TMI Blog2003 (4) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... sable value of the goods has to be determined on the basis of Depot Sale prices, whether the demand is time-barred and whether demand of duty can be confirmed against the units held to be dummy units. 2.1 Shri A.K. Jain, learned Advocate, submitted that M/s. Dujodwala Industries (DI in short) is a partnership firm manufacturing rosin products, terpene chemicals, camphor and sodium acetate; that they came into existence in 1969 and have been duly licensed by the Central Excise department and are also duly registered as a SSI units with Director of Industries, Haryana; that M/s. Rosin Terpene Industries (RTI in short) came into existence in 1979 as a partnership firm; that they are also registered as a SSI unit and have filed declaration with the Excise Department on 7-3-1980; that M/s. Dujodwala Udyog Pvt. Ltd. (DUL in short) was set up in 1983 and L4 Licence was obtained by them in February, 1983. 2.2 He, further, mentioned that after conducting search of all the three factories on 12-4-88, a show cause notice was issued on 14-12-88 on the main grounds that all the units were solely controlled by Shri S.V. Dujodwala; the ownership of all three units was vested among Shyam, hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xigible to excise duty; that the Tribunal has already given a finding in their favour in their own matters vide Final Order Nos. 1076-1077/98-C, dated 30-10-1998. He also relied upon the following decisions: (1) Bharat Forge Press Industries (P) Ltd. v. Commissioner of Central Excise - 1990 (45) E.L.T. 525 (S.C.). (2) Telangana Steel Industries v. State of Andhra Pradesh - 1994 (73) E.L.T. 513 (S.C.). (3) Union of India v. J.G. Glass Industries - 1998 (97) E.L.T. 5 (S.C.). (4) Light Metal Works v. Commissioner of Central Excise, Bombay - Final Order No. 612/86 Bl, dated 26-9-86. Affirmed by the Supreme Court in 1998 (95) E.L.T. A66 (S.C.) read with 2001 (47) RLT 78 (T). (5) Commissioner of Central Excise v. Popular Cotton Covering Works, 1994 (73) E.L.T. 264. (6) Master Strips Ltd. v. Deputy Commissioner of Commercial Taxes - 1995 (99) STC 216 (Kar.). (7) Swadeshi Mills Co. Ltd. v. Union of India - 1982 E.L.T. 237 (Bom.). (8) Commissioner of Central Excise v. Shri Balaji Cable Industries - 1987 (29) E.L.T. 77 (T). (9) Ramakant Wire Industries v. Commissioner of Central Excise - 1993 (63) E.L.T. 148 (T). (10) B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate in the working of RTI after V.M. Dujodwala suffered a paralytic attack in 1985; that he was eligible to participate in the activities of RTI as VMD -HUF was partner in that firm and he was a coparcener in the said HUF; that the other circumstances namely commonness of compound, water tank, canteen, administrative block, single entry and exit have pre-existed in all the three units; that all the three units enjoy independent status not only in the eyes of Income-tax, Sales Tax, Factory Act, Provident Fund Act, ESI Act, Industries Directorate, but in the eye of Central Excise Department itself as these units are registered separately and separate classification lists were filed and approved; that RT 12s were being assessed separately; that further even after registering the case against them, the Department had raised separate demands on RTI as well as DUL accepting them as separate and independents. The learned Advocate also mentioned that the three units have separate sheds for manufacturing activities with due segregation, separate electric meters, separate generator, separate production machineries/spares/fittings purchased by respective units, separate raw materials stock ya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d matching the statutory records; that the share holding in DUL by persons of Dujodwala family worked out to be 44.97% as against the share holding of 52.03% by other persons; that in any event all the buyers were eligible to take Modvat credit; that during the entire working of the three units, at no point of time the goods manufactured by each unit were found short or more and the Central Excise Officers had made endorsement on the respective RGIs in token of their having checked the stocks. 5.2 The learned Counsel, further, submitted that it is settled law that a Company is always independent of its share holders and is separately entitled to exemption. He relied upon the decision in Wood Craft Orissa Pvt. Ltd. v. Assistant Collector, Central Excise - 1979 (4) E.L.T. (J 139). He also contended that it is also settled law that when one person is a partner in two firms, those firms cannot be clubbed because partners and firm are different persons; that it has been held in Jaswant Sugar Mills Ltd. v. Union of India - 1981 (8) E.L.T. 177 (Del.) that partnership is a legal entity in itself; that the Central Board of Excise Customs has held in Re: Shyam Kumari - 1982 (10) E.L.T. