TMI Blog2016 (9) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerns), are under common management and closely controlled by only one person Shri J.S. Jain, who is one of the appellants here. The facts and circumstances have warranted to examine the reality of these units; and after going behind the mask of these entities, it has been revealed that activities of these units i.e. manufacture, clearance etc. has to be clubbed together supported by the decision of Hon'ble Supreme Court in the case of Calcutta Chromotype Ltd. vs. C.C.E., Calcutta [1998 (3) TMI 138 - SUPREME COURT OF INDIA]. Regarding the submission that M/s Arun Chemicals had got no manufacturing activity, it may be mentioned that both M/s Foamsil Chemicals and M/s Arun Chemicals have been actively involved in the operations of wrongly availing exemption under Notification No.175/86-CE by -artificial fragmentation when there was no distinction in management of the firms’. Therefore, M/s Arun Chemicals (who is one of the appellants) deserves to be penalized under Rule 9(2) and 173Q of Central Excise Rules. We are giving no specific findings on M/s Foamsil Chemicals as they are not the appellant here. It is clear that noticee appellants M/s Atlantic Chemicals played a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and contested the proposed penalty in the SCN. However, these submissions are not supported by any evidence. On the other hand, there is overwhelming evidence indicating the receipt and disposal of RBA transported under the garb of Soda bi Carb as discussed above. It is, therefore, held that they have been concerned in the receipt and disposal of the said offending goods and hence liable to penalty under Rule 209A of the CER”. Penalties imposed in the impugned order on M/s Atlantic Chemicals (of ₹ 29 lakhs) and on M/s Arun Chemicals (of ₹ 6 lakhs) are modified and we instead impose the penalty of ₹ 35,00,000/- (Rupees thirty five lakhs only) on M/s Atlantic Chemicals only in this regard under Rule 9(2) and Rule 173Q of the Central Excise Rules. Further, it is to be noted that M/s Arun Chemicals along with M/s Atlantic Chemicals and others has been actively involved in the clearance of RBA in the guise ofsoda bi carb and therefore, deserve imposition of penalties. Consequently, penalty of ₹ 6 lakhs imposed on M/s Arun Chemicals by the impugned order under Rule 9(2) and Rule 173Q of Central Excise Rules is hereby sustained. Demand and imposition of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icals h) Atlantic Chemical Industries. 2. These appeals are against common impugned order dated 25.6.2004 passed by the Commissioner, Central Excise (Adjudication). In the impugned common order, there are demands of Central Excise duty confirmed along with imposition of penalties against M/s Foamsil Chemicals also but presently before us there is no appeal by the noticee, namely Foamsil Chemicals. 3. The operative part of impugned order mentions the confirmation of demands and imposition of penalties for wrong availing Exemption benefit of Notification No.175/86-CE under Rule 9(2) of Central Excise Rules , read with Section 11A of the Central Excise Act, 1944 as follows: (i) Against Atlantic Chemicals - Rs.38,45,363/- (ii) Against Foamsil Chemicals - Rs.31,39,343/- (iii) Against Arun Chemicals - ₹ 1,21,360/- 3.1 For the above confirmation of demands of Central Excise duty, following penalties have also been imposed under Rule 9(2) of the Central Excise Rules read with Rule 173Q of the Central Excise Rules: i) Penalty of ₹ 35 lakhs on Atlantic Chemical Industries; ii) penalty of ₹ 27 lakhs on Foamsil Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants main pleadings on denial of SSI notification and consequent demand on the ground of clubbing of value of clearances : (a) It is submitted that once the clearances are to be clubbed then it is necessary to identify one manufacturer and the demand has to be confirmed against such manufacturer. In the present case no such exercise has been carried out and the impugned order does not hold one person as the manufacturer and the others as dummies. In such a situation the demand on account of clubbing of clearances is not sustainable in view of the judgment of the Hon ble Supreme Court in the case of Gajanan Fabrics Distributors Vs CCE - 1997 (92) ELT 451 (SC). (b) The appellants further rely on the Circular No. 6/92 dated 29.5.1992 where in the context of Notification No. 175/86-CE dated 1.3.1986 it has been clarified that different firms are treatable as separate manufacturers and each eligible for exemption. (c) This circular was considered by the Hon ble Supreme Court in the case of Supreme Washers (P) Ltd. Vs. CCE - 2003 (151) ELT 14 (SC) to lay down the criteria to club the value of clearances of different units. (d) The appellants further rely on the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted by the ld. Counsel for the appellant that Arun Chemicals admittedly did not have any facility to manufacture as is evident from paras 108 and 111 of the impugned order. Further, there