TMI Blog2018 (5) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... able value - It has been argued that the trading units are not “related” with any of the manufacturing units in terms of Section 4 (3) (b) of the Central Excise Act, 1944 - Held that: - all the manufacturing as well as trading units had only nominal existence but effectively were not independent but related. Since Shri Mahendra Bohra is the one person who has total financial as well as management control of all the units, the transaction values at which the goods are shown as sold from the manufacturing units to the trading units has no sanctity. It is not only that the manufacturing units and trading units are liable to be held as related persons as per Section 4 (3) (b) (iv), they are in effect one single large unit - the duty is required to be determined on the basis of the price on which the trading units have ultimately sold the goods to independent buyers. Similar issue decided in the case of COMMISSIONER OF C. EX., NEW DELHI Versus MODI ALKALIES & CHEMICALS LTD. [2004 (8) TMI 108 - SUPREME COURT OF INDIA]. Appeal dismissed - decided against appellant. - Excise Appeals No. 50047, 50061, 50055, 50049, 50056-50060 and 50048, 50050-50054 of 2018, E/50052/2018, E/50053/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tools Corporation and (iii) Shree Bherav Amla Food Processors jointly. (ii) Imposed penalty of ₹ 5,00,000/- and ₹ 1,00,000/- on Shri Mahindra Bohra, Director and Smt. Sangeeta Bohra, Director under Rule 26 (1) of Central Excise Rules, 2002. 3. The first issue relates to clubbing of value of clearances of four other manufacturing units with Shree Bherav Diamond Tools Pvt. Ltd. so as to deny SSI exemption availed by them. The second issue relates to valuation by adopting selling price of three trading firms where the sale was effected by the manufacturing units through these trading firms. 4. The five manufacturing units are :- Sl. No. Manufacturing Unit Goods manufactured Ownership etc. 1. Shree Bherav Diamond Tools Pvt. Ltd. (SBDTPL) Gang Saw Segments Wire Saw Segments (beads) Mahendra Director Sangeeta Director Bohra, Bohra, 2. Shree Bherav Engineers (SBE) Gang Saw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ma, learned DR for the Revenue. The arguments advanced on behalf of the appellants are summarized below :- (i) on the issue of clubbing it is submitted that all the manufacturing units were functional and having separate manufacturing facilities and separate identity and ownerships. All the manufacturing units are having separate Income Tax PAN and separate central excise registrations. Further, there is no mutuality of interest and separate manufacturing entities are discharging their duty liability in correct and lawful manner separately, therefore, there cannot be a situation for clubbing of value of clearances and denial of SSI exemption to the units ; (ii) there is no provision in central excise to issue show cause notice jointly and severally. It is generally only in the case of a surety bond that the person executing the bond and the surety jointly and severally bind themselves to be liable for any violation. When the legal entities are separate and clubbing of clearances are alleged by naming them dummy units, there is only one offender that is the alleged parent entity who only should be required to show cause and from whom only the duty was to be recovered ; (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-section (3) of Section 4 of the Central Excise Act, 1944. The aforesaid sub-clauses (ii) and (iii) do not apply in the impugned matter as these sub- clauses deal with natural persons whereas Shree Bherav Diamond Tools Pvt. Ltd. is an artificial legal persons ; (ii) As far as sub-clause (iv) of Section 4 (3) (b) of the Act is concerned, it is submitted that two persons shall be deemed to be related if they are so associated that they have interest, directly or indirectly, in the business of each other. Therefore, there must be mutuality of interest between the manufacturing units and trading units. Mutuality of interest means that (i) the manufacturing units must have interest in the business of trading units, and (ii) trading units must also have interest in the business of the manufacturing units ; (iii) the transactions between all the manufacturing and trading units were made on principal to principal basis without any interest involved between the seller and buyer. All the transactions between the seller manufacturing units and trading units were made on true transaction value in terms of clause (a) of Section 4 (1) of Central Excise Act, 1944. Since there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all ; (iii) the office premises of all the 5 manufacturing units as well as the three trading units is common and is the residential address where Shri Mahendra Bohra alongwith his family members live ; (iv) 4 of the manufacturing units are engaged in the manufacture of identical products namely viz. middle column gang saw wire used in the diamond industry. Only SBAFP was engaged in the manufacture of a different product i.e. Amla Candy and churan based tablets. The entire output of all the manufacturing units are sold exclusively through the three trading units, from where they are sold at enhanced prices. No separate phone numbers or electricity connections were there for different units. Further, the common office is situated in the premises owned by Smt. Sangita Bohra, but no rent was being paid to her by the respective units ; (v) a large number of employees were common between the various units and were drawing salary from a common account ; (vi) the department during investigation has found that funds were being transferred from one unit to another but no interest was being paid for such transferred amounts by the transferee units to the transferor units ; (vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in as much as manufacturing facilities in each of the units are available. 12. The SSI exemption under Notification No. 8/2003-CE dated 01/03/2003 allows duty free clearance up to the aggregate value of clearances in a financial year of ₹ 150 lakhs, when a manufacturer clears the specified goods from one or more factories. The exemption shall apply to the aggregate value of the clearances from all the factories together. 13. The argument that each factory will be entitled to duty free clearance upto an aggregate value of ₹ 150 lakh is appealing in the light of CBEC Circular No. 6/92 which has clarified that different firms will be treated as different manufacturers but in the present case, the reality uncovered by the investigation by the Revenue is different. The elaborate investigation has established that the independent existence of all the manufacturing and trading firms is only a facade which covers the reality that Shri Mahendra Bohra is one person who was having the technical know-how, knowledge and the manufacturing formula and has started initially SBTPL as private limited company in which he was a Director. Subsequently, he has started all the other m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no justification for adopting valuation under Rule 9 of the Central Excise Valuation Rules, 2000. 18. We have given careful and anxious consideration to the points urged before us. As discussed in above paragraphs, we are of the view that all the manufacturing as well as trading units had only nominal existence but effectively were not independent but related. Since Shri Mahendra Bohra is the one person who has total financial as well as management control of all the units, we are of the view that the transaction values at which the goods are shown as sold from the manufacturing units to the trading units has no sanctity. It is not only that the manufacturing units and trading units are liable to be held as related persons as per Section 4 (3) (b) (iv), they are in effect one single large unit. Consequently, we find no infirmity in the view taken by the Adjudicating Authority that duty is required to be determined on the basis of the price on which the trading units have ultimately sold the goods to independent buyers. 19. We have considered judgment of the Hon ble Apex court in the case of CCE, New Delhi vs. Modi Alkyls and Chemicals Ltd. 2004 (171) E.L.T. 155 (S.C.), i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployees/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 would show the same. The factors which have weighed with CEGAT like registration of three companies under the sales tax and income tax authorities have to be considered in the background of factual position noted above. When the corporate veil is lifted what comes into focus is only the shadow and not any substance about the existence of the three companies independently. The Circular No. 6/92, dated 29-5-1992 has no relevance because it related to Notification No. 175/86-C.E., dated 1-3-1986 and did not relate to Notification No. 1/93. The extended period of limitation was clearly applicable on the facts of the case, as suppression of material features and factors has been clearly established. If in reality the three companies are front companies then the price per unit to be assessed in the hands of MACL is ₹ 5 and not ₹ 0.50 as disclosed. The question whether there was manufacture or not was not in issue before the Commissioner. The plea that there was no manufacture has also to be re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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