TMI Blog2020 (7) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... lown from one company to another, (viii) money lended by one company has been returned, there is no diversion of funds and flow of funds from one unit to another unit, (ix) creation of the units were within knowledge of department since long back, (x) the appellant is availing benefit of SSI since its incorporation, (xi) shares holders of both the companies are same and common but not all (xii) directors of the are common but not all (xiii) the appellant is working in a separately demarcated portion. Moreover, necessary statutory declarations were filed by the appellant from time to time. Reliance can be placed in the case of CCE, JALANDHAR VERSUS M/S. S.K. SACKS PVT. LTD., SHRI ARVINDER PAL SINGH, DIRECTOR [ 2017 (3) TMI 413 - CESTAT CHANDIGARH] where it was held that when the units have separate registration with the Central Excise Department/Income-Tax Authorites, permission to do job work on behalf of other undertaking, factors like one supervisor working for both the units and one unit have certain financial dealings for the other unit cannot be a basis for clubbing of clearances of two units. The clearance of the appellant unit and M/s. NAPL cannot be clubbed. If the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies are common, (iv) Although, there is separate gate of Appellant but common gate is used by both the companies, (v) There is transfer of funds between both the units to each other, (vi) Accountant is different but he sits in the office of M/s. NAPL, (vii) Gate man is paid salary by M/s.NAPL, (viii) There are common debtor and creditor and (ix) There is common website of both the companies Therefore, the benefit of exemption was denied and clearances of M/s.NCPL were clubbed with the clearances of M/s.NAPL. Consequently, the demand of duty was raised against M/s.NCPL and penalty on all the appellants were imposed. Against the said order, the appellants are before us. 3. Ld. Counsel appeared on behalf of the appellants submits that when the clearances were clubbed with M/s.NAPL, the duty cannot be demanded from the appellant. 4. He further submits that the entire demand from the appellant is bad in the eyes of law on this ground. 5. He further submits that the appellant was established in 1993 and till 2006 the appellant was clearing their goods which were different from the goods manufactured by M/s.NAPL and no duty was demanded from the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that both the companies are one and same. He also submitted that the appellant M/s. NAPL had lended money but said amount was paid through cheque and duly received back. There is no law which holds that lending money amounts to financial flow back. Neither appellant nor NAPL has received consideration from buyers of each other or made payment to raw material suppliers of each other or profit was diverted from one company to another company. Therefore, lending of money which is received back within a short tenure does not amount to financial flow back. 7. He further submits that the appellant was working under duly executed lease deed so it cannot be called as used of factory premises of NAPL on the part of appellant. 8. He further submits that:- (i) The appellant and NAPL are two separate private limited companies, (ii) Both are manufacturing different products, (iii) Both are having separate electricity connection, (iv) Both are having different raw material which is separately stored, (v) Both are having separate work force, (vi) Both are having separate bank account and accountant to maintain record, (vii) Both are having independent buyers and consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------- (ii) ----------------------- (iii) ----------------------- (iv) ----------------------- (v) ----------------------- (vi) where the specified goods are cleared by one or more manufacturers from a factory, the exemption shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said Table and not separately for each manufacturer; (vii) the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturers, does not exceed rupees three hundred lakhs in the preceding financial year. 13. In this case, we find that it is a fact on record that M/s. NCPL was established in the year 1993 as private limited company and M/s. NAPL as a private limited company. As per the CBEC Circular No.6/92 dated 29.5.1992, the Board has clarified as under:- (i) The question whether different partnerships having common partners are treatable as separate manufacturers or the same manufacturer, would be a question of fact in each case to be determined on the basis of such factors among other, like composition of the partnership, exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acks and M/s.A.S.Processors having common director. As some financial transactions have been undertaken where M/s.A.S.Processors directly made payment on behalf of M/s.S.k.Sacks Pvt.Ltd. to their suppliers. 13. As both the units are private limited company and registration with the Central Excise and under the Companies Act, therefore, relying on the CBEC circular No.6/92 dated 29.5.1992 wherein the Board has clarified as under: (i) The question whether different partnerships having common partners are treatable as separate manufacturers or the same manufacturer, would be a question of fact in each case to be determined on the basis of such factors among other, like composition of the partnership, existence of the factory, licence, nature of goods manufactured, etc. (ii) Different firms will be treated as different manufacturers for the purpose of exemption limit. But if a firm consisting of certain partners say, A, B C, has got more than one factory, all these factories should of course be combined. Limited companies whether public or private are separate entities distinct from the shareholders composing it. Hence each limited company is a manufacturer by itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the companies so both the units has been created by Sh. Arvinder