TMI Blog2024 (4) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year 2014-15 only and hence the issue of the clubbing of clearances of the Appellant I with the clearances of M/s L S Plastics is only relevant for that period. Value of Clearances - HELD THAT:- Appellants have before Commissioner (Appeals), not challenged the basis of demand as per para 14.4 of the Show Cause Notice they have only stated that they have submitted the copy the ledgers duly certified by the Chartered Accountant. Appellant could have pointed out from sale invoice wise chart, made in Annexure A1, Annexure A2 Annexure A3 as to which were the export sales included in the value of clearances for making this demand. Even, except for referring to the table in para 14.1, there is no other submission made by the appellant. As we find that the basis of demand is para 14.4 read with Annexure A1, Annexure A2 Annexure A3, which has not been challenged there are no merits in the submissions made by the appellant in this regards. Clubbing of Clearances - HELD THAT:- There is no dispute that the beneficiary of all the activities undertaken by Appellant-I and M/s L S plastic is same family. Appellant 3 who is proprietor of M/s L S plastics is drawing remuneration of Rs 2,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been held:- ORDER (i) I hereby confirm the Central Excise duty amounting to Rs. 6,17,610/- (Rupees Six) Lakh Seventeen Thousand Six Hundred Ten only) inclusive of Education Cess SHE Cess under Section 11A(4) read with Section 11A(10) of the Central Excise Act, 1944 for the period from April 2013 to November 2014. I order that the amount of Rs 5,00,000/- (Rupees Five Lakh only) deposited by the party during investigation shall stand appropriated against this duty liability. (ii) I also order that the party shall pay Interest at the appropriate rate on the duty of Rs 6,17,610 (Rupees Six Lacs Seventeen Thousand Six Hundred Ten only) determined above under Section 11AA of Central Excise Act, 1944. (iii) I impose a Penalty of Rs 6,17,610/- (Rupees Six Lakh Seventeen Thousand Six Hundred Ten only) on M/s TSM Plastics under Rule 25(1) of the Central Excise Rules, 2002 read with Section 11AC (c) of the Central Excise act, 1944 for contravention of the provisions of the Central Excise Act and the Rules made there-under as pointed out herein above. (iv) I impose a Personal Penalty of Rs. 1,00,000 (One Lakh only) on Shri SK Sharma. Partner of M/s TSM Plastics, D-20 Sector-7, Noida under R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods and they were indulging in evasion of duty by resorting to claiming exemption under Notification No. 08/2003-CE dated 01.03.2003. 2.3 Searches were also conducted in the premises of M/s L.S. Plastics in presence of two independent witnesses and Appellant-III on the same date. During the search it was found that M/s L.S. Plastics started the production in August, 2014 and were manufacturing plastic bottles and clearing the same to their customer M/s G.D. Foods manufacturing India Pvt. Ltd., Delhi and Neemrana. 2.4 As per the information available in the computer system loaded with Tally (software) year wise sales turnover in respect of these two units is as under:- YEAR M/s TSM (Rs. In Crores) M/s L.S. Plastics 2010-11 0.62 0 2011-12 0.86 0 2012-13 4.54 0 2013-14 6.54 0 2014-15 (upto November 14) 3.43 0.90 2.5 From the above, it was observed that appellant-I has claimed the benefit of exemption under Notification No. 08/2003-CE dated 01.03.2003 even after crossing the exemption limit as provided by the said notification. Accordingly, the goods found in the premises of the appellant-I and M/s L.S. Plastics were detained/ seized by the officers vide seizer memo dated 19.05.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication No. 08/2003-CE dated 01.03.2003 cannot be denied by clubbing the clearances of two units. The documents clearly established that these two are separate independent entities as a partnership firm and proprietary firm respectively having their own land duly allotted by Noida Authority, having their own plant and machinery through which regular production was being made independently and the units were duly recognized by different departments like Noida Authority, Factory Act, Commercial Tax Department, Banks and Income Tax Department where the two units were recorgnised and assessed. The bank account of the firms are also enclosed which clearly show that there are no transaction or financial interactions or facilitation between the units. There is no dispute that anyone of the above two unit is dummy or non-existent. Therefore, exemption of manufacturing unit cannot be denied and clubbed together on the ground that one of the partners being common. Reliance is placed on the decision in the case of Thermotech [2013 (293) ELT 712 (T)]. It is alleged that appellant-II was caring out entire purchase of raw materials, consumables, machinery, stationery etc. including valuation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants and confirmed the demand without recording any findings thereon. M/s L.S. Plastics production commenced production in the financial year 2014-15 therefore there cannot be clubbing of clearance in financial year 2013-14. As the demands cannot be sustained, there cannot be any penalty imposed on the appellant-II and appellant-III. Appeals be allowed. 