TMI Blog2009 (1) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... rance is not allowed. - E/762 and 844/2005 - 15-16/2009 - Dated:- 12-1-2009 - S/Shri T.K. Jayaraman, Member (T) and M.V. Ravindran, Member (J) Mrs. Sudha Koka, SDR, for the Appellant. Shri B.V. Kumar, Advocate, for the Respondent. [Order per : M.V. Ravindran, Member (J)]. - These two appeals are filed by the revenue against Order-in-Original No. 13/2004 dated 30-4-2004 and Order-in-Original No. 25/2004 dated 28-7-2004. Since the issues in these appeals are common, we take up the same for disposal by a common order. 2. The relevant fact that arises for consideration are that on intelligence that M/s. Agarwal Rubber (P) Ltd., Plot No. C-8 and C-9, Industrial Estate, Patancheru, Medak District (hereinafter referred to as the "ARPL") and its associate manufacturing units viz., M/s. T.M. Tyres and Tubes Pvt. Ltd., Medak District (hereinafter referred to as the TMTTPL), M/s. Maruti Rubbers, Medak District (declarant - hereinafter referred to as the MR) and M/s. Robot Engineers, Medak District (declarant - hereinafter referred to as the RE) who are the manufacturers of Butyl Rubber Tubes/Rubber flaps and moulds/special engineering goods (hereinafter referred to as the " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the four units. It is her submission that the clearances made by all the units need to be clubbed, as there is financial accommodation between them, there is no repayment of loans made between inter companies and the loans were given by ARPL to other people and were not repaid. She reads out the grounds of appeal. 2. In the case of Shree Gajanan Fabrics Distributors v. CCE, Pune - 1992 (43) ECR 172 (1) it was held by the Tribunal that close relationship among the proprietors, partners, etc. the use of common premises and availing common facilities justified clubbing of value of clearances. On the appeal filed by the party in Supreme Court, the court did not set aside the above findings of the Tribunal. Supreme Court only observed that in such a case the demand ought to have been confirmed against main unit on facts of the case in which the units were found fictitious and remanded the case for de novo decision afresh. But facts in the instant case under consideration are that the units were in existence and functioning separately. However, in view of the existence of facts such as the units being controlled by the same set of members of the family having major shareholding in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director's loan. It is her submission that this would be a direct indication, that Deendayal Agarwal has interest in Private Limited company i.e., TMTTPL. This would go to show that both companies are having financial arrangements as well as special interest in the business of each other and are being managed by the same management under the close control and supervision of Deendayal Agarwal. 3.3 It is her submission that M/s. ARPL were Exporting and Manufacturing 2-wheelers Butyl tubes under the brand name "TM" which is brand name of TMTTPL without any agreement. It is also her, submission that the land the place given for the functioning of other units were at a very paltry sum of lease, hence, it would also indicate that there was a common understanding. 3.4 She would submit that the decision of the Supreme Court in the case of Commissioner of Central Excise, New Delhi v. Modi Alkalies Chemicals Ltd. - 2004 (171) E.L.T. 155 (S.C.) would cover the issue and is applicable to this case. This "clubbing of clearances" - pervasive financial and management control are prima fade indicators of interdependence. She would also rely upon the decision of the Tribunal in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Partner (ii) Shri Shyam Sundar Agarwal, Partner (iii) Shri Ashok Kumar Agarwal, Partner (iv) Smt. Prema Agarwal, Partner (v) Smt. Sunita Kumari Agarwal, Partner. 4.5 He would rely on the Circular of the Board wherein it has been very clearly held that the private limited companies cannot be equated to the partnership firm and there cannot be any clubbing of clearances and is clearly applicable to this case. It is his submission that the said Circular No. 6/92 dated 29-5-1992 is a direction issued under Section 37B and is applicable in all squares to this case. 4.6 He would submit that the case laws relied upon by the learned SDR is not applicable to this case. On the contrary, he would rely upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Central Excise, New Delhi v. Superior Products - 2008 (230) E.L.T. 3 (S.C.) and Commissioner of Central Excise, Jaipur v. Electro Mechanical Engg. Corpn. - 2008 (229) E.L.T 321 (S.C.) to submit that absence of mutuality of interest or flow back of funds from one unit to another and when the units are having accounts separately, there cannot be any clubbing of clearances. He would also reply u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name. In support of their claim, the noticees' have shown the rubber flaps with the respective brand names at the time of personal hearing. 21. I have gone through the lease agreement and the case laws cited by the noticees. I observe that there is no yardstick to decide the said rent is abnormally low nor any evidence to this effect was placed on file. It is the agreement entered between ARPL and MR. ARPL and RE that decide the amount of rent. The parties i.e. ARPL, MR and RE entered into agreements in their individual capacity. I feel that even the amount of rent fixed in two cases is low, use of godown, table space, and some marketing staff without any commercial consideration, it will not be a factor to draw an inference that all the units are one and the same; without establishing other elements like the financial flow back, control of the unit etc. In this connection I rely on the case law of M/s. Cheryl Laboratories v. CCE [1993 (65) E.L.T. 595 (T)] and Binod Kumar Maheswari v CCE [1995 (80) E.L.T. 438 (T)] in which it was held that the clearances of factories of proprietary concern and the two limited companies units having separate machinery owned through bank lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utstanding amounts