TMI Blog2017 (6) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... ision. Hence, we consider it appropriate to set aside all the impugned orders and remand the entire matter for reconsideration by the jurisdictional Commissioner - appeal allowed by way of remand. - E/2163-2170, 2202, 2250-2251, 2263/2012-EX (DB), E/289-2292 & 2487-2490/2008-EX(DB) - A/53712-53731/2017-EX[DB]-EX[DB] - Dated:- 6-6-2017 - Mr. (Dr.) Satish Chandra, President And Shri V. Padmanabhan, Member (Technical) Sh. V Lakshmikumaran and Shri Rahul Tangri, Advocates for the Appellants Sh. H C Saini, DR for the Respondent ORDER Per: V. Padmanabhan 12 appeals are filed against the impugned orders and have been filed by the manufacturer as well as employees of the manufacturing companies. In addition, 8 appeals are filed by the Revenue against the same impugned orders. The appeals and the impugned orders deal with the common controversy encompassing 3 distinct legal entities viz., M/s. Suzuki Textiles Ltd. M/s. PGO Processors Pvt. Ltd. and M/s. Suzuki Synthetic Pvt Ltd. All the above appeals are being disposed of through this common order. 2. All the appeals were heard together in which Shri V Lakshmi Kumaran and Shri Rahul Tangri learned advocates re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in funds for the operations of the process-house. The entire working capital funds were provided by Suzuki. Thus, Suzuki alone had the financial involvement required for running the process-house and accordingly, exercised financial control on the process- house through various means. The rent under the agreement was not paid through their own funds but by credit entry in the accounts of Suzuki, Salaries, wages, power, fuel, coal, raw materials, freight all were financed with funds from Suzuki. It is, thus proved beyond doubt that the transfer of assets on lease to PGO was a bogus arrangement entered into with a view to earning benefit from excise evasion. The lease agreements entered into between the two were bogus. By entering into bogus lease arrangements with PGO, Suzuki conceived a plan to evade payment of duty under which PGO obtained the registration under Rule 174 as a lessee-cum-independent manufacturer and processed the fabrics of Suzuki under the guise of Job work and adopted the price based on cost of grey fabrics + the processing charges under Rule 7 of the Valuation Rules, 1975 read with the principles laid down by the Supreme Court in the case of Ujagar Prints ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs (P) Ltd., Bhilwara filed a declaration dated 16.12.1998 in terms of Rule 3 of the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998 with a view to paying duty at specified rates of ₹ 2 lakh per chamber per month on the grounds that they were an independent processors within the meaning given under explanation III of the Notification No. 42/98-CE(NT) dated 10.12.1998. (h) Vide letter C.No. V(PER) JP-II/30/48/98/9413 dated 30.12.98, M/s. PGO were informed that their request could not be entertained under the scheme as enquiries had revealed that M/s. Suzuki Textile Ltd. appeared to be processors of fabrics and they had a proprietary interest in weaving of fabrics. Aggrieved with the decision conveyed in the said letter, M/s. PGO Processors (P) Ltd. Bhilwara, filed DB CWP No. 11/99 in the Rajasthan High Court, Jodhpur and obtained a Stay Order dated 5.1.999 by which M/s. PGO were allowed to take the benefit of Notifications under the scheme and clear the goods on payment of duty at the rates provided for in the Notification No. 36/98-CE dated 10.12.98 till the disposal of the petition. (i) The Hon'ble High Court disposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/12 dated 30.3.12 was passed against M/s. PGO Processors confirming the demand for differential duty. In this order deductions were allowed on account of certain post manufacturing activities traceable to M/s. Suzuki Processors such as brokerage paid to intending agents, etc. 6. The appeals have been filed by the assessee as well as their employees against demand of duty as well as imposition of penalties vide the above impugned orders. Revenue has filed the appeals against the admissibility of selling expenses from the assessable value extended to M/s. Suzuki Processors as well as admissibility of brokerage and other deductions extended to PGO Processors. 7. The proceedings emanate from and hinge upon the determination of a common question of fact, being whether the commercial arrangement, comprising of a lease agreement, rent agreement and a job work contract, entered into between M/s. Suzuki Textiles Ltd. and M/s. PGO Processors was a sham arrangement to evade payment of central excise duty. Such determination is crucial for ascertaining the correct valuation of the clearances effected by M/s. PGO Processors. It is the case of the department that as the commercial arra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se only on the basis of Ujagar Prints case. The Tribunal vide the above decision, held that such lease agreement for process house cannot be considered as a sham and process house owner cannot be regarded as real manufacturer. Accordingly, it was held that demand was not sustainable. The decision of the Tribunal was also upheld by the Hon'ble Supreme Court as reported in [2007 (218) ELT 641 (SC) ]. He submitted that since the facts of the present case are identical to the above decision of the Apex Court, the present appeals also merit a similar decision without prejudice to the above, he also submitted that if the demand is held to be maintainable both M/s. Suzuki and M/s/. PGO will be entitled to certain deductions and abatements which have not been taken into account in the impugned orders. 10. The case of the Revenue was argued by Shri T R Saini, DR. He reiterated the impugned orders and emphasized the fact that the adjudicating authority has held that processing house was part of M/s. Suzuki Textile Ltd. and the same was artificially separated into a separate unit and lease / rent agreements were entered into between M/s. Suzuki and M/s. PGO Processors. This is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of their competence to contract. The fact of their being Cos. of the same group notwithstanding, the lease agreements were valid in law. The commercial wisdom behind the agreements is not open to questioning by tax authorities. The issue as to whether a transaction is genuine or not is required to be examined from the point of view of whether the transaction really took place and who is the beneficiary of the transaction. In the present case, since the transacting parties were fairly big public limited companies, there could be no doubt about their existence. The books of accounts of the Cos. and their Balance Sheets show clearly that each bore the responsibility for his end of the deal. RSWML continued to be responsible for the capital invested on the process house as its owner, while BSL and PFTL bore responsibility for paying the lease amount as well as for the running of the processing house. Each Co. paid the other for the assets or services received, including interest for delayed payments. Management control by the Group Hqrs. or common workers and managerial staff for the processing house before and during lease period make no difference to the status of BSL and PFTL as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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