TMI Blog2002 (6) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... Kareemullah under Rule 209A. 2. The Noticees took up a lengthy defence denying the allegation that MTPL (respondent herein) and the nine units are liable to pay the duty amount as demanded in the show cause notice. The main allegation centered around the respondent having set up these nine units to evade payment of Central Excise duty. They denied the allegation that nine units were set up with a new group to evade payment of duty. A defence was also taken by them that all the nine units were independent in existence with their own bank accounts; with their own premises; with separate registration with sales tax authorities and were assessed to income tax separately. They had engaged their own labour and had obtained components and raw materials directly from their own sources. They were neither provided with any funds by the respondent, MTPL nor they had sold any components to these independent units. Although the raw materials had been supplied by MTPL and the goods namely, Mixies had been manufactured, according to the quality and design and specifications of MTPL and affixed with their brand name but that by itself cannot be a factor for clubbing the clearances of all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractice and cannot be termed as financial accommodation unless the evidence of flow back is available. He noted that there is no evidence or even charge of flow back in the show cause notice. He noted that no special significance can, therefore, be attached to the advances made to M/s. Deen Appliances and M/s. Leo Appliances even before the start of supply of mixies. He also noted that these advances were made by A/c payee cheques and were recorded in the book of accounts of both MTPL and the units. He noted that no adverse inference could be drawn from the fact that the advances were used for purchase of raw materials. He also noted that the charges made in the show cause notice that MTPL fixed the price of mixies providing for meagre margins and selling the entire quality manufactured by all the units to MTPL cannot be a ground to club the units. He noted that as MTPL is selling mixies so purchased from various units in the market, it is also not unusual for MTPL to negotiate for a uniform price. He noted that this issue of controlling the price, maintaining the market cannot be a ground for clubbing the units as has been upheld by the Tribunal in the case of Cheryl Laboratories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extending the larger period, the Commissioner noted that there is no evidence on record to come to the conclusion that there was suppression of facts. He noted that the larger period was not invokable for the reason that all the units had filed their declarations and one unit M/s. Durable Appliances had taken out the Central Excise licence. He noted that the four units M/s. Durable Appliances, Quality Appliances, Perfect Processors and Modern Appliances commenced production even before MTPL declared lock out in October, 1982. He also noted that MTPL had informed the department about the lock out. He also noted that in 1984, the department had issued Show Cause Notice No. 857/84 to five out of nine units on the same issue. Even after the issue of show cause notice in 1984, MTPL had continued to get the mixies manufactured by the units and the department even after the issue of SCN had not taken any further steps but in fact had dropped the SCN by accepting the plea that all the units were independent. Therefore, he held that subsequent issue of SCN and proceedings were barred by time as there was no suppression of facts for invocation of larger period. In this regard, respondents h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in para-16 of his order that nine units were receiving components from Mansfield and not from MTPL is not correct as Shri L.E. J. Mansfield, a former employee of MTPL who had given a specific undertaking that mould could be used for supply of components to the units. He pointed out that none of the nine units individually approached Shri L.E.J. Mansfield in this regard. M/s. MTPL had been directly and occasionally through Shri Mansfield, addressing M/s. Plasticraft Industries, the custodian of the mould to supply the components in the name of the nine units to enable them to receive components and assemble them. No other unit was permitted to receive the components by making use of the said mould. Hence, it appeared that M/s. MTPL was giving directions/instructions either to M/s. Mansfield or Plasticraft Industries for supply of components to nine units and M/s. Mansfield was only carrying out the instructions of MTPL. He also pointed out from the Annual Report of MTPL that for the period ending 31-3-1984, 31-3-85 and 31-3-86, it was noticed that they had shown the quantity of mixies manufactured as NIL . In the annual report for the period ending 31-3-83, they had shown 1378 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The judgments have since attained finality before the Hon ble Apex Court and therefore there cannot be any doubt that the order given by the Commissioner is legal, valid and proper and the department has not established financial flow back between MTPL and nine independent units and hence the appeal is required to be rejected. 8. We have carefully considered the submissions made by both sides and have perused the entire records of the case. Ld. Senior Counsel has taken a preliminary objection that the appeal against a single party i.e. M/s. MTPL is not maintainable without filing of appeals against other nine units of whose clearances, department wanted to club with the clearances of MTPL in terms of show cause notice. He had submitted that the like issue had come up before the Tribunal in three cases as in the case of - (i) CCE, Mumbai v. Maganlal Nandlal Sons - 1999 (113) E.L.T. 597 (ii) CCE, Mumbai v. Supreme Electrical Appliances - 2001 (131) E.L.T. 271 (iii) CCE, v. Sompura Ceramics 2001 (130) E.LT. 195 (T) = 2001 (42) RLT 399. 