TMI Blog1999 (9) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... availing of the benefit of Small Scale Exemption under Notification 175/86-C.E., dated 1-3-1986, as amended. It was alleged in the show cause notice dated 12-7-1989 that all these units were set up by one Shri R.K. Luther, who was the sole prop. of M/s. Atul Fasteners, and had no independent existence. They were set up as a comouflage to secure advantage of excise duty concession under Notification 175/86, and it was proposed that the clearances of all the units were required to be clubbed together. When the Central Excise officers had paid a visit to these units on 17-1-1989, shortages in the stocks vis-a-vis the records were detected. It was alleged that the units were under-billing the goods by raising bills of lesser quantity than the quantity actually supplied. It was further alleged that the screws were being removed under the garb of rivets with intention to evade excise duty as the rivets attracted lower rate of duty than the screws. The total Central Excise duty recoverable was arrived at ₹ 24,91,303.32 P. 2. The matter was adjudicated by the Collector of Central Excise, Chandigarh who under his Order-in-Original dated 10-4-1991, observed that except M/s. Kirti W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial flow back and the two firms were having separate income-tax assessments, they were deemed to be considered as separate and distinct. Reference was also made to the Tribunal s decision in the case of Raj Mechanical Industries v. C.C.E., Chandigarh [1997 (96) E.L.T. 696 (Tribunal)] wherein it had been held that the financial flow back between the two units being absent, other factors could not sustain the allegation of clubbing to deny exemption from licensing. With regard to the charge of under billing he submitted that in December, 1988, the unit had introduced standard packing and that the goods receipts could not form the basis for the allegation of under billing. 4. In reply Shri M.P. Singh, learned DR submitted that it was an admitted position that M/s. K.P. Fasteners and U.K. Machine Tools were floated by Shri R.K. Luther and that the so called directors of these companies were his co-employees and had no finances of their own. They had no managerial capacity and it was all the show of Shri R.K. Luther, the so called Directors of these Companies in their statements recorded at the time of search and seizures had clearly admitted that they were dummy Directors and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to the first issue, the Adjudicating authority did not confiscate the excess goods but ordered that duty as applicable was required to be paid at the time of clearances of those goods. With regard to shortages, it was held that the goods found short had been clandestinely cleared and the duty was liable to be paid thereon and that the penalty was also leviable. With regard to the second issue, while the Adjudicating authority came to a finding that Kirti Wire Products was an independent unit, with regard to K.P. Fasteners and U.K. Machine Tools, it was held that they were created by Atul Fasteners whose Prop. was R.K. Luther as a camouflage to avail of the excise duty concession. After analysing the evidence on record and after discussing the various pleas taken by the appellants, he came to the conclusion that Shri R.K. Luther was controlling all the units and that the whole show case stage managed by him only to avail of the small scale exemption. On limitation, he found that clearly there was a suppression of production and the suppression of the facts and that Directors were appointed from amongst his employees to create new units by Shri R.K. Luther. It was conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urer, were required to be clubbed. For the purposes of small scale exemption, the manufacturer did not mean the separate excise licence holder. Even when there were different licences, there could be one manufacturer. 7. M/s. Atul Fasteners a Prop. concern of Shri R.K. Luther was formed in the year 1982. K.P. Fasteners and U.K. Machine Tools were floated by Shri R.K. Luther in 1988 with his employees showing as Directors. Shri R.L. Kaul, Director of K.P. Fasteners held the post of supervisor in Atul Fasteners and Shri Krishan Mohan Khandelwal, Director K.P. Fasteners was computer operator in Atul Fasteners. Similarly in U.K. Machine Tools, Shri Ashwani Kumar was earlier store keeper in Atul Fasteners and Sunil Bir Singh was also employed in Atul Fasteners. None of them was a genuine Director. Shri R.L. Kaul, Director of K.P. Fasteners in his statement dated 17-1-1989 stated that he was earlier working as Supervisor in Atul Fasteners and was working as supervisor in K.P. Fasteners since October, 1988. Shri Krishna Mohan Khandelwal, Director K.P. Fasteners in his statement dated 17-1-1989 stated that he was a operator in Atul Fasteners and that his name was not in thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to employees, common storage facilities, common operation of bank accounts and other financial arrangements as between the units clearly establish the financial inter-connection, inter-lacing and inter-dependent, embracing all the units. The recovery of pre-signed blank cheques from Shri R.K. Luther for financial transactions pertaining to other units, confirms the financial inter-lacing as between different units. The factual position had been admitted by the persons concerned who had signed the blank cheques. It is also relevant to note that all the goods had the common brand name Atul . 10. No cut and dry formulae could be established to arrive at the decision whether a group of units could or could not be considered as a single manufacturer/manufacturing entity for the purpose of small scale exemption. From the various decisions of the Tribunal, it is seen that while with reference to isolated facts, the units may appear to be distinct and separate, but when the facts and circumstances are seen in totality, a new picture may emerge where the seemingly distinct and separate units merge into one common manufacturing entity. 11. The Tribunal in the case of Grauer and Weil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clubbed together. The appellants had contended that the original statements recorded of the Directors of K.P. Fasteners and U.K. Machine Tools had been retracted by them during the course of adjudication proceedings. We find that the retraction was very late and no satisfactory explanation had been adduced by the witnesses for such a long time gap in retracting their version if the initial version was not correct. 13. Shri Krishan Mohan Khandelwal, Director K.P. Fasteners verified an affidavit of 12-7-1989 wherein he stated that his statement of 17-1-1989 was not correct. He did not disclose the reasons for his belated retraction of 17-1-1989. He had stated that he was working as computer programmer-cum-operator in Atul Fasteners and that his name was not there in their attendance/salary register but he got his pay in cash from the common cashier of the units, Shri S.P. Tondon. As already summarised above, he had added in that statement dated 17-1-1989 that he was Director on paper only and that the unit was controlled by Shri R.K. Luther. He had already admitted that he was not aware of the use to which the cheques signed by him blank were put. He was storing the salary/stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in para 4.29 of the order had recorded as under : The party has given two reasons in support of their contention that the demand is time barred. The first reason is that the range office was intimated vide Shri R.K. Luther letter dated 19-7-1988 that the four units will be managed by a corporate office. Vide its letter dated 12-8-1988, the range officer called for the Articles of Association of the four units which were duly submitted by the party in August, 1988. The second reason given by the party is that all the four units had separate licences with approved classification lists and there was no fraud, collusion or wilful suppression by them. As regards the first point, I notice that the party intimated the range officer about setting up of corporate office only in July, 1988. Therefore, this argument does not hold good for the period prior to July, 1988. In any case Shri R.K. Luther Prop. of Atul Fasteners simply intimated that the four units will have a corporate office. There was suppression of production. Supplying the articles of Association to the Range office does not imply that the party had given complete information regarding the way the units were to be managed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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