of Cherry Motive was Rs.110.90 lakhs; J.K. Banmore was Rs. 104.03 lakhs; J.K. Kankroli was Rs.18927 lakhs. It is general trade instances of having outstanding amounts for the work done or the sales or purchase made with the other business counterparts. The Noticees have submitted the gist of transactions between ARPL and TMTTPL, ARPL and MR, ARPL and RE. It is observed from the said transactions that the outstanding amount of TMTTPL represents payment towards job work charges and for purchase of butyl rubber only; in respect of MR and RE the outstanding amounts represents the business transactions and certain amounts of interest free loans and the said transactions were reflected in their respective books of account and in the audited balance sheets of the said companies. An amount of Rs.133 lakhs payable by TMTTPL as on 31-3-99 was not a very big amount to conclude that without realization of this ARPL could not manage the affairs. In fact there were total outstandings i.e. Debtors as on 31-3-99 amounting to Rs. 614.25 lakhs in the books of ARPL. It is common in the course of business to have outstanding amounts of Debtor/Creditors and the same shall not be conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 4(4)(c) is not applicable for the purpose of clubbing clearances when partners of all the firms were not common inter Se financial transactions, related to interest free loans, duly entered in account books are to be regarded as perfect routine business transaction. Further, all units were registered independently and none of the units was described in show cause notice as dummy or supporting unit of another. Also there was no evidence of flow back of funds or sharing of profits to hold clubbing of clearances valid. In the present case all the four units have their independent capital, plant and machinery, labour, factory, staff and electricity and production activities of each unit is managed by different persons. Moreover each unit was registered under Companies Act/Partnership Act. Merely because of evidences viz, interest free loans, which is common trade practice, lease agreement which facilitates low rent, use of office space and staff, common shareholders and contents of letter/project report intended to obtain Bank loans, in the absence of any evidences to prove flow back of funds or sharing of profit and managerial control of other three units by ARPL, are not suffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separately. That they have separate capital, premises, machinery and labour and carrying out separate operations. That they are separate units. These findings are findings of fact which cannot be interfered with and, therefore, the same are confirmed. 5.5 We find that in the case before us, it is admitted by revenue that all the four units are having different and independent activity which in itself would squarely be covered by the Jaw as has as been laid down by the Hon'ble Supreme Court in the case of CCE v. Superior Products (supra). 5.6 We find that the decision of this Tribunal in the case of CCE Sushil Chemicals (supra) would also apply. We may reproduce the said finding. 6.1The above observations do not mean that we are allowing Revenue's appeal. We have to examine the findings of the Commissioner from Paragraph 61 to 82. In the above Paragraphs, the Commissioner has cited several instances where one unit pumped funds for financing another unit. The partners of the nine units are all family members. Therefore, mutual interest is not at all ruled out. In the normal course, there can be definitely mutual interest but sometimes there may be rivalry and bitter animosi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no legal existence. We have already extracted the Commissioner's finding in Paras 95, 96 97. In the light of those findings, the Commissioner's decision to drop the proceedings is correct. We do not find any merit in the Revenue's appeal and therefore, the same is dismissed. 5.7 It is also to be noted that in this case the revenue is seeking to club the clearances of two private limited companies and two partnership companies, it is on record and it can be seen that the partners of both the partnership firms are different, though there may be common partners. It is the allegation of the revenue that the Directors of the private limited companies are common and the partners are common. We find that the CBEC vide its Circular No. 6/92 dated 29-5-1992 had clearly given a direction, under Section 37B which is read. Sub:- The text of the Direction issued under Section 37B is as follows:- "In exercise of the powers conferred under Section 37B of the Central Excise Act, 1944, for the purpose of ensuring uniformity of levy of duties of excise the Central Board of Excise Customs has ordered that the following general principles will be applicable to Notification No.175/86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sive financial control and management control". They have also further said that this has to be seen from the facts and circumstances of each case. It can be noticed in this case before us that the revenue has not been able to prove that there was a pervasive financial or management control of all the units by one person. Mere financial accommodation in form of loans, would not by itself be construed as pervasive financial control exercised by one company over other. In any case, reasons given by the Adjudicating Authority after considering all the aspects and the records, like balance sheet and other evidence produced before him seems to be uncontraverted by the revenue, as they have not adduced any contrary evidence to these records which were produced before the Adjudicating Authority. 5.9 Accordingly, in view of the above reasoning and the law as settled by the higher judicial fora, we find that the impugned orders are legal, proper and correct and do not require any interference. The appeals filed by the revenue are rejected and the cross-objection filed by the respondents are also disposed of. (Pronounced in open Court on 12-1-2009) - - TaxTMI - TMITax - Central Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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