TMI Blog2004 (8) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... s were availed with the aid and assistance of MACL has not been seriously disputed. Apart from that, the cylinders were brought on lease by MACL from another concern and were sub-leased to the three companies. The cylinders bore the name of MACL. If the three companies had separate standing as contended it could not be explained why they could not get the cylinders directly from the lessors on lease basis and the need for introducing MACL as the lessee and then the three companies becoming sub-lessees. As noted by the Commissioner, entire receipts were paid as lease amount to MACL. The financial position clearly shows that MACL had more than ordinary interest in the financial arrangements for companies. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on No. 1/93, dated 28-2-1993 and thereby evade payment of central excise duty. With a view to unravel the truth, Director General of Anti-Evasion (for short 'DGAE') searched the factory and office premises of MACL and the three front companies on 27-9-1996. It was found that all the three bottling units were located in one single shed and were separated from each other by small brick walls of about 4 ft. height. The Directors of the three front companies were employees of either MACL or other Modi Group of companies and they were frequently changed. They had common staff for maintenance of records, and operation of the units. The main plant and machinery i.e. cylinders had been supplied only by MACL and the total finance was provided by MACL as unsecured loans or had been arranged by finance companies whose whereabouts were not even known to the Directors of the three front companies. Marketing of the products was done by one Ritesh Beotra, a so-called Director of SCGCPL who was working as Deputy Manager (Marketing) in M/s. Modi Gas Chemicals Sales Depot at Delhi. He was marketing various gases manufactured by a Modi group concern and was answerable as an employee of MACL. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies did not exist or that MACL was the company having manufacturing activities in their premises. Similar replies were filed by the three companies who denied that they were fake units or front companies. It was pointed out that all requisites of central excise laws were followed. There was nothing suspicious in the transactions entered into by them with MACL. 4.After consideration the show cause reply, the Commissioner of Central Excise (Adjudication), Delhi (for short the 'Commissioner') analysed, the factual position and found that this is a clear case where the three companies were dummies of MACL. Documents have been created to show existence of the bottling companies, whereas in reality MACL was in full control over the units and, therefore, MACL was treated to have evaded duty by resorting to under valuation. Duty and penalty as proposed were imposed. Confiscation was directed of land, building, plant machinery of the three companies with option for redemption on payments of fine of Rs. 20 lakhs, Rs. 7 lakhs and Rs. 50,000/- respectively. Penalty of Rs. 1 lakh was imposed on each of the three companies and Rs. 50,000/- on each of the three employees and the Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be adjudicated on the facts of each case. There cannot be any generalization or rule of universal application. Two basic features which prima facie show interdependence are pervasive financial control and management control. In the present case facts clearly show financial control. Undisputedly, the share capital of each of the three companies was Rs. 200/-. Though it was claimed that financial assistance was availed from the financial companies, it is on record that the unsecured loans advanced by MACL to the three companies were substantially heavy amounts as on 1-4-1998. NGCPL received an amount of Rs. 1.55 crores. About 14 lakhs appeared to have been paid after the issue of show cause notice. Loans advanced to NGCPL was about Rs. 52 lakhs while to SCGCPL it was about Rs. 65 lakhs. The finding of the Commissioner that the financial assistance from the financial institutions were availed with the aid and assistance of MACL has not been seriously disputed. Apart from that, the cylinders were brought on lease by MACL from another concern and were sub-leased to the three companies. The cylinders bore the name of MACL. If the three companies had separate standing as contended it cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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