TMI Blog1999 (10) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Briefly stated the facts of the case are as under:- 2.1 M/s. Ruby Rubber Industries is a factory engaged in the manufacture of Hose Pipes of Vulcanised Rubber falling under Heading : 40.09 and situated at 38/39, Jaibibi Road, Ghusuri, Howrah. At the same address, are working other Units namely, M/s. Diamond Cotton Industries, M/s. Shankar Rubber Industries, M/s. Shankar Rubber Industries (P) Ltd., M/s. Ambica Processing Industries, M/s. Venus Rubber Works, M/s. Victor Rubber Works, M/s. Supreme Belt Industries. Excepting M/s. Shankar Rubber Industries (P) Ltd., which is a Company registered under the Indian Companies Act, 1956, all other Units are Partnership Firms registered under the Indian Partnership Act, 1932. 2.2 The Department s case is that all the Units working from the said premises and having a common Head Office at 74, Jamunalal Bajaj Street, Calcutta-7 and having partners from one family, are so closely interlocked financially and in the matter of control of production by that family close relation that they are in reality only one entity. As such the Units are not entitled to the separate small-scale exemptions. 2.3 Acting on an intelligence, the factory p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries 1967 1/RP/R-7/HN /85 Cycle Tyre Tube and Hose Pipe (c) M/s. Ambica Processing Industries 1977 1/Processing/1977 Gum Boot, Jungle Boot Ground Sheet/Rain Coat (d) M/s. Venus Rubber Works 1980 44/R-IV/HND/ Mfg./94 Minor Safety Rubber Canvas Boot (e) M/s. Shankar Rubber Industries (Private) Limited 1972 1RP/92 Industrial V Belt (f) M/s. Victor Rubber Works 1981 1/RP/R-7/CAL-VII/81 Braided Hose Pipe (g) M/s. Supreme Belt Industries 1983 1/RP/CAL-VII/R-7/83 Fan/ V Belt 2.6 Further, it would be convenient if the different partners of the Partnership Units and their relationship, which facts are undisputed on record are also reproduced for the sake of convenience :- Name of Unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2 Partner is the brother of Shri Sreeram Bhuwalka 2.6 Taking the above factors into consideration, the adjudicating authority has held that there was no separate infrastructure available with each and every Unit so as to be treated as a complete Unit and all the selling arrangements, managements and personnel and financial inter-relationship being common and run by the same family, the clearances being shown by them individually, are liable to be clubbed together. It is this Order of the Commissioner which has been assailed before us by the appellants strongly on the merits as also on the point of limitation. 3.1 Arguing on the appeal, Shri K.K. Banerjee, learned Advocate, for the main appellant firm, M/s. Ruby Rubber Industries Ltd. submitted that the findings of the adjudicating authority are mainly based upon the allegations of family ownership, common premises, common infrastructure, common procurement of raw materials and selling arrangements, financial relationship and common management. Arguing on each point, Shri Banerjee submitted that all the Units came into existence at different points of time and as such, it cannot be said that the same wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice has not referred to these notifications because no purpose was going to be served by relying upon the same inasmuch as, as observed earlier, the Department could have raised the demand only for a period of five years and could not have raised the demand for the period when the other small-scale exemption notifications were holding the field. As such the Commissioner has rightly observed that 1986 cannot be considered as a cut-off period for dubious method and fragmenting the various Units, which fragmentation could have been done by the appellants even prior to the said date because of availability of the other small-scale exemption notifications available at the relevant time. 5.1 Arguing further, Shri Banerjee submitted that the family ownership of all the Units is no criteria for holding the Units to be one and the same. He submitted that all the Units have distinct legal entities and there is nothing on record to show that one Unit is owned by the other or there is a financial or production control by the other Units or any flow-back of profit. All the Units being registered Partnership Firms are separately assessed under income-tax and sales tax. The Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for clubbing of clearances. Electricity and steam are being supplied against charges and as such cannot be the reason for clubbing. 5.4 In respect of the allegation of common procurement of raw-materials, he submitted that the same is not relevant inasmuch as all the Units were separately registered as small-scale Units and also for income-tax and sales tax purposes. Reliance in this regard was placed upon the decision in the case of Prabhat Dyes and Chemicals (supra). 5.5 Shri Banerjee, further, argued that the mere fact of advancing of loan by one Unit to other is not sufficient to club the clearances when there is nothing on record to show that there was profit-sharing or money flow-back. In this connection, he referred to the decisions in the case of Alpha Toyo Ltd. v. C.C.E. reported in 1994 (71) E.L.T. 689 and in the case of Cardcure Engg. Co. v. C.C.E. reported in 1996 (86) E.L.T. 351 (T) = 1996 (14) RLT 878. 