Pal Singh and his spouse so as to evade revenue liability and therefore clearance of both have sought to have been clubbed for the purpose of charging of Central Excise liability. For arriving at this view, the revenue has, based its findings on the under mentioned factors:- (i) That both the units have promoted and got incorporated by Sh. Arvinder Pal Singh and his wife Smt. Sarabjit kaur. (ii) That the appellants No. 1 manufacturing the plastic sacks and plastic fabrics. For sacks, they did not have the facility to manufacture of plastic sacks or plastic fabrics till 31.03.2002. To manufacture these items they had to send their basic raw material to the other company i.e. M/s A.S. Processors, Amritsar. Thus, both the units are completely dependent on each other. (iii) That the appellant No. 1 has two bank accounts and these to bank accounts can be operated by any of the Directors. Similarly, M/s A.S. Processors, Amritsar has two bank accounts and both these accounts can be operated by either of the two directors. Since, both the directors of these two units are the same so any one can operate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than that which have been shown in the books of accounts. Thus, in the absence of any flow back there is no reason to hold that both the units belongs to the same manufacturer. (iv) That mere operation of accounts by any directors cannot be any reason to allege that there is financial flow back of funds. (v) That mere operation of accounts by any directors cannot be any reason to allege that there is financial flow back of funds. (vi) That the adjudicating authority has not taken into account the appellants plea that the factory of the M/s. A.S. Processors, Amritsar was a separate factory duly registered under Factory Act and eligible for exemption as a separate factory. (vii) That even if argument sake the M/s A.S. processors, Amritsar is considered to be an unit of appellants No. 1 (which in fact was not) even then no duty was demandable as goods manufactured in that unit upto on 28.02.2001 remained exempted under Notifications providing exemption based on value of clearances in the financial year. Lay flat tubing was exempt unconditionally under Notification No. 5/98, 5/99, 6/2000 3/2001 and similarly plastic bags of heading 39.23 were exempt as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt as such is not produced before us. But on going through the circular dated 10.5.56, It is seen that paragraphs (i) to (III) contained therein are quoted verbatim in circular dated 29.5.92 as if those provisions stood contained in Notification dated 1-3- 56. Both sides submit before us that what is referred in circular dated 29-5-92 and as contained in Notification dated 1-3-56 are the same as is found in the circular dated 10.8.56. We proceed to consider the matter on the above basis. Paragraph (i) of the Circular dated 10-8-56 reads as follows:- (I) Different firms will be treated as different manufactures for the purpose of the exemption limit. But if a firm consisting of certain partners say, a, b C has got more than one factory, all these factories should of course be combined. Limited companies whether public or private are separate entities distinct from shareholders composing it. Hence each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. The above portion would show that the limited companies whether public or private are to be treated as separate entities distinct from shareholders and that each such lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch both have to be considered as tow factories separately eligible for exemption. Regarding some entries mentioned in the show cause notice in respect of making of payments by M/s. A.s. Processor,s Amritsar to the suppliers of raw materials of the appellants No. 1, it is observed that what the department has brought on record is the fact of payment by M/s. A.S. Processors to the suppliers of raw material of appellants No. 1 which are dully reflected in the books of accounts of both the units. These transactions between the two units are just commercial transactions and cannot be termed as other than normal commercial transactions. There is no evidence on record regarding any sharing of profit of one unit by the other. Nor there is any case of special financial relationship. In other words, to uphold the charge of financial flow back, the evidence w.r.t. manipulation of accounts or sharing of one profit by the other etc. should have been on record. In the instant case, both the units were manufacturing different items for which the jurisdictional excise authorities were duly informed. Both the units were granted the registration by the department. Not only that the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing separate bank account and accountant to maintain record, (vii) both are having independent buyers and consideration have never flown from one company to another, (viii) money lended by one company has been returned, there is no diversion of funds and flow of funds from one unit to another unit, (ix) creation of the units were within knowledge of department since long back, (x) the appellant is availing benefit of SSI since its incorporation, (xi) shares holders of both the companies are same and common but not all (xii) directors of the are common but not all (xiii) the appellant is working in a separately demarcated portion. Moreover, necessary statutory declarations were filed by the appellant from time to time. 17. In that circumstance, the clearance of the appellant unit and M/s. NAPL cannot be clubbed. If the clearances of the appellant are to be clubbed with M/s.NAPL then the duty is required to be demanded from M/s.NAPL, which is not the case here. 18. Therefore, we hold that the appellant is entitled to avail the benefit of exemption Notification No.8/03-CE dated 1.3.2003. Therefore, no duty is sustainable against M/s.NCPL. 19. In view of the above observations ..... X X X X Extracts X X X X X X X X Extracts X X X X
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