is no specific finding given in the entire order as to how the demand of ₹ 22,51,582 is to be confirmed against Arun Chemicals. Only at para 152 the duty demand confirmed has been indicated, which is based on the test report of the sample of RBA drawn from the premises of Atlantic Chemicals and Foamsil Chemicals. The adoption of this test report to Arun Chemicals is not sustainable, since no sample was drawn from their premises as no RBA was manufactured by them. (e) There is no evidence whatsoever to show the removal of RBA without payment of duty. There is also no evidence to show the procurement of raw materials required for the manufacture of the quantity of 4.15 lakh kgs of RBA. There is also no evidence of the flow back of the money consideration for the quantity of RBA alleged to have been clandestinely removed. Thus, the demand of ₹ 22,51,582 confirmed by the Commissioner in the impugned order is unsustainable and liable to be set aside. 6.3 Appellants main pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the sodium bicarbonate. On this basis the demand has been worked out assuming that, the appellants, manufactured extra quantity of the RBA from the DNPT obtained and that this extra quantity has been removed clandestinely. f) The entire basis of the demand is erroneous, in as much as there is no evidence whatsoever by the department to show that the appellants had used only 48.9% of the pure blowing agent in the final product during the entire period of dispute . On the basis of the test report of one sample the department has worked out that the demand for the total period of 5 years from 1989-90 onwards which is not permissible. 6.4 Appellants main pleadings on demand on the ground of removal of RBA in the guise of sodium bicarbonate : a) The Commissioner confirmed a duty amount of ₹ 6,87,381 on Arun Chemicals and ₹ 29,42,754 on Atlantic Chemical Industries on the ground that they cleared RBA in the guise of sodium bicarbonate. This demand was proposed in the show cause notice based on the statement of the buyers in Kerala who in their statements had indicated that the sodium bicarbonate as such could not be used for the manufacture of the hawai rubbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Bicarbonate consumed in the final product which resulted in suppression of production which has been clandestinely removed b) The appellants had set up their unit in 1984/1988 and since then were manufacturing RBA under the brand name Foamtax and Foamsil. The fact of manufacture of these goods under the brand name of Foamtax and Foamsil indicated by the appellants in the classification lists filed from time to time. The fact of using the brand name of other manufacturers was also indicated in their classification list and these manufacturers were also working under the jurisdiction of the same Officer. Thus, the departmental authorities at all times had verified the owner of the brand name and as to whether the appellants were entitled for the benefit of SSI exemption. c) The existence of all the units and the fact of all the family members running of the units was also known to the departmental authorities in view of the various declarations filed from time to time. The appellants submit that the departmental authorities could have verified the actual position and the eligibility of the SSI notification to each of the units on receipt of such declarations from the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cals, shown as manufacturer of RBA was found non-existent on the date of visit by the officers of DGCEI.(Para 106, Para 108 and Para 111 of OIO). (h) All the units are proprietary concern, owned by three members of one family, engaged in the manufacture of common single goods namely RBA and having common brand names, foamsil , foamtax 7.2. Revenue s submissions on procurement of raw material and disposal of finished excisable goods members of one family played active and decisive role : a) M/s Arvind Rubber Mills (owned by Father Shri J. S. Jain and another brother Shri Amar Kumar Jain) and M/s Amar Enterprises (owned by mother Ms. Kiran Mala Jain) played active role in disposal of the goods manufactured by three units. b) Three units, situated at a piece of land, were under common management and financial control of one family living in one house and all the business was being conducted jointly from one office/premises mainly by Sh. J. S. Jain and Shri Amar Kumar Jain. c) These firms/units were artificially fragmented for the sake of availing exemption under Notification No. 175/86-CE dated 01.03.1986 (later 01/93-CE) and therefore the benefit of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RBA without payment of Central Excise duty availing exemption. Thus, there is a clear contravention of Para 3 and Para 4 of Notification No. 175/86-CE dated 01.03.1986. (Para 112 of OIO). 8. We heard the parties at length and gone through submissions; case laws cited carefully. 