3.3 Arguing for revenue learned Authorized Representative reiterates the findings recorded in the impugned order and in order of the Original Adjudicated Authority. He submits that both the authorities have taken into consideration all the submissions made. 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 We find that the impugned order records the following findings for upholding the Order-in-Original:- 5. I have considered the material available on record, relevant statutory provisions and the respondent s submissions at length. The issue involved in the case is whether in the facts and circumstances of the case, the units, allegedly floated by the appellant in order to fragment the clearances of M/s T S M Plastics so as to enable each of the unit to avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taker out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. 10. In the result, as discussed, as there exist liability on them in terms of the Impugned Orders, its attendant consequences follow as a matter of course. Interest under Section 11AA of the Central Excise Act, 1944 would be payable by them as ordered therein. I further observe that in the present system of self-assessment documents like invoices and other transaction details are not supplied to the Department, the intention will have to be believed as that of evasion by way of suppression or mis-declaration. Once the details are not submitted to the Department, it amounts to mis-declaration or suppression which is rightly invoked in the case before me. I, therefore, conclude that the element of suppression with intent to evade payment of service tax is conspicuous by the pec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en time was maintained only at the factory premises of M/s TSM and even at the time of visit of the Central Excise Noida Anti Evasion officers, each and every detail and records pertaining to both the units were available at the office of M/s TSM only. The finished goods of both the units were similar and for the same class of customers which also indicated that they were not independent entities, but a well thought out creation for bifurcation and suppression of clearance value in order to avail duty exemption through SSI benefit as per notification. The authorized person of both the related units for maintaining accounts was on the payroll of M/s TSM, but was functioning as the key person in both the units and signing all the documents as, authorized signatory of both the said units on closer scrutiny of records, evidences gathered and on the basis of statements given by the key persons, it appeared that the entire manufacturing activity was not done in single premises but was bifurcated in two manufacturing premises under the supervision and control of same set of persons belonging to one family The entire goods so manufactured by these two firms were meant for same customer. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excisable goods without payment of Central Excise duty On the basis of the above facts and computation of value of clearances for the period 2012-13, 2013-14 2014-15(upto Nov, 2014), a quantification Chart (Consolidated duty calculation worksheet) enclosed as Annexure B to the Show Cause Notice was prepared and was also shown to Shri S K Sharma, Partner of M/s TSM, on 31.12.2015. Admittedly, M/s TSM have cleared finished goods without payment of duty during the aforesaid period, therefore M/s TSM appeared to be liable to pay duty amounting to Rs. 6,17,610/- on the goods valued at Rs 49,66,618/-. 37. I find that though both the units were registered separately with Central Excise Income Tax. Sales Tax, Industries Deptt and are located in separate premises and both maintain Independent bank Account however, no accounts or records were being maintained at the premises of M/s L S Plastics and all this activity was being controlled centrally in the premises of M/s TSM Plastics. Moreover, Shri Sanjeev Sharma was a partner in M/s TSM Plastics and proprietor in M/s LS Plastics Further Shri Binod Bharti was the common accountant for maintaining all the records of M/s LS Plastics and M/s TSM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at the single premises of M/s TSM plastics. Both have a common accountant and the accounts of both units are being maintained through a tally Software installed at the premises of M/s TSM Plastics There