9911796707
TMI Blog2000 (1) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... demanded under Section 11A of Central Excise Act, 1944, alleging that - (1) The goods manufactured by these units are of M/s. Rexello Castors Pvt. Ltd., 23-D, Mahal Industrial Estate, M.K. Road, Andheri (E), Mumbai - 400 093. (2) M/s. Rexello Castors is the main units and has floated M/s. Rex Arts, M/s. Rex Builders & Engineers, M/s. Crown Rollen and M/s. Rex Arts Castors Pvt. Ltd., with an intention to avail exemption under Notification No. 1/93, dated 28-2-93 separately. (3) All these units are manufacturing excisable goods of M/s. Rexello Castors Pvt. Ltd. who accepts purchase orders and subsequently transfers the same to its dummy units. (4) The records of the dummy units are maintained at M/s. Rex Builders & Engineers. In order to keep their turnover within units so as to avail the benefits of Notification 1/93, dated 28-2-93. (5) These units are not independent and they have interest in each other. The said show cause notices were confirmed and penalty was imposed under Rule 173Q of Central Excise Rules, 1944, hence the appeals. They had also applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... len (CR) and M/s. Rex Art Castors Pvt. Ltd. (RACPL) & M/s. Rex Arts (RA) just to remain within the prescribed exemption limit as stipulated under Notification No. 1/93, dated 28-2-93 as amended from time to time. Various show cause notices were issued to all the four appellant in question, alleging that four dummy units in the name and style of M/s. Rex Builders & Engineers (RBE), M/s. Rex Arts (RA), M/s. Crown Rollen (CR) and M/s. Rex Art Castors Pvt. Ltd. (RACPL) were floated in order to fragment the clearances of M/s. Rexello Castors Pvt. Ltd. and to remain in the duty free exemption limit as envisaged in Notification No. 1/93, dated 28-2-93 to evade Central Excise duty payable during the period from April, 1994 to March, 1998. The appellants had filed a detailed reply refuting the allegations and relying upon documentary and circumstantial evidence to prove that all the four units are independently carrying on their own business. 6. Appellants case is that M/s. RBE is a partnership concern, registration of the said partnership deed was done in the year 1985, having manufacturing premises at 26/6 Mittal Indl. Estate, Siv. M.V. Road, Andheri (East), Mumbai - 400 059 having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he grounds of appeal. 10. Besides what is mentioned in Paras 6 to 9 they also generally stated that the above mentioned data and facts are proof enough to prove that they are having independent stature and existence, performing individual business by virtue of independent sales, purchases, manufacture and arranging all their activity independently as required by any juristic person. They have been filing necessary declarations, classification list, R.T.12s and they have been observing all the formalities required by the law. The physical verification of their stock including prebudget stock, periodical inspections of their records, the department is fully aware of their manufacturing and clearance activities. (a) In the impugned order the Assistant Commissioner has not placed any evidence to show that they are a dummy unit inasmuch as that he has solely placed his reliance on the Order of the Collector-II & restricted for the period 1-11-1986 to 31-7-88. (b) Appellant has stated that they are not floated by M/s. Rexello Castors Pvt. Ltd. and that they are not manufacturing excisable goods of M/s. Rexello Castors Pvt. Ltd. as observed in the impugned order. They do not underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e used and reused as has been done in their case for deciding the issue for the current/subsequent period, yet the adjudicating officer confirmed the demands in question by clubbing the turnover of these units with other unit, solely on the grounds that the earlier in their case for the period 1-11-86 to 31-7-88, Commissioner-II Mumbai-I had confirmed the order against them, without giving any proper findings nor producing any tangible evidence to prove that there was a cash flowback from the appellants unit back to the main unit in question. It was also pointed out that the products manufactured and sold by them do not bear the brand name of "Rexello" since the change in the Central Excise Law. The copy of the correspondence dated 28-7-94, with the Range Superintendent was produced. They also submitted a copy of letter dated 28-3-94 from M/s. Rexello Castors Pvt. Ltd., referring to termination of license for using the brand "Rexello" with effect from 1-4-94, as per the Resolution of their Board of Directors. 11. Therefore, the charge regarding dummy unit is not sustainable since all the four units are in existence and that they are conducting their manufacturing and business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above mentioned facts, there is no doubt about the distinct individual identity of each unit in question and that they exist work and operate totally by itself and that there is no interlink between them in any manner. As such in view of the above mentioned facts and in view of the various judgments quoted below and in the grounds of appeal and the law on the subject, on the matter, the impugned order passed may please be set aside and quashed and also revoke/remove the penalty imposed on each firms person as they hold no ground. The said contention is squarely covered under list of judgments relied upon, the above mentioned judgments. 1. M/s. International Dyestuff Mfg. Co. v. CCE - 1991 (53) E.L.T. 85 (T). 2. M/s. Alpha Toyo Ltd. v. CCE, New Delhi - 1994 (71) E.L.T. 689. 3. R. Suresh Jayaseelan v. CCE - 1990 (48) E.L.T. 37. 4. M/s. Annapoorna Mills v. CCE - 1990 (47) E.L.T. 635. 5. M/s. Ambica Scale Mfg. Works v. CCE, Ahmedabad - 1996 (86) E.L.T. 229. The appellants further requested for settin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re one and the same. Bhagwan Das Kanodia v. Collector - 1987 (32) E.L.T. 204 (T). 4. Just because common persons have been employed in two firms functioning in adjacent premises and some of the partners of the firm are closely related, the value of clearances of two units are not clubbable if there is no common funding or financial flow back and both the firms have separate income tax assessments. Shree Packaging Corp. v. Collector - 1987 (32) E.L.T. 94 (T). 