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also referred to the decision in Jagjivan Dass Co. - 1985 (19) E.L.T. 441 (T) wherein despite the fact of three factories being located in the same compound having common telephone/storage place/trade mark/office premises, having some common machinery/telegraphic address and mutual flow of finance without interest, the Tribunal did not club the three units keeping in view their separate Income-Tax/Sales Tax Registrations, SSI Registrations and separate electric meters. Reliance has also been placed on the decision in the case of Renu Tondon v. Union of India - 1993 (66) E.L.T. 375 (Raj.) wherein the Rajasthan High Court has held that value of clearance of the two units cannot be clubbed together and the two units cannot be treated as one unit merely because there are some common employees unless there is a clear and specific evidence that there is mutuality of business interest between the two units and that both have interest in the business of each other or they have common funding and financial flow back. In the present case, the most important aspect having common funding and financial flow back is missing and therefore, to withdraw the assessment or club the clearances is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India - 1988 (35) E.L.T. 605 (S.C.) (ii) Prabhu Steel Industries Ltd. v. Commissioner of Central Excise, Nagpur - 1997 (95) E.L.T. 164 (S.C.) (iii) ESPI Industries Chemicals Pvt. Ltd. v. CCE - 1996 (82) E.L.T. 444 (S.C.) (iv) CCE, Baroda v. Cotspun Ltd. - 1999 (113) E.L.T. 353 (S.C.) (v) Nikhildeep Cables Pvt. Ltd. v. Commissioner of Central Excise, Coimbatore - 1990 (70) E.L.T. 273 (T) He also relied upon the Board s Circular No. 312/28/97-CX., dated 22-4-1997 wherein it has been observed by the Board that quite a lot of unnecessary litigation and avoidable work is created by indiscriminate issue of show cause notices invoking the proviso to Section 11A of the Central Excise Act even when there is no fraud or misdeclaration, etc., for example where there has been an established practice well within the knowledge of the Department; that the Board has directed therein that where a view is taken that the long established practice was wrong, the show cause notice cannot normally be issued beyond six months. 7. In respect of demand of Central Excise duty confirmed against M/s. DUL and M/s. RTI only, the learned Advocate submitted that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he emergence of a new and distinct commercial product, marketable as such, the conclusion is inevitable that their new product would invite imposition of duty, though there may not be any move away from the tariff item or from one sub-heading to another. The learned Senior Departmental Representative also referred to the decision of the Supreme Court in the case of TVL. K.A.K. Anwar and Co. v. State of Tamil Nadu, AIR 1998 S.C. 518. He also mentioned that it has been held by the Supreme Court in Union of India v. Ahmedabad Manufacturing and Calico Printing Co. Ltd. - 1985 (21) E.L.T. 633 (S.C.) that the classification of the manufactured product for the purpose of excise duty should depend upon its nature and character at its final stage of production and contended that as new products emerge as a result of processes undertaken by the Appellants, excise duty is leviable. Alternatively, he mentioned that as the plea of excisability was not raised by the Appellants before the Adjudicating Authority, they cannot take a new plea at the Appeal stage. 9. The learned Senior Departmental Representative, further, submitted that the factual position came to the notice of the Department on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice; that under letter dated 21-7-87 from Shyam to Calcutta office price of goods ex-factory and ex-godown were intimated; that selling strategy was also decided by Shyam which is evident from Inter Office Memo dated 6-4-87 in which Shyam instructed Calcutta to sell resin on account of RTI to give benefit of 10% excise duty to customers; that Shri M.D. Kedia has clearly stated, in his statement dated 4-5-88 that S.V. Dujodwala used to decide about when, how much, and to whom and from which factory i.e. RTI. DUL and DI how much sale was to be done and accordingly instructions were to be sent to Faridabad factory; that Kedia confirmed that factory gate price of all the three factories was fixed by S.V. Dujodwala and O.P. Garg. 10. The learned Senior Departmental Representative also mentioned that there was common offices, common staff and common facilities for all the units and head branches, offices spread all over India as deposed by Shri O.P. Garg, Shri B.L. Kamath, Shri Arun Jain and Shri P.K. Jhunjhunwala in their respective statements all dated 12-4-88; that Shri Bishwanath Bokania. honorary caretaker and Chartered Accountant at Bangalore had stated in his statement dated 13- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Senior Departmental Representative contended that these facts have not been controverted by the Appellants as Commissioner has given a specific finding in the impugned order that nothing has been brought on records before me to disprove the allegations levelled in the show cause notice. The learned Senior Departmental Representative relied upon the decision in the case of U.K. Machine Tools Pvt. Ltd. v. Commissioner of Central Excise - 1999 (114) E.L.T. 1009 (T) wherein it has been held that common procurement of raw materials, centralized payments to employees, common storage facilities, common operation of bank accounts and other financial arrangements establish that the units were not independent and the value of clearances of the three units is to be clubbed for purpose of small-scale exemption; that this decision has been affirmed by the Supreme Court as the Civil Appeal filed against the decision has been dismissed as reported in 2000 (119) E.L.T. A84. Reliance has also been placed on the decision in the case of Heemanshu Traders v. CCE, Surat - 2000 (122) E.L.T. 555 (T) wherein the Tribunal has upheld the clubbing of value of clearance of different unit on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir commission agents or transferring stock to their branch offices and to the independent buyers on contract basis; that no evidence has been produced by the Appellants for having sales at factory gate; that the goods were transferred at lower prices in the names of fictitious firms created in the names of partners/directors by withdrawing the money from their personal accounts; that this has been disclosed by Shri P. K. Jhunjhunwala in his