is no operational office at the premises of M/s LS Plastics and no records regarding inputs/services received and stock keeping of finished goods is being maintained at their factory Purchase of raw materials is also centralized at the premises of M/s TSM Plastics and done by Sh Sanjeev Sharma Therefore it is very much clear that M/s L.S Plastics was created solely for the purpose of diversifying into the manufacture of plastic bottles for supply to a common buyer with the sole intention of circumventing the provisions of Notfn No 8/2003 so as to separately avail the benefit of the notification by qualifying as SSI Unit having annual turnover of less than 15 crores In reality both the firms produce similar goods for the same buyer and are under the control of the same family. Thus they are actually two factory units under the same management and their value of clearances is required to be clubbed together for the purpose of arriving at the value limit of Rs 15 crore to avail SSI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue for Demand 1 2012-13 1,41,53,579/- 0 2 2013-14 1,72,98,582/- 22,98,582/- 3 2014-15 (upto Nov 14) 1,76,68,036/- 26,68,036/- As the value of clearances for the year 2012-13 was less than Rs 1.5 crores well within the exemption limit as per notification No 8/2003-CE dated 01.03.2003, no demand has been made for the said year. In respect of the year 2013-14 taking the value of clearances of the Appellant-I only, the demand has been made on the value of clearance as indicated in table above and for the year 2014-15 the demand has been made by clubbing the clearances. 4.6 Appellant has challenged the demand for the year 2013-14 by stating that there is error in calculation, by referring to table in para 14.1 of the show cause notice. It is their submission that as per this table the after excluding the value of clearances for export and the value of traded goods the value of clearances will be only Rs 1.41 crores which is well within the exemption limit as provided by the notification No 8/2003-CE. No other submission has been made by the appellant to challenge this demand except for the sole reliance on this table. However we find that the demand has not been made by computing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal provisionally the dealing hand. There was no mala fide intention to evade payment of duty. As soon as the mistake was detected, Noticee paid the amount of Rs. Five lacs at the investigation stage. In view of the fact imposition of penalty under rule 25 of C.E. Rules 02 is not justified and legal. Appellants have before Commissioner (Appeals), not challenged the basis of demand as per para 14.4 of the Show Cause Notice they have only stated that they have submitted the copy the ledgers duly certified by the Chartered Accountant. Appellant could have pointed out from sale invoice wise chart, made in Annexure A1, Annexure A2 Annexure A3 as to which were the export sales included in the value of clearances for making this demand. Even before us, except for referring to the table in para 14.1, there is no other submission made by the appellant. As we find that the basis of demand is para 14.4 read with Annexure A1, Annexure A2 Annexure A3, which has not been challenged we do not find any merits in the submissions made by the appellant in this regards. Clubbing of Clearances 4.8 Appellant-I is a partnership firm in which following are the partners as per the Supplementary Deed of Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the important consideration but cannot be made sole basis for arriving at the decision. Merely because the two owners of the units were husband and wife and the profits earned by them came into same household, does not mean that clearances of all the units is required to be clubbed. We really fail to understand the above reasoning of the adjudicating authority. If the husband is helping his wife in running of any business activity and rendered assistance, the same cannot be made the basis for clubbing the clearances of all the units. For doing so, Revenue is expected to produce evidence to show that all the units were facade and were not complete units independently manufacturing the goods in question. If the reasoning adopted by Commissioner is accepted, the same would result in legal chaos inasmuch as the clearance of units being run by wife s, independent of their husband s units would lead to clubbing issues, irrespective of the fact that finances of wife and husband are being separately managed by them. 16. Apart from above, we note that all the units were separately registered with income tax as also sales tax authorities. Their locations of business were at separate places. