TMI Blog2017 (5) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... is seen that some of them were availing Modvat and when credit of inputs is taken such movement of goods is not permissible without proper documentation and/or permissions and without reversal of credit. Such free movement of inputs without following due procedure is not permissible in law - Similarly in case of finished goods and intermediates manufactured by them such movement was not permissible without payment of duty and without proper documentation. If any finished or intermediate goods manufactured out of duty paid goods are to be removed outside manufacturing premises the duty is required to be paid. In case the credit is taken, the same is required to be reversed. No such activity was being done and the manufactured goods being moved from premises to another is illegal unless the factory is one registrant. Simply, it is seen in the said case that there was no allegation of free usage of machine of other units. The decision of the Hon’ble Supreme Court in the case of SUPREME WASHERS (P) LTD. Versus COMMISSIONER OF CENTRAL EXCISE, PUNE [2002 (12) TMI 82 - SUPREME COURT OF INDIA] applies where on similar issue it was held that there is mutuality of interest between the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Headquarters Preventive and Intelligence unit had visited the premises of the appellants and found that in one compound having plot No.P-788 to 792, the following four units were working: Sr.No. Name of the Factory M/s Plot No. Description of final product 1. Mayur Printers P-788 PVC Film 2. Vikas Agencies P-790-791 -do- 3. Mayank Rotoplast Inds P-789 792 -do- 4. Stylopack P-791-792 1st Floor HDPE Film While units at Serial No.1, 2 4 were registered with Central Excise Department and paying duty after availing SSI exemption under Notification No.1/93-Central Excise dated 28.2.93, the unit at Serial No.3 was neither registered with Central Excise Department nor any declaration for manufacturing activity had been filed with Central Excise Department for the year 1992-93 and 1993-94. During search Panchnamas were ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also informed that packing activities of these units were done with common labour at Plot No.790. He stated that finished material from all the units was being received here for wrapping, weighment, packing and strapping etc. 3. In the statement of Shri Labhubhai Patel, partner of all these units, he stated that he was looking after production of goods, clearance of final products, purchase of raw materials and banking etc. of all the units. That he was the active partner in all four appellants firms. He further informed that all the four appellant firms were duly registered with the Directorate of Industries as small scale Industry. He also informed that Mayank Rotoplast Industries is engaged in the manufacture of PVC bags and PVC Film but it was not registered with Central Excise Department and that they have not filed any declaration in respect of the said units for the year 1992-93 and 1993-94. However, they have filed declaration for 1991-92 and for previous years. He also confirmed that electricity was supplied to these firms from the electric Generation Set installed at Plot No.790 of M/s Vikas Agency. He also confirmed that packing weigment etc. of finished goods was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p of Kalimata brand waste grinding machine installed at backside room of plot No.788 - 789 which was found in working condition as on 6.1.94, he stated that the said machine is owned by M/s VA but due to oversight during the Panchnama he had informed that the said machine was owned by M/s MP, which was incorrect. He further informed that 40 kgs size High Speed Mixture (Jailaxmi Engg. Corporation made) installed in plot No.788 in which manufacturing of PVC compound is going on, is owned by MRPI but due to oversight during panchnama the said machine is owned by MP. He further informed that M/s MP was having factory at plot No.P-788 only at Plot No.P.789 is not owned MP but said plot No.P-789 is MRPI and their four units have their factory a following plots: a) M/s Mayank Rotoplast Inds. Plot No.P .789 P.792 b) M/s Mayur Printers Plot No.P-788 c) M/s Vikas Agencies Plot No.790 - 791 d) M/s Stylopack Plot No.P-791 - 792, 1 st floor. He also informed that MRPI have two plot No.789 and 792 and in between said plots, plo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e unit. The said demand was confirmed by the ld. Commissioner and the matter travelled to Tribunal. The Tribunal vide Order dated 6.6.2003 remanded the matter back to the Commissioner for de novo consideration. After de novo consideration, the Commissioner again confirmed the demand of duty. Aggrieved by the said confirmation, the appellants are now before this Tribunal. 5. Ld. Counsel for the appellants argued the very fact that the Commissioner has imposed penalties on dummy units shows that the order recognizes that they have independent existence. He further argued that so called dummy units have existence in reality and have their own independent premises and necessary infrastructure to carry out manufacturing process. He argued that all the units have a separate SSI registration, sales tax registration and are also filing separate Income Tax returns. Three units are also registered with the Central Excise Department. He further argued that they have their independent source of finance and credit facilities from banks to carry out their manufacturing activity. The purchase of raw materials and the sale of finished product are done separately by the three units. He argued th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or because of combined purchase of raw materials, or due to interest free loan by one to the other especially when the units are separately registered and filed income tax and sales tax return. 