statement; that accordingly the assessable value for charging excise duty would be the price charged by their sister concerns from the independent buyers. Regarding confirming demand of excise duty against individual units, learned Senior Departmental Representative mentioned that there are two types of dummy units - Dummy units which are not in existence and dummy units which exist; that where the dummy unit exists and their value of clearances is to be clubbed as all the units are one and the same, demand of duty can be made from them as they have been availing the exemption wrongly. Finally, the learned Senior Departmental Representative mentioned that the extended period of limitation for demanding duty is invokable as the vital informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in Renu Tandon s case; that the decision in Heemanshu Traders, supra, is not applicable to the facts of the present matter as in the said matter two units were not paying any duty at all; that the judgment in Calcutta Chromotype case was in relation to related person and as such is not relevant; that in fact all the decisions relied upon by the learned Senior Departmental Representative are not applicable as facts are different. He also referred to the list of buyers (at page 461) whom the goods were sold directly from the factory and contended that they were not related persons. He also mentioned that there was no financial flow back as the partners and directors were arranging finances for their requirements and all the units were having there independent bank facilities; that transfer of profit or loss to Head Office was compulsory for preparing a consolidated balance sheet of all the transactions for submitting to Income Tax Department. 14.1 We have considered the submissions of both the sides. As per Section 3 of the Central Excise Act, the duty of excise is levied and collected on all excisable goods which are produced or manufactured in India as, and at the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tariff Act provides for it. In the instant case, though the cotton fabric had suffered duty under Tariff Item 19(1), the Tariff Act has made bed sheets, pillow covers, etc., also dutiable under the very same tariff item, therefore, the Respondent is liable to pay duty on bed sheets, pillow coves, napkins, etc., manufactured by it . The decision in the case of J.G. Glass Industries, supra, is not applicable as in the said matter glass remains glass even after printing and no new product emerges. The decision in the Appellants own case [Final Order Nos. 1076-77/98-C, dated 30-10-98] does not advance their case as the Tribunal observed that the authorities below have not addressed the question whether the impugned goods can be said to still retain the same characteristics of the raw materials even after manufacture and the appeals were decided by the Tribunal on the ground of limitation only. We, therefore, hold that the impugned products are exigible to excise duty. 15. The Collector under, Order-in-Original No. 25/90, dated 6-6-1990 has denied the benefit of SSI exemption to all the three units DI, DUL, and RTI and has confirmed the demand of Excise duty against M/s. DI holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of final products, common despatches and sales, utilization of employees commonly. The learned Senior Departmental Representative has referred to the letter dated 5-11-86 in which it is mentioned that Central Bank of India, Faridabad was insisting upon to transfer the account to it as it was found difficult to segregate the stock of raw materials as well as of finished products of DI and DUL. The financial involvement of these three units is also evident from the evidence material brought on record. Common land and machines, etc., were mortgaged for loan facilities from the bank. The learned Senior Departmental Representative has also drawn our attention to the statement of Shri S.V. Dujodwala in which he had stated that to meet the emergency expenses, one firm used to take money from another for payments and no interest was generally charged. It has not also been rebutted by the Appellants that at the close of the year, the outstanding amount of sister concerns were transferred to Bombay Office Account. In fact it has been mentioned by the learned Advocate that the transfer of profit or loss to head office was compulsory for preparing a consolidated balance sheet of all the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the different units are held to be one. It has been held by the Tribunal in Double Bee Enterprises v. Commissioner of Central Excise, New Delhi - 1995 (78) E.L.T. 261 (T), relying on the decision in Lotus Chemical Industries and Aurbindo Chemical Industries v. Commissioner of Central Excise, Indore, Final Order Nos. 458-459/91-C, dated 21-5-1991, that the mere fact that units are separately registered as SSI unit or that they were separately assessed for income-tax or sales tax purpose will not make any difference for clubbing of clearances of two firms. Thus taking into account the cumulative effect of all the facts and circumstances, we find no reason to interfere with the findings of the Collector that the value of clearances of all the three units, DI, RTI and DUL is to be clubbed for determining the availability of the benefit of small-scale exemption. 17. We also agree with the submissions of the learned Senior Departmental Representative that the extended period of limitation for demanding duty is invokable as the Appellants had devised the modus operandi of having three units to avail the benefit of SSI exemption with an intent to evade payment of duty. The visit by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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