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2018 (8) TMI 686

and they cannot be treated as a one person for the purpose of SSI exemption - Difference of opinion. - Held that:- There is difference of opinion on the matter: Whether the appeals are to be rejected as held by Learned Member (Technical) or the same are to be allowed as held by Learned Member (Judicial)? - Appeal No. E/1442 to 1444/07 - I/33-35/2018 - 19-7-2018 - MRS. ARCHANA WADHWA, MEMBER (JUDICIAL) And SHRI RAJU, MEMBER (TECHNICAL) None for Appellant Shri S.J. Sahoo, Asstt. Commissioner (AR) for Respondent ORDER Per: Raju These appeals are filed by M/s Pharma Chem Services, Mrs. Reema Madhavan and M/s Sanj Pharma Engineering Pvt. Ltd. against order of Commissioner (Appeals) upholding the order of Assistant Commissioner of Central Excise, wherein the demand of duty was confirmed and penalty was imposed by clubbing the clearances of the appellant for the purpose of SSI exemption. 2. The matter was listed almost 15 times but no one appeared on behalf of the appellant and consequently the appeals are being decided on the basis of the grounds of appeal and no further adjournment has been given. 3. A perusal of the impugned order shows that the appellant M/s Pharma Chem Services i .....

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Engineering Pvt. Ltd. is a partnership concern, wherein Mrs. Reema Madhavan is holding 99% of the shares. In the appeal memo, it has been argued that the appellant M/s Pharma Chem Services and M/s Sanj Pharma Engineering Pvt. Ltd are both separate legal entity and they cannot be treated as a one person for the purpose of SSI exemption. While Revenue has relied on the fact that appellant M/s Pharma Chem Services was fully financed by M/s Sanj Pharma Engineering Pvt. Ltd on loan basis though the said loan was repaid later on. The appellants have countered this fact on the ground that since this loan was repaid later on, it cannot be considered as a single entity. Revenue has argued that the existence of common Directors is relevant for the purpose of considering that two manufacturing units are being controlled by same person. The appellants have countered this contention of the Revenue with the decision of Tribunal in the case of Studioline (supra). 5.1 We find that crucial fact for consideration is that whether the appellant M/s Pharma Chem Services and M/s Sanj Pharma Engineering Pvt. Ltd are one or different entities. 5.2 Revenue has argued that they are a single entity for the .....

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an be lifted and its face examined in substance. The doctrine of the lifting of the veil thus marks a change in the attitude that law had originally adopted towards the concept of the separate entity or personality of the corporation. As a result of the impact of the complexity of economic factors, judicial decisions have sometimes recognised exceptions to the rule about the juristic personality of the corporation. It may be that in course of time these exceptions may grow in number and to meet the requirements of different economic problems, the theory about the personality of the corporation may be confined more and more. 13. In Life Insurance Corporation of India v. Escorts Ltd. & Ors. [(1986) 1 SCC 264], this Court again considered this question and said: "While it is firmly established ever since Salomon v. A. Salomon Co. Ltd. [(1897) AC 22 HL] was decided that a company has an independent and legal personality distinct from the individuals who are its members, it has since been held that the corporate veil may be lifted, the corporate personality may be ignored and the individual members recognised for who they are in certain exceptional circumstances. Pennington in .....

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he veil to prevent devices to avoid welfare legislation. It was emphasised that regard must be had to substance and not the form of a transaction. Generally and broadly speaking, we may say that the corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected etc. " 14. In M/s. Mcdowel and Company Ltd. v. Commercial Tax Officer [(1985) 154 ITR 148], this Court examined the concept of tax avoidance or rather the legitimacy of the art of dodging tax without breaking the law. This Court stressed upon the need to make a departure from the Westminster principle based upon the observations of Lord Tom .....

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he third proviso to clause (a) of Section 4(1) of the Act, to arrive at the value of the excisable goods. It cannot be that when the same person incorporates two companies of which one is the manufacturer of excisable goods and other is the buyer of those goods, the two companies being separate legal entities, the Excise authorities are barred from probing anything further to find out who is the person behind these two companies. It is difficult to accept such a narrow interpretation. True that shareholdings in a company can change but that is the very purpose to lift the veil to find out if the two companies are associated with each other. Law is specific that when duty of excise is chargeable on the goods with reference to its value than the normal price on which the goods are sold shall be deemed to be the value provided (l) the buyer is not a related person and (2) the price is the sole consideration. It is a deeming provision and the two conditions have to be satisfied for the case is to fall under clause (a) of Section 4(1) keeping in view as to who is the related person within the meaning of clause (c) of Section 4(4) of the Act. Again if the price is not the sole considerat .....

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peated to avoid redundancy. 2. Undisputedly both the units i.e., M/s Pharma Chem Services as also M/s Sanj Pharma Engineering Pvt., are located at two different places. Whereas M/s Pharma Chem Services is located at R-841, Rabale, TTC Industrial Estate, Navi Mumbai, M/s Sanj Pharma Engineering Pvt., is located at Damji, Shamji Industrial Estate, Vikhroli. Further M/s Pharma Chem Services, is a sole proprietary unit with Mrs. Reema Madhavan being proprietor and M/s Sanj Pharma Engineering Pvt. Ltd., is admittedly a private limited company, whereas 99% shares of the same are owned by Mrs. Reema Madhavan. Further there is no dispute that M/s Pharma Chem Services was created out of the loan supplied by M/s Sanj Pharma Engineering Pvt. Ltd. 3. The issue is as to whether in the above background, when the two manufacturers, one a proprietary unit and the other a private limited company, located at two different far-off places are complete units in themselves for the manufacture of final products, whether their clearances are required to be clubbed for the purposes of SSI Exemption or not. For deciding the said issue it has to be kept in mind that small scale exemption limit in terms of va .....

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ircumstances to SSI Notification stand declared in favour of the assessee in various decision. Same references can be made to following decisions:- (i) CCE vs. Servo Packaging (P) Ltd., 2007-2010-ELT-355-TRI - CHE, (ii) Switching Electronics vs. CCE - 2006-203-ELT-308-TRI (iii) CCD vs. Saint Laboratories - 2006-201-ELT-85-TRI (iv) Studioline Interior Systems Pvt. Ltd. vs. CCE - 2006-201-ELT-250-TRI (v) Universal Inds. vs. CCS - 2005-188-ELT-200-TRI (vi) CCE vs. Servo Packaging (P) Ltd. - 2007-210-ELT-355-TRI (vii) Jifcon Tools Pvt. Ltd. vs. CCE - 2007-208-ELT-345-TRI I may take into consideration a recent decision of the Tribunal in the case of Ghaziabad Organics vs. Commissioner of Central Excise, Ghaziabad reported at 2016 (344) ELT 965 (Tri.-All) wherein the clearances from two factories situated adjacent to each other were not held liable to be clubbed even though there were common directors who held shares in both the companies, the two had a common supervisory structure and there was free flow of Acetic Acid from one company to another. The Tribunal observed that there is no ban on the existence of more than one unit in a compound and likewise commonality of directors with st .....

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