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TMI Blog2007 (4) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... cted on a piece of land belonging to Mrs. Uma Garg wife of Shri Suraj Narain Garg, who is the partner of the firm by getting lease deed executed in favour of the firm. The factory started its production on 23.8.1973. Number of its employees always remained less than fifty upto 1978. In view of the provisions contained in the Act of 1952, the provisions of the said Act were not applicable to the petitioners' factory for a period of five years from the date such factory was set up i.e. on 23.8.1973. It is so because the factory never employed more than fifty employees for any single day during that period of five years. After 23.8.1973, the petitioners themselves requested the Commissioner for its registration under the provisions of the Act of 1952 with effect from 1.9.1978. 3. Bone of contention between the parties is as to from which date the Act of 1952 should apply to the factory in question. According to the respondent, the factory was entitled to 5 years exemption from 23.8.1973 but the case of the appellant is that the factory is entitled to only 3 years exemption from the provisions of the Act of 1952. Thus, dispute in substance is whether the factory would be covered u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Vijay, the learned Counsel for the appellant argued that the learned Single Judge has erred in law by interfering with the order passed by the Commissioner on the basis of appreciation of evidence on record that two factories had a functional integrity and unity of purpose and that both of them were therefore covered under the provisions of the Act of 1952 as one single establishment. The order passed by the Commissioner did not suffer from any legal infirmity and that the learned Single Judge erred in law in reversing that order. In doing so, the learned Single Judge has neither taken into consideration the findings, reasons and conclusions recorded by the Commissioner nor has given his own reasons. When the Commissioner has given detailed reasons for recording the finding of fact that the two factories had a functional integrity, the learned Single Judge was required to give reasons for reversing such finding as to why and how the functional integrity was not proved. Shri R.P. Vijay, the learned Counsel for the appellants submitted that there were two partners namely Shankar Lai Garg and Suraj Narain Garg in M/s. Moti Warping Factory. Shri Suraj Narain Garg is the son of Shri S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Narain Garg and one of the partners in respondent-firm, M/s. Jyoti Sizing Factory was located in the premises belonging to Smt. Beena Devi Garg Wife of Shri Prem Narain Garg. There further case was that the land and building tax for both the premises is assessed separately and therefore the premises are separate. There is no common management for finance between these two factories. Financial year of both the factories is also different which are separately assessed for the purpose of Income Tax and Central Sales Tax Act. Both of them have been separately registered as small scale units with the Director of Industries and have got separate registration under, the Rajasthan Sales Tax Act, the Factories Act and ESIC Act. Power connections of both the units were separate and the employment of, workers and staff of the factories was also completely separate who were not inter transferable. 9. The Commissioner on the basis of evidence especially the statement of Shri Prem Kumar Vaid, Manager of the respondent-firm found that the firm was engaged in warping of yarn and warped yarn was sold in the open market. Shri O.P. Gupta, Manager of M/s. Jyoti Sizing Factory also stated that his fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the sales are being effected by one to another, it is natural phenomenon if the persons involved are related to each other, then they give the preference to such concern and for that reason alone, it cannot be said that there is a functional integrity or that the unit itself would be closed if the other unit stops supplying the goods. Having thus recorded his finding, the learned Single Judge has omitted to give reasons as to how the reasons given by the Commissioner were not justified in arriving at the satisfaction which he finally reached. 11. Their lordships of the Supreme Court in A.C.C. v. Their Workmen 1960-1-LLJ-1 were called upon to decide whether the cement factory and a lime stone quarry situated at two different places could be treated as one establishment. The lime stone quarry was situated at a distance of one and half miles from the cement factory. It was held that there was unity of purpose and functional integrity between quarry and the factory. The Supreme Court held that the tests which could be applied to decide as to what constitute one establishment would be unity of ownership, unity of management, supervision and control, unity of finance and employment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f purpose between these two units. Wrapped yarn, which was end product of the respondent-firm was raw material for M/s. Jyoti Sizing Factory. Substantial quantity, if not total, of wrapped yarn manufactured by the respondent-firm was sold to M/s. Jyoti Sizing Factory for its sizing. No doubt, close relationship between partners of the two firms alone may not be determinative of functional Integrity but when proximity of relationship coupled with proximity of the location of the factories Is analysed with their business relationship of sale by one to another In substantial proportions in which the same product is subjected to two different kind of process first by one and then by another, it certainly becomes a case of not only functional integrity but also of unity of purpose. In the context of these facts, therefore, in spite of there being separate registration of the two factories under various enactments such as CST Act, RST Act, Central Excise Act, ESIC Act, Factories Act and their separate registration as small scale industries notwithstanding, they would still be liable to be treated as one establishment for the purpose of Section 7A of the Act. In our considered opinion, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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