L-4 Licence-holder, were entitled to avail exemption on the basis of their own clearance values of excisable goods and such benefits was not deniable to them as long as the Department did not prove that they had created the other two companies as dummy or fictitious units and that there was a flow of finances from them to the two companies and a flow-back of profits from the latter to the former. Factors such as common storage of raw materials, sharing of services of some workers, occasional use of some machine of one unit by another unit, temporary interest-free loan transactions between the units, maintenance of common records, sharing of unregistered brand name etc. did not affect the independent status of the units and their right to claim exemption under the Notifications without clubbing of clearance values. 4.4 They also challenged the demand of duty on the ground of time-bar. According to them, the extended period of limitation was not invocable in their case since they had not suppressed or wilfully mis-stated anything inasmuch as :- (i) they had filed declaration for the period 1982-83 to 1985-86 and such declarations were accepted by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lea for clubbing the three units and ordered dropping of all proceedings against them save those in relation to the 78 valves admittedly manufactured (but not accounted for in RG-1) by Niton Firm. We have not been able to persuade ourselves to accept the impugned order as a reasoned order on the main issue. At the same time, we are not inclined to remand the matter to the adjudicating authority, having regard to the fact that the dispute is more than a decade old. We would rather dispose of the case on merits in the interest of justice. 7.1 We note that, in the SCN, the department had enumerated their investigatory findings on various aspects of the manufactural activities of the respondents and the parties, in their replies, sought to meet such findings with their explanatory submissions. We have mentioned the gists of the department s findings and the parties counter thereto in paragraphs (3) and (4) of this order. The adjudicating authority, apparently, accepted the parties submissions in toto and held that the inter-relations in the three units were not strong enough to be conclusive evidence against them. The inter-relations as observed by the department were manifold, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices [vide particulars infra] issued from time to time by Inventa Co. to Niton Firm for labour charges. Invoice No. date Description Amount (Rs.) 117/17-3-83 Machining/labour charges 38,000/- 144/29-6-83 -do- 2,400/- 153/18-9-83 -do- 22,800/- 154/24-9-83 -do- 28,500/- 179/30-12-83 -do- 45,500/- 135/20-7-85 -do- 31,500/- 137/25-7-85 -do- 14,700/- 138/28-7-85 -do- 8,700/- 189/85 Machining and threading 7,950/- 31-12-85 charges Niton Firm s evidence further included copies of Profit Loss Account for different accounting periods, which show, inter alia, machining and labour charges on the debit side as follows :- Accounting period Amount Year ended 30th June 1982 Rs. 3,65,731/75 1983 Rs. 3,94,763/95 1984 Rs. 6,27,571/45 1985 Rs. 9,22,803/65 1986 Rs. 4,78,774/50 The eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Moreover, the factual situation, in the instant case, of one unit having got some of the processes done on the machinery of another unit on job work basis would materially distinguish this case from the case of Jagjivandas Co. 7.4 What remains to be considered is whether the maintenance, by the three units, of a common Serial Number Register for valves manufactured by them could be a valid ground for the Department to club the clearances of the units for charging duty. The respondents defence in this context is that their clearances were not liable to be clubbed on the said ground inasmuch as the mere maintenance of such a register did not disturb their status as independent legal entities. Ld. Advocate has cited the Tribunal s decision in Collector v. Standard Watch Co. Pvt. Ltd. [2000 (119) E.L.T. 703] in support of this defence of the respondents. In that case, two companies manufacturing wall clocks and table clocks were maintaining a common register for stock, production and clearance. The Revenue pleaded for clubbing of the two units on the ground of maintenance of common register as well as on other grounds. The Tribunal rejected the plea, following the ratio of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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