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arances of other units with M/s. Thermotech without even putting the other units on notice and without even letting them know about the same is against the settled principle of law. From the perusal of the above it is quite evident that the matter has been decided in favour of the appellant, as no show cause notice was issued to the units whose clearance was sought to be clubbed with the clearance of M/s Thermotech. In the present case the facts are not the same notice has been issued to Appellant-III who is proprietor of M/s L S Plastics and also partner in partnership firm (Appellant-I). 4.11 Appellant has also relied upon the following decisions: o Sharad Industries [2013 (294) ELT 0561 (Tri.-Del.)]; Tribunal has held as follows: 6. We, after appreciating the submissions of both the sides find that there is not much dispute on factual position. It is not the Revenues case that two unit owned by Smt Kamlesh Gupta and her husband Shri Avdesh Kumar Gupta not complete units having all the necessary machines and infrastructure for manufacture of their final product. Both the units have separate Sale Tax Registration, Industries Registration, Income Tax Registration, Electricity Conne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies, separate sales tax registration, income tax, bank account and separate lease deed with MIDC and are having separate premises also. In that event the clearance of both the units cannot be clubbed From the above it is evident that tribunal has recorded a finding of fact holding that clearance of both the units cannot be clubbed. In the facts of the case which are before us there is clear finding of fact recorded by both the authorities vis a vis the commonality of infrastructure, management and control of the unit. This decision is clearly distinguishable. o Poona Radiators and Oil Coolers [2017 (347) ELT 0320 (Tri.-Mumbai)]; In this case tribunal has held as follows: It is the case of the Revenue that eight units indicated hereinabove are of the same family group; hence in effect all the units need to be clubbed together. The adjudicating authority has specifically recorded that the eight units are separately registered as small scale unit, whether as partnership concerns and each unit is registered under the Central Excise Act as well as with the various Government Department like Sales Tax Act, Income Tax Act, Factories Act, etc. As per the adjudicating authority each uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dducing evidences that on firm is dummy or camouflaging the others. In the present case, there is no such allegation in the show-cause notice and there is no iota of evidence in this regard. The same view was expressed in the case of Probhat Dyes Chemicals Vs. Collector of Central Excise reported in 1992 (62) ELT 469. The same view has been expressed by the Hon'ble Supreme Court in the case of Assistant Collector of Central Excise Customs, Surat Others Vs. Shri J.C. Shah, M/s. Yayantilal Babubhai Others reported in 1978 ELT J-317 (SC). The decisions submitted by the ld. JDR are not applicable in the present circumstances. In the case of Supreme Engineering Works Vs. Collector of Central Excise, Pune, the Tribunal held that the Collector's conclusion, based on ample evidence regarding common control of production and sales among the units, having special financial relations shown to be not on a principal to principal basis. In the case of Collector of Central Excise, Chandigarh Vs. Densons Pultroteknik, the Tribunal held that one or more factories were controlled by the same manufacturer and it was held that the value of clearances of the two units clubbed together. the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndestine clearances as per seized records; iii. Value of clearances as per estimation on the basis of production capacity per day as per company and statements of supervisors. The appellants submit that for the year 1994-95, value of clearances declared by the unit is Rs. 66,77,052/- and the value of clandestine clearances is shown as Rs 2,40,61,738/-. These figures when added should result in Rs. 3,07,39,590/-. However, the value taken for calculation of duty is Rs. 3,73,08,790/-. Such misapplication of mind, and upholding of demand thereafter, and reliance on assumed/presumed production on estimation of machines cannot be upheld per se. (e) The matter of existence of these units and the activity were within the knowledge of the department vide proceedings initiated by Preventive Officers by Show Cause Notice dt 8.3.94 issued to each unit and which culminated in order in appeal by Commissioner dated 3.7.96. The Commissioner s finding in present order impugned on this issue in para 8 is: 8 Moreover the statement of Shri Subhash Karia recorded at that time in connection with adjudicated by the then Assistant Commissioner of Central Excise Customs, Bharuch vide Order-in-Original date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirmed. 