Corporate veil in excise can be lifted where dummy units and suppressed transactions support duty, penalty and extended limitation.

Pervasive financial and managerial control, together with suppressed transactional arrangements, can justify treating nominally separate bottling units as dummy entities. The record showed minimal share capital, assessee funding, continuing control through lease and sub-lease arrangements, shared staff and operations, and collection of funds by an employee linked to the same group; on that basis, the corporate form was disregarded and duty, penalty and confiscation were sustained. Suppression of the real arrangement also supported invocation of the extended limitation period, and the plea that no manufacture was involved did not assist where the exemption position and valuation adopted by the assessee were not accepted.

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Issues: (i) Whether the three bottling companies were independent entities or merely front companies under the control of the assessee, so that the demand, penalty and confiscation could be sustained. (ii) Whether the extended period of limitation was applicable on the facts, and whether the plea that no manufacture was involved could defeat the excise demand.

Issue (i): Whether the three bottling companies were independent entities or merely front companies under the control of the assessee, so that the demand, penalty and confiscation could be sustained.

Analysis: Inter-dependence has to be determined on the facts of each case, and pervasive financial control as well as management control are material indicators. The record showed negligible share capital, substantial funding by the assessee, lease and sub-lease arrangements for cylinders that continued the assessee's control, common staff for accounts and operations, marketing by a person connected with the same group, and collection of amounts by an employee of the assessee. The corporate form was therefore only a facade.

Conclusion: The three units were front companies and the assessee had effective control over the business; the duty, penalty and confiscation were justified, and the finding of the Tribunal to the contrary was set aside.

Issue (ii): Whether the extended period of limitation was applicable on the facts, and whether the plea that no manufacture was involved could defeat the excise demand.

Analysis: Suppression of the material arrangement and the true nature of the transactions was established, so the extended period could validly be invoked. The plea that no manufacture was involved was not accepted, since the exemption was claimed on the footing that the bottling units were manufacturers and the contention had not been raised before the original adjudicating authority in any event. The valuation adopted by the assessee was also not accepted because the real sale value was far higher than the declared supply price.

Conclusion: The extended limitation applied, and the contention that no manufacture was involved did not help the assessee.

Final Conclusion: The excise duty, penalty and interest were restored against the assessee on the peculiar facts established on record.

Ratio Decidendi: Where financial and managerial control, coupled with suppression of the real transactional arrangement, shows that nominally separate units are in substance dummy units, the corporate veil may be lifted and excise demand, penalty and extended limitation can be sustained.

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