5.3 Ld. Counsel further argued that they were entitled to the benefit of modvat credit on certain endorsed invoices which was denied by the Commissioner. Ld. Counsel argued that at the material time it was permitted to take credit on the basis of endorsed invoices. Perusal of the photocopies of the invoices and the gate passes show the said gate passes did not contain any endorsement. However, the ld. Counsel showed his copy of gate pass and on the backside of the said gate pass there were two endorsements - one in favour of the dealer and another in favour of the assessee. He also showed us invoices by which they had purchased material from intermediate dealers. 5.4 Ld. Counsel further argued that extended period of limitation has been invoked on duty demand and in the instant case, the appellants were registered with the Central Excise authorities and were filing Classification List from time to time. He further argued that records of the unit were also audited on various occasions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arging with each other. b) the intermediate production during manufacture of PVC film was manufactured in one High Speed Mixer installed in MRPI while final product PVC film was manufactured by Mayur Printers and Vikas Agencies with extruder machine installed therein. c) No rent has been paid for giving facility of water by the water supply, water chilling plant and for manufacture of PVC compound etc. though the appellant M/s Mayur Printers paid an amount of ₹ 24,000/- to M/s MRPI on 18.3.94 after visit of officers on 6.1.94. d) That the raw material, intermediate goods and finished goods were moving freely between the premises of various units 7.2 The Commissioner has recorded the process of manufacture being undertaken by the appellants in their factory which involves as follows: It is pertinent to note that process of manufacture of PVC film/a final product, involves manufacture of PVC compound by mixing of various raw materials like PVC resin, Tine Stabilizer, Epoxy Plasticizers DOP in High Speed Mixer Machine at Plot No.789 of MRPI for all three units and then PVC film had been manufactured on Extruder Machine and slitter rewinder; machines i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and goods produced by them were sold through a common agent. (vi) The units were served by a common effluent treatment plant. (vii) Financial assistance by way of interest free loan had been provided by one of the units to the other. It is seen that in the said case that the facts are different in so far as in the instant case the some machinery for manufacture and all machinery for packing of goods is common. Even though each premise has most machinery needed for manufacture but still some machinery of other premises are being used freely. The common machinery in the case of Prabhat Dyes Chemicals (supra) is effluent treatment plant, which is only a subsidiary machinery, not directly used in the manufacture of goods. It is seen in the instant case that there is free movement of material between these units during the process of manufacture, whereas there is no such allegation in the case of Prabhat Dyes Chemicals (supra). In the instant case raw materials belonging to these units were stored in common premises. It is seen that some of them were availing Modvat and when credit of inputs is taken such movement of goods is not permissible without proper doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal on facts like the three companies having common management under Shri S.L. Raheja, having common procurement of raw material having common stock accounting and planning, having interdependence in manufacturing operations, having common stock of raw materials and semi finished goods, having common use of machinery between the three units, having common marketing arrangements and free flow of finance between three units cumulatively indicates interdependence of the three units with each other as also inter-relationship, cumulatively establishes the appellants inter-relationship and interdependence with each other, hence, the arguments of the appellants on this factual score must fail. 6. In regard to the second contention of the appellant in Civil Appeal No.6161 of 1999, it is seen from the Circular dated 1-3-1956, which according to the appellants have been reiterated by another subsequent Circular No.6/92, dated 29 th of May, 1992 by the Central Board of Excise Customs, New Delhi that a limited company should be treated as a separate entity for the purpose of exemption limit. If that be the position in law, then there may be some justification for the appellant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearance of all the factories put together which would be considered. Similarly, eligibility for SSI Exemption during a particular financial year, shall be determined on the basis of aggregate value of clearances of all excisable goods for home consumption during the preceding financial year made from all the factories of the manufacturer and if the aggregate value exceeds the threshold limit, none of the units would be eligible for SSI Exemption even if the value of clearances for home consumption of all excisable goods made