9. It may be mentioned that duty demands and penalties confirmed by the impugned order on respective noticees firms and personnel are as under: Sl.No. Name Duty Demand (Rs.) Penalty (Rs.) 1. Atlantic Chemicals Total ₹ 1,02,96,122/- (3845363 +3508005+2942754) Total ₹ 1,02,00,000/- (3800000+3500000+2900000) 2. Foamsil Chemicals 58,92,405/-(3139343+2743062) 58,00,000/- (3100000+6000000) 3. Arun Chemicals 30,60,323/- (121360+2251582+687331) 29,20,000 (120000+2200000+600000) 4. Shri J.S. Jain - 25,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion) in the impugned order inter alia observes as under: 96. It is observed that all the firms, namely, (i) ) M/s Atlantic Chemicals (ii) M/s Foamsil Chemicals and (iii) M/s Arun Chemicals (iv) Amar Enterprises and (v) Arvind Rubber Mills were operating from A 1/11-B, Pahwa Mansion, Asaf Ali Road, New Delhi (hereinafter referred as Pahwa Mansion Office) which was declared registered office of Atlantic Chemicals. Shri J.S. Jain in his statement dated 20.4.93 admitted that the sale and purchase work of Atlantic Chemicals, Amar Enterprises and Arvind Rubber Mills was being carried on from the said premises; that the rent of the said office and electricity bills were paid by Amar Enterprises; that payment of bills 2 telephone installed in the said office was made by Atlantic Chemicals and sometimes by Arvind Rubber Mils. The correspondence in File No.4 of Foamsil Chemicals pertaining to sundry debtors for the year 1992-93 recovered from their Pahwa Mansion Office, contained several letters addressed by different customers to Foamsil Chemicals in which the address of Foamsil Chemicals is of their Pahwa Mansion office. SCN fists out names of a few of the firms who had mail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. The admitted position about the above facts and the role played by Shri J.S. Jain lend support to the allegations made in the SCN in respect of clubbing proposition . 11.1.2 Further, the Commissioner (Adjudication) in the impugned order, inter alia in paras 103 and 124 observes as under: 103. The SCN refers to specific instances and entries in the financial accounts of Atlantic Chemicals and Foamsil Chemicals which indicate that the said firms also had a common financial management. These cases include transactions under which money was transferred through cheque by Foamsil Chemicals to Atlantic Chemicals ; payment made to UPSEB on behalf of one another etc. However, no records was found indicating payment of interest by Atlantic Chemicals to Foamsil Chemicals or Arun Chemicals for keeping and utilizing their amounts in their business. Similar instances of fund transfers form Arun Chemicals to Atlantic Chemicals, Arvind Rubber Mills (P) Ltd. to Atlantic Chemicals and by Amar Enterprises to Foamsil Chemicals have been pointed out in the SCN. These monetary transactions from one firm to another and outstanding huge sums as credit balance with no interest liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only for the sake of availing exemption under the Notification No.175/86-CE (later 1/93-CE). Thus, the clearances of all the units were required to be clubbed for computing the value of clearances for the applicability of Notification No.175/86 CE (later 1/93 CE).When this is done, the value of clearances of RBA from the said 3 units exceeded the eligibility limit in a financial year and hence the benefit of Notification No.175/86 CE was not available to any the said units. They were, therefore, required to clear the RBA manufactured by them on payment of full rate of duty. This was not done.It is therefore, held that Atlantic Chemicals and Foamsil Chemicals have contravened the provisions of Rule 9(1), 173B, 173F, 173G of CER and cleared RBA manufactured in their factories without payment of appropriate duty amounting to ₹ 38,45,363.59 and ₹ 31,39,143.16 respectively during the period from 1989-90 to 1993-94.Simiarly, Arun Chemicals are also held to have manufactured and cleared RBA without payment of duty amounting toRs.1,21,360/- in violation of Rule 9(1), 173B, 173G of the CER. As this short/non-payment of duty was done by suppression of facts, such as, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e need to make a departure from the Westminster principle based upon the observations of Lord Tomlin in the case of IRC v. Duke of Westminster [(1936) AC 1] that every assessee is entitled to arrange his affairs as to not attract taxes. The Court said that tax planning may be legitimate provided it is within the framework of law. Colourable devices, however, cannot be part of tax planning. Dubious methods resorting to artifice or subterfuge to avoid payment of taxes on what really is income can today no longer be applauded and legitimised as a splendid work by a wise man but has to be condemned and punished with severest of penalties ... (emphasis supplied) 11.1.5 We do not agree with the appellants contentions that impugned order has fixed liabilities of central excise duty separately on the noticee/appellant, namely, M/s Atlantic Chemical Industries, M/s Foamsil Chemicals (who is not the appellant) here and M/s Arun Chemicals and have held that their clearances are to be clubbed whereas the impugned order concludes that M/s Arun Chemicals had no manufacturing facilities and if it is so, how liability could be fixed against M/s Arun Chemicals. 