9. We have carefully considered the submission on this plea. We notice from the show cause notice, which was issued on 20-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence service of notice on partners cannot be said to have served notice on the firm. Further the appeal filed by the Department against the four units were dismissed as barred by time. In the case of Commissioner of Central Excise, Mumbai v. Azo Dye Chem (supra) in an application filed under Section 35E(4) of the Central Excise Act, it has been held that Tribunal has no power to condone the delay caused in filing the appeal beyond the period of three months allowed by the clause as it has in the case of appeal under Section 35B. In view of this, appeals filed by the Department as against the other units were dismissed as barred by time. Since no appeal lies against the co-noticee, issue with reference to clubbing of clearances of five units cannot be decided hearing the appellant alone as it was rightly pointed out by the respondent s Counsel. We find that Tribunal in the similar situation in the case of CCE, Mumbai v. Maganlal and Nandlal Sons reported in 1999 (113) E.L.T. 597 as well as in the case of CCE, Mumbai v. M/s. High Land Dye Chem, held that appeal by the Department against only one firm without impleading other firms is not maintainable when clearances of all the uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge number of judgments to substantiate his plea that the demands are barred by time. On this very plea, the judgment of Dawn Fireworks Factory Ors. v. CCE Madurai, 1999 (31) RLT 104 has been relied. The findings recorded by the Tribunal in para-5 of the said order is reproduced below which applies to the facts both on limitation as well as on merit. The arguments noted by the Tribunal in para-3 is also extracted as the same argument made in the grounds of appeal applies to this case. The Paras 3 to 6 are reproduced herein below :- 3. Arguing for the appellants, the learned advocate Sri Ranganathan pointed out that the issue of notice to the other independent firm namely Dawn Fireworks Industries was mandatory as it was in existence with independent registration and without issue of notice to them and deciding the case against them is unsustainable under law. In this regard, he relied on the judgment of the Tribunal rendered in the case of Ogesh Industries v. CCE as reported in 1997 (94) E.L.T. 88 (T), wherein it was held that when at all times, the existence of M/s. Gore Industries separately from Ogesh Industries was projected, the department should have issued the show-cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 3604.90 of the Central Excise Tariff, as Pyrotechnic articles for amusement other than fireworks carrying nil rate of duty. This view has been upheld in the case of Taj Fireworks Industries v. CCE as reported in 1995 (6) RLT 811 = 1995 (76) E.L.T. 180. He submits that in view of this legal position of serpent eggs manufactured by the three units, Dawn Fireworks Industries being not excisable, therefore, the question of clubbing of its clearances for imposing duty does not arise. He also submits that the first unit namely Dawn Fireworks Factory having paid duty on their clearances, the demands are required to be set aside including penalties. He further stated that the demands issued by show-cause notice dated 13-12-1990 for the period April, 1980 to July, 1990 is barred by time as the department was fully aware of the facts of both these units and there was no suppression of facts. He pointed out that earlier show-cause notice issued on 3-7-1990 alleging some facts and therefore, subsequent show-cause notice invoking larger period is not sustainable, in view of the Tribunal s judgment rendered in the case of Neyveli Lignite Corporation Ltd. v. CCE as reported in 1992 (58) E.L.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the other unit, which has not been done in the present case and in view of the judgment rendered by the Tribunal in the case of Ogesh Industries and in the case of Hindustan Foam Industry, the contention of the appellants that non-issue of show-cause notice has vitiated the proceedings, is required to be upheld and on this ground alone, the appellants are entitled to succeed. The other ground is that the item serpent eggs manufactured by M/s. Dawn Fireworks Industries is dutiable and not eligible for classification under heading 3604.90 at nil rate of duty and such dutiable and on had being clubbed with the clearances of the first unit M/s. DFF duty liability. In the case of Taj Fireworks Industries, the Tribunal has held that serpent egg is classifiable at the nil rate of duty under Heading 3604.90 of Central Excise Tariff Act, 1985. In view of this legal position, raising demand by the department on serpent eggs will not be sustainable and therefore, the present demands raised on this item and confirmed in favour of M/s. Dawn Fireworks Factory could not arise and hence, these demands are required to be set aside. Thirdly, the present show-cause notice dated 13-12-1990 raised th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of assembled mixies and employees of MTPL attending to 9 units to maintain standards of work. There is no allegation brought out in the memo of appeal or in the Board order showing that there was a flow back of funds and MTPL had funded nine units and had taken away all the profits, exclusion of 9 units. The Commissioner has clearly recorded that revenue did not rely on any evidence on financial flow back. The fact that respondent MTPL supplied raw material has been discounted by the Commissioner is not a ground for clubbing clearance in the light of large number of judgments noted supra. We have considered this plea of Revenue and notice that demands in the case of CCE v. M.M. Khambhatwala (supra) noting the earlier judgment of Ujjagar Prints v. UOI and that of Empire Industries Ltd. v. UOI have clearly held that merely because the household ladies were paid small amount by the supplier of raw materials that by itself is no ground for treating the household ladies as hired labourers nor as manufacturers. The findings recorded in Paras 7 to 11 is reproduced herein below :- 7. We have considered the submissions advanced before us by the learned counsel on both the sides. