1988 (4) TMI 187 - AT - Central Excise

Tribunal denies separate exemptions to firms with common partners under Notification 105/80

The Tribunal overturned the Collector (Appeals)'s decision and upheld the Assistant Collector's ruling, denying separate exemptions under Notification ... Value of clearances Issues Involved:1. Eligibility for exemption under Notification 105/80.2. Clubbing of clearances of two respondent firms.3. Applicability of Supreme Court decisions on partnership and tax law.Summary:Issue 1: Eligibility for exemption under Notification 105/80- The primary question was whether the respondents were eligible for exemption under Notification 105/80, dated 19-6-1980. The Assistant Collector of Central Excise Division Srinagar held that the clearances of the two respondents should be clubbed, making them ineligible for separate exemptions. The Collector of Central Excise (Appeals) New Delhi, however, ruled that the two units were separate despite having common partners and allowed them separate exemptions.Issue 2: Clubbing of clearances of two respondent firms- The Assistant Collector confirmed a duty demand of Rs. 73719.75, asserting that the clearances of the two firms should be combined. The Collector (Appeals) disagreed, referencing the Tribunal's decision in G.D. Industrial Engineers, Faridabad v. Collector of Customs & Central Excise, Chandigarh, which held that separate units with common partners should not have their clearances clubbed. However, the Tribunal noted that the Supreme Court's decision in Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes) Ernakulam v. K. Kelukutty overruled this precedent, emphasizing that a firm is not a corporate entity and should be assessed based on partnership law.Issue 3: Applicability of Supreme Court decisions on partnership and tax law- The Tribunal referred to the Supreme Court's observations in K. Kelukutty and McDowell & Company Ltd. v. Commercial Tax Officer, which stressed that partnerships should be assessed based on the partnership law unless modified by specific tax laws. The Tribunal found that the second partnership was created to circumvent the exemption limits, and the clearances should be attributed to the original firm. The Tribunal concluded that the clearances made by the second firm were effectively for the first firm, thus justifying the clubbing of clearances.Conclusion:- The Tribunal set aside the Collector (Appeals)'s order and restored the Assistant Collector's decision, denying separate exemptions and confirming the duty demand. The appeals by the Revenue were allowed.