11.1.6 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y remove RBA in the guise of soda bicarbonate . In this regard, there are clear facts on record mentioned in the show cause notice as well as in the Order-in-Original issued by the Commissioner (Adjudication). It has come out clearly that soda bicarbonate (soda bi carb) was available in Kerala at hugely cheaper rate for anyone to buy and use; whereas the appellants have claimed that they sold and sent soda bi carbonate when there was no commercial or other reason available to such sale/dispatch of soda bi carb to Kerala or any other place. There have been enough number of corroborative evidences in the form of statements by respective persons concerning the subject matter to disprove the appellants averments that they sold/ sent soda bi carb and not the RBA. The appellants have also argued that a few of the statements were later on retracted or modified. However, we are of the considered view that those retractions and modifications do not matter when overall evidences conclusively prove that appellants in fact cleared their product RBA in the guise of soda bi carb thus evading central excise duty. It has also come on record that soda bi carbonate cannot be technicall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledgers of Amar Enterprises. Besides the bills in all cases have been issued for bulk quantities and never for less than 1,000 kgs. And as such there was no necessity for incurring expenditure and wasting labour on repacking of 50 kgs. Bags to 25 kgs. It is also evident that Atlantic Chemicals were arranging collection of Soda bi Carb billed to India Rubber Chemicals from the godown of Laxmi Commercial Corp. and were taking the same to their factory situated at Dundahera and in its place they dispatched the consignments of RBA manufactured in their factory without payment of duty. They also dispatched RBA from their factory and the bills of Soda bi Carb were raised from Amar Enterprises, Arun Chemicals and also sometimes from their own factory. Arun Chemicals also cleared clandestinely RBA to India Rubber Chemicals, Ceyenar Chemicals and Lotus Chemicals without payment of Central Excise duty leviable thereon. It is therefore, held that in this way Atlantic Chemicals and Arun Chemicals manufactured and cleared RBA in the guise of Soda bi Carb without payment of duty amounting to ₹ 29,42,754/- and ₹ 6,87,381/- respectively (ref. paras 2.3, 3, 5 and 7 of SCN) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order is hereby confirmed against M/s Atlantic Chemicals only. Thus, duty liability against M/s Atlantic Chemicals on this account would be ₹ 36,30,135/-. (Rs. 29,42,754/- + ₹ 6,87,381/-) under Rule 9(2) read with Section 11A of Central Excise Act. 11.2.4 Further, considering the findings and conclusion made above, penalties imposed in para 155 (vi) of the impugned order on M/s Atlantic Chemicals (of ₹ 29 lakhs) and on M/s Arun Chemicals (of ₹ 6 lakhs) are modified and we instead impose the penalty of ₹ 35,00,000/- (Rupees thirty five lakhs only) on M/s Atlantic Chemicals only in this regard under Rule 9(2) and Rule 173Q of the Central Excise Rules. Further, it is to be noted that M/s Arun Chemicals along with M/s Atlantic Chemicals and others has been actively involved in the clearance of RBA in the guise of soda bi carb and therefore, deserve imposition of penalties. Consequently, penalty of ₹ 6 lakhs imposed on M/s Arun Chemicals by the impugned order under Rule 9(2) and Rule 173Q of Central Excise Rules is hereby sustained. 11.3 3rd Part : The impugned order in its para 155 (iii) (v) has confirmed the duty liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees will get the relief accordingly. 11.4 4th Part: In para 155 (vii), the impugned order imposed penalties of various amounts on the following noticees: (a) Penalty of ₹ 25,00,000/- on Sh. J.S. Jain, (b) Penalty of ₹ 10 lakhs on Shri Amar Kumar Jain, (c) Penalty of ₹ 2,50,000/- on M/s Amar Enterprises, (d) Penalty of ₹ 1,50,000/- on M/s India Rubber Chemicals, (e) Penalty of ₹ 60,000/- on M/s Ceyenar Chemicals, (f) Penalty of ₹ 85,000/- on M/s Lotus Chemicals, 11.4.1 In respect of above penalties, after considering the totality of facts and circumstances of the case, we are of the considered view that there is no reason to interfere with the above penalties. The impugned order has rightly imposed these penalties on the respective noticees appellants for the reasons mentioned in the impugned order. This ground is dismissed. 12. Since there is no appeal before us from the noticees M/s Foamsil Chemicals, no specific findings have been arrived at in respect of their liability of central excise duty and penalties imposed on them by the impugned order. 13. In the result, the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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