4.12 In the case of M/s CALCUTTA CHROMOTYPE LTD. 1998 (99) ELT 202 (SC) wherein Hon ble Supreme Court has observed as follows:- 3. The Assistant Collector, Central Excise found that both the appellant and its sole distributor were limited companies registered under the Companies Act, 1960. He found that the Board of Directors of both these companies were constituted : Appellant 1. Shri Narendra Sharma, Managing Director 2. Smt. Brahma Devi, Director 3. Smt. Indu Sharma, Director M/s. Ganga Saran Sons Co. 1. Shri Narendra Sharma, Managing Director 2. Smt. Brahma Devi, Director 3. Shri Brajendra Sharma, Director 4. Shri Rajendra Sharma, Director . 4. Assistant Collector also found that shares of the appellant and its sole distributor were held by the members of the Sharma family, i.e., persons who were related to each other and that both the companies were having the common Managing Director and further that the appellant was selling the goods with the brand name of its distributor, namely, M/s. Ganga Saran Sons Pvt. Ltd. It was contended before the Tribunal that both the companies were registered under the Companies Act and were separate legal entities and therefore, could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e two. He said the two judgments, one of Supreme Court and other of the Appellate Tribunal itself on which the Appellate Tribunal relied were not applicable inasmuch as facts in the said two cases were entirely different and decisions were clearly distinguishable. He said that in order to be a related person within the meaning of Section 4(4)(c) of the Act the person alleged to be related must have interest, direct or indirect, in the business of the assessee and that in the present case both the appellant and its buyer were private limited companies established much before the imposition of the excise duty on playing cards and had been dealing with each other at arm s length. He said there was no evidence before the Appellate Tribunal as to the shareholding in each of the two companies and to say that shareholdings were held by Sharma family was a misnomer and that such a fragile test could not be applied to test the identity or mutuality of interest. Mr. Dave said that the Appellate Tribunal came to a wrong conclusion on prima facie holding that Sharma family controlled both the companies. Sharma family is a vague term and did not reflect as to what was the exact shareholding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fted 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 his Company Law (4t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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) 3 SCC 230 = (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 Tomlin in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso 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 (1) 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 consideration, then aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that records of all the units i.e. Atlantic Chemicals, Amar Enterprises and Arvind Rubber Mills as well as that of Arun Chemicals and Foamsil Chemicals were recovered from the same premises. Further, a cheque book of Foamsil Chemicals signed by Shri Naveen Kumar was also found in the in the Almirah kept in Shri J.S. Jain s room. Besides above, a file containing trade mark registration papers of Foamsil and accident claim papers pertaining to truck, which was in the ownership of Foamsil Chemicals, were also recovered from the said office premises. A common letterbox showing the name of Foamsil Chemicals was also found affixed in the Pahwa Mansion office building. The above facts are not disputed by the Noticees. Their contention, however is that sharing of office premises telephoney the noticees firms and no-demand of rent does not constitute evidence that Shri J.S. Jain was owner of Arun Chemicals and Foamsil Chemicals. It is observed that in the reply dated 9-1-95 of Atlantic Chemicals was admitted that Shri J.S. Jain, being MD of Arvind Rubber Mills remained stationed at this office premises and being the head of the family, he was respected by the customers who used to place o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mers including those of Kerala and Maharashtra States concerned in this case are common. In procuring raw materials, such as, soda bi carb for manufacture of RBA and disposal of RBA, Shri Amar Kumar Jain (brother) and Sh. J.S. Jain (father) continued to play active and decisive role. Apart from claimed manufacture and sale of goods from these units Arvind Rubber Mills (owned by father Shri J.S. Jain and another brother Shri Amar Kumar Jain) and Amar Enterprises (owned by mother Ms. Kiran Bala Jain) play active role in the disposal of the goods manufactured by the three units. These units, that is, Atlantic Chemicals, Foamsil Chemicals and Arun Chemicals were situated in a piece If land purchased from the brother of Shri J.S. Jain at a nominal price; they were under the common management and financial control of only one family living in one house, and the business of all the firms was conducted jointly from one and the same office premises. On record, the firms were under the proprietorship of different person, but the whole show was being managed by Shri J.S. Jain and Shri Amar Kumar Jain. As per the noticees submissions, Foamsil Chemicals came into existence in June, 1987, and Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions are under common management and financial control and have mutuality of financial interest with each other. When it is so, then we agree with the findings of the impugned order. 