5. Merely because the goods are manufactured on job work basis, does not mean that the value of clearances of raw material supplier are clubbable with that of the job worker. Metal Box v. Collector - 1986 (23) E.L.T. 187 (T). 6. Value of clearances made by two firms are not to be clubbed merely because the Proprietor of one firm is a close relative to the Director/Partner of the other. Kinjal Electricals v. Collector - 1989 (43) E.L.T. 327 (T). 7. Close relation between partners of one firm and proprietor of another company, use of staff, telephone are not conclusive circumstances to prove that two units are one and the same. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its Circular Letter No. 5, dated 10-8-1956 which has subsequently been confirmed by Government of India in their letter F. No. 350/57/77-TRU, dated 20-1-1978, by observing as under : "Different firms will be treated as different manufacturers for purposes of the exemption limit. But if a firm consisting of certain partners say, A, B and C has got more than one factory, all the factories should, of course, be combined; limited companies whether public or private are separate entities distinct from shareholders composing it. Hence, each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. As mentioned above, if there are two firms with only some of the partners in common, each firm is entitled to a separate exemption limit, and hence the question of distributing the exemption does not arise." Thus the clearances of the various partnership firms cannot be clubbed together merely because some of the partners are common as laid down in the case of State of Punjab v. Jullundhar Vegetable Syndicate - (1996) 17 STC 326 (S.C.), G.D. Industrial Engineers v. Collector - 1983 (14) E.L.T. 1994 (T), Smt. Shyam Kumari - 1982 (10) E.L.T. 329 (C.B.E. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Engineers (RBE), M/s. Crown Rollen (CR), M/s. Rex Art Castors Pvt. Ltd. (RACPL) and Rex Arts (RA) being a dummy units only on collateral evidences, and not on the basis of any direct evidences. The appellants have claimed that not only does separate code numbers exists in respect of all the four firms with the Central Excise authorities, State Industries Department for SSI registrations, and sales tax authorities, but also they are being assessed independently by Income Tax Authorities. Except for taking technical assistance of the manager of one firm to another on reciprocal basis or that some persons are commonly assisting all the units in certain technical matters, there is no evidence to suggest that one unit is connected to the other in any manner. 21. The matter regarding treating of a company as a dummy unit of another company and denial of full exemption under Notification has been a matter of determination by the Courts of law, which need to be examined before reaching the conclusion in this matter under the requirement of the stated position under the law. 22. I find that the most illustrative examination on the question of clubbing of clearances by treating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rers. Following the ratio of earlier decided cases by the Courts of law, the Tribunal in the case of Meteor Satellite Ltd. and Telstar Electronics, Ahmedabad reported in 1985 (22) E.L.T. 271 (T), had held that merely because three directors of the company were the partners in the partnership firm would not lead to the conclusion that the latter was a dummy or camouflage for the former. The fact that the former sold some machinery to the latter cannot be held against the latter. Also, the contention that the firm sold all its production to one company is also not a valid consideration, since the firm sold its products to other buyers earlier. The firm produced separate partnership deed, sales tax and small scale industries certificate, Factory Act Finance, Income Tax assessment etc. There is nothing to show that profit made by the firm but flowed back to the company. Neither the company had any financial involvement in, nor controlled, the firm in any way. Accordingly, even when goods were produced by the firm with the company's brand name, the manufacture was not considered for or on behalf of company and the concessional benefit extended. In the case of Shree Packaging Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out to the first firm (M/s. Rexello Castors Pvt. Ltd.), or that the profits, or any part thereof (except the rentals) in the case of M/s. RA, flowed back to the first firm. There is also no proof of common funding or any other form of financial control, some common utilisation of the facilities of some persons and other evidences referred in the impugned order cannot also lead to a conclusion establishing a dummy status of the firm, under the law, for clubbing the clearances of four units while regulating the benefit of SSI Notification. 26. In the case of Indian Metal Industries v. CCE, BBSR reported in 1999 (108) E.L.T. 593 (T) = 1999 (31) RLT 297 (CEGAT), it was held that for treating a unit as a dummy of another unit it is essential that there is mutuality of interest as also common funding and financial flow back. No evidence that sale proceeds of one unit are going to the account of another, though there is common source of funding, clearances not to be clubbed as they are independent units. 27. Also in the case of R. Venkatachalam v. Commissioner of Central Excise, Chennai reported in 2000 (115) E.L.T. 192 (Tribunal) it was held regarding SSI Exemption - that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trade name, whether registered or not, that is to say a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person". As stated earlier, use of one's own brand name on the specified goods does not affect the exemption contained in Notfn. No. 175/86 but when the brand name belonging to another person is used, it has two direct repercussions. First is that if such other person is not eligible to the benefit of Notfn. No. 175/86, then the specified goods affixed with the brand name or trade mark of such a person would not be entitled to the benefit of Notfn. No. 175/86. It is to be remembered that the restriction contained in Para 7 of Notfn. No. 175/86 is applicable only in relation to the specified goods affixed with the brand name of another person who is not eligible to the benefit of Notfn. No. 175/86, if the same manufacturer is also producing other specified goods which are not aff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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