5.6 As regards the allegation of common management which has been made the strong basis for arriving at a finding against the appellants, Shri Banerjee submitted that all the Units are manufacturing different excisable goods. The allegation that Shri Sreeram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices. This finding of the adjudicating authority has been challenged on the ground that there is nothing in the impugned Order to show that the Commissioner has examined the aspect of pricing of goods. He submitted that the goods manufactured by different Units were inspected before delivery to the customers and the question of under valuation is wholly erroneous. The observation of the adjudicating authority that the goods were manufactured from the same set of machineries, is not based upon any evidences inasmuch as all the Units were duly licensed/registered and registrations were granted by the proper officers after physical verification of the premises and the machineries installed. 5.8 Learned Advocate also challenged the Order on the basis of limitation. He submitted that on 19-2-83, Central Excise Officers from Headquarters of Anti-evasion Unit visited the factory of the appellants and seized various records. After careful examination, these records were sent back to the appellants under a letter dated 13-6-85. Drawing attention to the said letter, he submitted that as all the Units mentioned in this letter by the Assistant Commissioner, are parties in the present procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retracted by them at any point of time, thereafter. He also drew our attention to the statements of Shri Bimal Sarkar, Accountant and Authorised Signatory of M/s. Harchandrai Sreeram, which is to the effect that though he was an employee of the said Company, but was maintaining Central Excise Statutory Records of all the Units in question. In his said statements, Shri Bimal Sarkar had also deposed that the said Company procures Orders, purchases raw materials and fixes prices of commodity manufactured and cleared by the other Units. It is the contention of Shri Premkumar that the Servicing Company does not fix the price of the goods manufactured by the other independent manufacturers. This factor itself is a pointer towards the management being in the hands of Shri Sreeram Bhuwalka. He submitted that it is not one particular factor that the commonness of the partners or the commonness of the premises or the same Head Office being shared by all the Units, which is decisive of clubbing of clearances of various Units, but it is the cumulative effect of all the factors and evidences in a particular case which should be taken into consideration for arriving at the identity of the Units. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws that the documents seized earlier were being returned to the said parties. The said letter does not even show as to in which connection these documents were seized. They could be for any other purpose. Learned S.D.R. stressed that nothing could be made out from the said letter that various records were seized to examine whether all the Units situated at the same postal address have relations with each other and their clearances were to be clubbed. The appellants have not produced the Seizure Memo or any other communication or correspondence with the Department. As such, submitted the learned S.D.R. that nothing turns on the said letter. 6.5 As regards the appellants plea that all the Units were situated at the same premises and were either L-4 licence holder or duly registered with the Central Excise Authorities and fell under the jurisdiction of the same Assistant Commissioner, in which case knowledge on the part of the Department should be inferred with, he submitted that the commonness of all the Units came into notice of the Department by way of investigations conducted by them and the same is never looked into by the Officers at the time of issuance of the licences. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the evidences present in a particular case and is, more or less, applicable to the facts and circumstances of that particular case. The ratio cannot be picked up and straightaway applied to the facts of any given case. No doubt, the same is a guiding factor and has to be judiciously kept in mind while deciding a case. Nevertheless, the facts, the circumstances, the evidences and above all the purpose and intent of the parties, are the relevant factors which have to be considered and appreciated while trying to arrive at the real face of the Units. Lifting of the corporate veil to look into the real identity of the Units which might appear on paper to be totally independent, indentifiable and individual Units, is permissible. As such it is not the identify created on paper, but the actual status of the Units, which is to be identified for justifying clubbing of clearances of the various Units. Common premises, common head office, common partners and sharing of common facilities may not by themselves, be factors enough to hold that the Units involved are not independent Units. But it is the cumulative effect of all these, which is to be seen coupled with other factors on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Mill 1. Mising Mill - 2 Nos. 1. Braiding - 6 Nos. 2. Mising on Mamdrell 2. Mamdrell of D/size 250 pcs. (approx.) 