11.1.4 Hon ble Supreme Court s decision in the case of Calcutta Chromotype Ltd. v. C.C.E., Calcutta - 1998 (99) E.L.T. 202 (S.C.) had observed that depending upon the facts and circumstances of the case, veil of the company has to be lifted to find the real facts. In the present case also, three units namely, M/s. Atlantic Chemical Industries, M/s. Foamsil Chemicals and M/s. Arun Chemicals, whatever is their constitution, (these are proprietary concerns), are under common management and closely controlled by only one person Shri J.S. Jain, who is one of the appellants here. The facts and circumstances have warranted to examine the reality of these units; and after going behind the mask of these entities, it has been revealed that activities of these units i.e. manufacture, clearance, etc. has to be clubbed together. In this regard, we take support from the Hon ble Supreme Court s observations in the above case of Calcutta Chromotype Ltd. (supra) which are given below : 14. .. (emphasis supplied) 11.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court as reported at 2018 (361) ELT A70 (SC). 4.14 In case of M/s R.K. Chaddha 2016 (332) ELT 650 (All.) Hon ble Allahabad High Court has been held as follows:- 14. Having heard the learned counsel for the parties, the Court finds that the submission of the learned counsel for the State appears to be attractive in the first flush but, on a closer scrutiny, the Court finds that the doctrine of lifting the corporate veil is not applicable in the present facts and circumstances of the case. 15. The company, in law has a separate legal entity of its own. Once incorporated, the entity of the company is entirely separate from that of its shareholders. The company has its own name, has its own seal, has its own assets and it can be sued or can sue for its own purposes. On the other hand, the liability of the shareholders is limited to the extent of its own shares, namely, to the extent of the capital invested by the shareholder. The creditors of the company cannot obtain satisfaction from the assets of the shareholders of the company and similarly, the shareholders have no right to the assets of the company. This position was recognized in Salomon v. Salomon Company Ltd., 1897 A.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 this Court held that where circumstances so warranted, persons responsible for illegal acts and who were found to evade tax, the corporate veil could be lifted to recover the dues from the persons responsible for such illegal acts. The Court held :- 4. We do not agree. The legal principle that a company is a distinct legal entity separate from its directors and shareholders (vide Soloman v. Soloman Co. Ltd., 1897 A.C. 22 H.L .) was evolved to encourage business and industry since many businessmen feared to start a new business or venture because if the said business/venture failed (due to competition, recession, etc.) even their personal assets could be attached and sold for the recovery in respect of the dues against the company. Hence his principle was created so as to encourage businessmen to take risks and set up industries and businesses and it has played a historical role in helping industrialization. This principle was not made to help tax evaders. As held by the Supreme Court in Delhi Development Authority v. Skipper Co. (P) Ltd. - AIR 1996 SC 2005 (vide para 28) :- The concept of corporate entity was evolved to encourage and promote trade and commence, but not to commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearances for home consumption of all excisable goods made by each individual unit during the preceding financial year is well within the threshold limit for SSI exemption. It may happen that a manufacture may have several factories located in different states falling under the jurisdiction of different Commissioners of Central Excise. If each of these factories was availing the SSI Exemption separately and if it is found that for a particular financial year, the aggregate value of their clearances of all excisable goods during the preceding financial year had exceeded the threshold limit for SSI Exemption, none of these units would be