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inently plausible view and does not suffer from any fallacy. 10. On the facts of this case and in the light of the pronouncements of this Court on the question of liability to excise duty, we do not think that there is any case for interference with the order of the CEGAT. We answer the point against the appellant. 11. The appeal fails and is dismissed accordingly. No costs. 14. On a careful reading of the above judgment, we notice that the said finding of the Apex Court clearly answers the grounds of appeal brought out by the Revenue and the Commissioner s order is sustainable. 15. Further, we notice that the issue of common premises, common Directors, supply of raw materials have all been the subject matter of several Tribunal orders as in the case of Cheryl Laboratories v. CCE, 1993 (65) E.L.T. 596, Alpha Toyo Ltd v. CCE, 1994 (71) E.L.T. 689; Mico Ltd.; 1999 (111) E.L.T. 163. It will not be out of place to extract the findings of the Tribunal rendered in MICO Ltd. (supra) which would apply to revenue s contentions raised in the grounds of appeal. Paras 19 to 22 are extracted herein below : - 19. The Commissioner has rejected the independency of the ancillary units o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleges, i.e. the goods are manufactured under the management, direction and control of MICO. Thus the show cause notice is substantially correct when it alleged that the goods are manufactured under the management, direction or control of MICO. 20. With due respect, we are unable to agree with this conclusion of ld. Commissioner. This is not a new concept which the Commissioner or the department has tried to bring out in the order. But this has been gone into again and again by several courts and they laid down what managerial control means and in these cases it has been well laid down that managerial control should be such as to lead to the flow back of the profits to Principal manufacturer. In this particular case, admittedly the ancillaries prepare the cost estimate and that is being negotiated and where there is an escalation of price, the same is also negotiated and re-fixation of price is arrived at. In any contract of this type there is always a price and that price is a negotiated price with offer and acceptance and that there is free will in determining the price. In this case the Commissioner has not demonstrated and shown that there is no free determination of price b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rers in terms of Section 2(f) of Central Excises and Salt Act. This has been further analysed by the Hon ble Supreme Court in the case of C.C.E. v. M.M. Khambhatwala as reported in 1996 (84) E.L.T. 161 (S.C.) where goods produced by household ladies in their own premises out of the raw material supplied by the respondents who paid wages on the basis of number of pieces manufactured and there was no supervision over the manufacturing of the goods by the respondents, and the goods sold from the premises of such household ladies, but sale proceeds sent to the respondents. Such household ladies, the Hon ble Supreme Court held, are to be treated as manufacturers of the goods and not as hired labourers . In this regard Hon ble Supreme Court relied on its earlier judgment in the case of Ujagar Prints v. Union of India as reported in 1988 (38) E.L.T. 535 (S.C.) and that of Empire Industries v. Union of India as reported in 1985 (20) E.L.T. 179 (S.C.). In the case of Santha Industrials v. C.C.E. as reported in 1995 (78) E.L.T. 556 (Tribunal), the Tribunal held that owner of the brand name getting the goods manufactured, the ancillary is certainly concerned about its make, quality, standa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is apparent that the seller cannot be said to manufacture the goods on behalf of the buyer. Further the Supreme Court observed in para 7 that the appellant relies on the circumstances that under the agreements the seller is required to affix the trade-marks of the buyer on the manufactured goods and, it is said, that indicates that the goods belong to the buyer. The Supreme Court observed that it seems to them clear from the record that the trade-marks of the buyer are to be affixed on those goods only which are found to conform to the specifications or standard stipulated by the buyers. All goods not approved by the buyer cannot bear those trade-marks and are disposed of by the sellers without the advantage of those trade-marks. The trade-marks are affixed only after the goods have been approved by the buyer for sale by the seller to the buyer. The seller owns the plant and machinery, the raw material and the labour and manufactures the goods and under the agreements, affixes the trade marks on the goods. The goods are manufactured by the seller on its own account and the seller sells the goods with the trade marks affixed on them to the buyer. This ruling of the Hon ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