2. Vulcaniser - 1 Nos. 3. Vulcaniser 3. Vulcaniser - 2 Nos. 3. Mixing - 1 No. 4. Steam Boiler 4. Sraping - 2 Nos. 4. Thread Winding - 1 No. 5. M/Tube - 2 Nos. 5. Extender - 1 No. A comparison of the above required equipments and the equipments available at the various Units reflects that these Units were not fully equipped with machinery required to be used in the manufacture of Hose Pipes. Further, one type of machinery was available in the premises of M/s. Ruby Rubber Industries and the other type was available in the premises of M/s. Victor Rubber Works. We fail to understand what more is required to show that the Units were not independent Units and were only created on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness had been placed on record by the appellants. 7.6 As held by the Hon ble Supreme Court in the case of Deputy Commissioner of Sales Tax v. K. Kelukutty reported in 1986 (24) E.L.T. 186 while referring to the Partnership Firms, their lordships of the Apex Court have observed - An Agreement between the partners to carry on a business and share its profits, may be followed by a separate agreement between the same partners to carry on another business and share profits therein. The intention may be to constitute two separate partnership and therefore two distinct firms . It will all depend on the intention of the partners. The intention of the partners will have to be decided with reference to the terms of the agreement and all these surrounding circumstances, including evidence as to the interlacing or interlocking of management, finance and other incidents of the respective business. 7.7 Similarly, in the case of Mohanlal Maganlal Bhavsar v. Union of India and Others reported in 1986 (23) E.L.T. 3 (S.C.), in a case of valuation under Section 4 of the Central Excises and Salt Act, 1944, the Hon ble Supreme Court has observed that the firm of Messrs M.B. Bhavsar Sons, thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility, something more would be required, for example, the existence of a person or a body of persons, who in reality, owned, directed and controlled the production in the four separate units which would show that the four units were only a facade to avail of the exemption. 7.10. Now, reverting to the various decisions quoted by the learned Advocate, Shri Banerjee for the main appellant-firm, it is seen that great reliance has been placed on the Rajasthan High Court s decision in the case of Renu Tandon v. Union of India reported in 1993 (66) E.L.T. 375. The paragraph relied upon by the learned Advocate deserves to be quoted, which is as follows :- the value of clearances of the two units cannot be clubbed together and the two units cannot be treated as one unit merely because of proximity of relationship or the situation of the two factories or 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 about having common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e properties of H.U.F., but are the separate properties of the individual concerned. We are, however, afraid that the ratio of the said judgment would not be applicable to the present case, where the clubbing has been ordered based upon a number of factors and not only on the skill and labour contributed by Shri Sreeram Bhuwalka. Fixation of sales prices of different individual companies by the Servicing Firm owned by Shri Sreeram Bhuwalka cannot be called a contribution of skill and labour of that individual. 7.13 Similarly, the ratio of the other decision of the Rajasthan High Court in the case of Commissioner of Income-tax v. Birdhichand and Sons reported in 1987 ITR (163) 573 holding - A karta of a Hindu undivided family can enter into partnership with other members of the Hindu undivided family who is or are taken in partnership though they have not contributed any separate or individual property of their own and such a firm is genuine and registration or continuation of registration cannot be refused to such firm - is not applicable to the facts and circumstances of the case inasmuch as the question before the Hon ble High Court arose on a reference arising out of the Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Units in question were having common partners belonging to the same family or were being managed by one person, Shri Sreeram Bhuwalka. Their reliance upon the letter dated 13-6-85 of the Assistant Collector returning the records to them, cannot be taken as a sufficient evidence reflecting knowledge upon the Department as regards the true identity of these Units. The contents of the said letter are being reproduced below for better appreciation :- Sub: Seizure of records and documents on 19-2-83 Dear Sir, After careful examination and scrutiny of the records and documents seized on 19-2-83 and the records submitted on 16-3-84 which were handed over by M/s. Ruby Rubber Industries it has been decided to release the same. You are, therefore, requested to take delivery of the above-mentioned records and documents from this office with prior arrangement with the Superintendent of Central Excise, Hqr. Anti-Evasion Unit, Calcutta-II Collectorate, Calcutta. Yours faithfully, Sd/- (Biswajit Dutta) Assistant Collector, Central Excise, Hqr. Anti-Evasion Unit, Cal.II Collectorate, Calcutta. A bare reading of the above letter neither discloses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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