eligible for SSI Exemption during that year. In such a situation, duty can be demanded by the Jurisdictional Central Excise Authorities separately from each unit and the question of identifying the main unit and dummy units and demanding duty only from main unit does not arise, as in the scheme of collection of Central Excise duty, as laid down in the Central Excise Act, 1944 and the rules made thereunder, the collection of duty is manufacturing unit wise and if a manufacturer has two or more factories located at separate locations, each unit is req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 1998 (99) E.L.T. 202 (S.C.) = (1998) 3, SCC-681; (b) Subra Mikharjee another v. Bharat Cooking Coal Ltd., reported in (2000) 3 SCC-312; and (c) Delhi Development Authority v. Skipp Construction Co. (P) Ltd., reported in (1996) 4 SCC-622. The Apex Court in the case of Associated Rubber Industry Ltd., reported in 1986 (157) ITR-77 (S.C.), relying upon its earlier judgment in case of Medowell Co. Ltd. v. CTO, reported in 1985 154 ITR-148, 161 (S.C.) has held that even if companies are distinct legal entities having separate existence, this is not the end of the matter and it is the duty of the Court in every case, where ingenuity is expended, to get behind the smokescreen and discover the true state of affairs. Thus, the principle of lifting the corporate veil for discovering the true state of affairs behind the veil of the corporate entity is a well settled legal principle. It is this principle which has to be applied for determining as to whether two or more manufacturing units owned by separate partnership firms, private limited companies and/or public limited companies are to be treated as the units of the same manufacture. On this point, the Apex Court in case of CCE, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supervision of a person who belongs to the same group of concerns. The amounts have been collected by an employee of MACL. The so-called Directors of the companies were undisputedly employees of MACL. Almost the entire financial resources were made by MACL. The financial position clearly shows that MACL had more than ordinary interest in the financial arrangements for companies. The statements of the employees/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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir activities, the clearances of the factories owned by these entities are to be clubbed for the purpose of determining their eligibility for SSI Exemption by treating them as the units of only one manufacturer, even if those units are owned by different public limited companies, private limited companies or partnership firms. If on clubbing their clearances during the preceding financial year, the aggregate value of the clearances is found to be exceeding the threshold limit for SSI Exemption, the SSI Exemption would have to be denied to each of them and if each of them is a functioning unit and not a non-functional dummy unit, the duty can be demanded separately from each unit. 7.1.4 However, if there is only one unit which is functioning unit and other units are just dummy units, not actually engaged in manufacturing activities, duty would have to be demanded only from the existing unit by treating the other units as dummy units, and clubbing the clearances made in the name of those dummy units with the clearances of the main unit and for this purpose, there is no need to invoke the provision regarding clubbing in the SSI Exemption Notification. This decision has been affirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nceded similar relation between them and M/s. RRT. This decision of the Tribunal has been affirmed by the Hon ble Supreme Court as reported at 2016 (338) ELT A291 (SC). 4.17 In view of the discussions as above we do not find any merits in the submissions of the appellant in respect of the clubbing of the clearances. The impugned order holding that the clearances for the period 2014-15 are to be clubbed as appellants has clearly and being aware that their value of clearance has crossed the exemption limit as provided by the notification no 8/2003-CE had crossed the exemption limit created the dummy unit to continue operating within the exemption limit. Appellants have cleverly made a scheme for suppressing the value of clearances with intent to evade payment of duty for which they are also liable for penal action. Accordingly, penalty imposed on Appellant-I under rule 25 (1) of the central Excise Rules, 2002 read Section 11AC is justified in view of the decision of the Hon ble Supreme Court in the case of Rajasthan Spinning Weaving Mills [2009 (238) ELT 3 (SC)]. 4.17 In our view as the demand of duty is upheld the demand for interest follows as natural corollary. In the case of Padm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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