1985 (5) TMI 141 - AT - Central Excise

Entities deemed separate for tax purposes due to lack of common ownership or operations. Department's case lacked evidence. Appellants not liable.

The Tribunal found that two entities, M/s. Aroma Apparels and M/s. Intima Wear, were distinct legal entities with no common ownership or operations. The ... One firm not dummy for another Issues involved: Allegations of creating a dummy company for excise duty exemption and imposition of penalty under Rule 173Q of Central Excise Rules, 1944.Summary:The case involved a dispute where the Department alleged that two separate entities, M/s. Aroma Apparels and M/s. Intima Wear, were actually linked and operated as a single unit to gain excise duty exemptions. The Department issued a show cause notice demanding duty payment and penalties, which was upheld by the Collector and the Central Board of Excise & Customs.The appellants contended that they had no association with M/s. Intima Wear, highlighting separate bank accounts, distinct tax assessments, and lack of necessity to create a bogus firm for duty evasion. They also argued that the notice issued was time-barred.The Department argued that M/s. Intima Wear was a sham company created to exploit duty exemptions, relying on account entries and circumstances. They claimed to have sufficient evidence shifting the burden of proof to the appellants.After considering both parties' contentions, the Tribunal found that the two firms were distinct legal entities with no common ownership or operations. The Department's case lacked concrete evidence and relied on broad inferences rather than proven facts. The Tribunal concluded that the appellants were not liable for duty payment or penalties, setting aside the impugned order and allowing the appeal.