by each individual unit during the preceding financial year is well within the threshold limit for SSI exemption. It may happen that a manufacture may have several factories located in different states falling under the jurisdiction of different Commissioners of Central Excise. If each of these factories was availing the SSI Exemption separately and if it is found that for a particular financial year, the aggregate value of their clearances of all excisable goods during the preceding financial year had exceeded the threshold limit for SSI Exemption, none of these units would be eligible for SSI Exemption during that year. In such a situation, duty can be dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Income Tax Commissioner, Madras v. Meenakshi Mills, Madurai, reported in AIR 1967 Supreme Court 819, in certain exceptional cases, the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade and that the court has powers to disregard the corporate entity if it is used for tax evasion or to circumvent the tax obligation. Same view has been taken by the Apex Court in cases of :- (a) Calcutta Chromotype v. Collector of Central Excise , reported in 1998 (99) E.L.T. 202 (S.C.) = (1998) 3, SCC-681; (b) Subra Mikharjee another v. Bharat Cooking Coal Ltd ., reported in (2000) 3 SCC-312 ; and (c) Delhi Development Authority v. Skipp Construction Co. (P) Ltd ., reported in ( 1996) 4 SCC-622. The Apex Court in the case of Associated Rubber Industry Ltd., reported in 1986 (157) ITR-77 (S.C.), relying upon its earlier judgment in case of Medowell Co. Ltd. v. CTO, reported in 1985 154 ITR-148, 161 (S.C.) has held that even if companies are distinct legal entities having separate existence, this is not the end of the matter and it is the duty of the Court in every case, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies had separate standing as contended it could not be explained why they could not get the cylinders directly from the lessors on lease basis and the need for introducing MACL as the lessee and then the three companies becoming sub-lessees. As noted by the Commissioner, entire receipts were paid as lease amount to MACL. Here again, the under-valuation aspect assumes importance. While the supply by MACL to three companies was ₹ 0.50 per unit, the sale price by the three companies was ₹ 5 per unit. It is on record that accounts were kept by common staff and marketing was done under the supervision of a person who belongs to the same group of concerns. The amounts have been collected by an employee of MACL. The so-called Directors of the companies were undisputedly employees of MACL. Almost the entire financial resources were made by MACL. The financial position clearly shows that MACL had more than ordinary interest in the financial arrangements for companies. The statements of the employees/Directors show that the whole show was controlled, both on financial and management aspects by MACL. If these are not sufficient to show inter-dependence probably nothing better wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he four legal entities are part of the same family. It is also seen that interest of loan are made to one entity to the another. However, undisputed facts are that raw material has and finished goods were moving from one place to another for processing/packing on machines of different premises of different entities free of costs, using common facitlities of electricity generation and chilling plant free of costs. It is also apparent that there cannot be any legal movement from one Central Excise unit to another without proper documentation and without discharging duty or Modvat credit reversal liabilities. In case of finished goods, there will be liability to pay central excise duty on movement of goods from one unit to another and in case of raw material, there will be liability to reverse modvat credit at the time of moving of goods from one premises to another. From the fact of the case it is apparent that all the four premises are being operated as a single factory. The purchasing and marketing is common, employees are common, there was free movement of raw material/ intermediates and finished goods within the premises. In the circumstances, the decision of the Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the extended period of limitation has rightly been involved. In view of above the appeals on account of confirmation of demand and imposition of penalty are dismissed. 9. The next contention raised by the appellant is regarding CENVAT credit on certain invoices which have been denied by the Commissioner. We have perused the invoices produced by the ld. Counsel for the appellants. It is seen from the document shown by the ld. Counsel that there is gate pass issued by M/s Indian Petrochemicals Corporation Limited (IPCL) for removal of goods. Thereafter, there are documents of M/s Shah Narotamdas Harjivandas Co addressed to the appellants. Ld. Counsel claimed that they had gate passes of IPCL addressed for their clearance to their own depot endorsed in favour of M/s Shah Narotamdas Harjivandas Co and second endorsement in their favour. It is seen that there is prima facie case made by the appellants that the Commissioner has not dealt with the same in detail. At the material time, the credit was available on endorsed gate pass. It is seen that there is no in depth examination of these documents at the level of Commissioner. Therefore, the denial of credit on these gate passes is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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