TaxTMI 
TaxTMI 
1986 (8) TMI 312
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....tled to benefit under Notification No. CER-8(28)/56, dated 5-1-1957 (as it stood during the material period 29-10-1962 to 31-8-1963), show cause notice was sent to the abovesaid five firms as to why duty evaded should not be demanded and penalty also levied, apart from ordering confiscation of the goods seized. On adjudication the Officer on Special Duty, Central Excise, Bombay passed order on 30-12-1966 holding the charges established. He imposed penalty of Rs. 250/- on each of the four persons mentioned earlier (owners of the four Textiles) and further demanded duty from them on the cotton fabrics manufactured on the sixteen powerlooms, duty being demanded on the basis of compounded levy rates. He directed that all the four persons shall be jointly and severally liable for payment of duty. He ordered confiscation of the cotton fabrics seized from M/s. Surajmal Purshotam Das and further held that on failure to produce the goods in terms of the bond at the time of provisional release an amount of Rs. 1,000/- was to be appropriated out of the bond amount. The five appeals preferred by the five parties against the said order were disposed of by the Central Board of Excise and Customs....
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....e, each in respect of four powerlooms, the further conclusion on his part that the four individuals were working together as a group or consortium was not correct. After considering the evidence for the Department in this connection, the special officer had summarised his conclusions as follows in paragraph 31 of his order :- "31. Thus we find that : (i) 4 units invariably shared the yarn beams said to have been purchased by them; (ii) All the relevant papers concerned in the purchase of yarn beams were kept in one file; (iii) No separate account of weft yarn and coloured yarn was maintained. The coloured yarn for use on all the looms was received from Head Office and was issued for use on all the looms without even putting the name of the unit; (iv) There was a common stock of weft yarn although it is claimed that the units purchased their weft yarn separately; (v) All the money for payment of wages was received from the same source and a common statement was maintained for payment of all the wages; (vi) &nb....
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....gister or by opening some different statutory registers but this will not mean that the purchase of yarn and its allocation, employment of labour, production of goods and their sale were entirely separate for each unit and that the profits and losses were really separate. Such allocation could always be done any time by splitting the accounts more especially when the law either requires it or confers some benefit thereby. The Board, therefore, finds that on the facts and circumstances of the case the exemption under Notification No. CER-8(28)/56, dated 5-1-1957 was not available to the goods produced in the 4 units during the material time as correctly held by the Collector." 7. Shri Gopal Prasad contends before us that these findings of the special officer, which had been accepted by the Board also, were incorrect. His argument was generally to the effect that whenever there were common purchases, to be utilized by the four units subsequently independently, such a common purchase was for proper reasons and that such purchases were accounted for in respect of each of the four units independently with reference to the quantity used by them independently and thus there was no comm....
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.... the circumstances, the mere fact that advance for payment of wages was being received from M/s. Surajmal Purshotam Das would not militate against the case of the appellants if they were able to establish that the advances so received were adjusted periodically with reference to the expenses and income in each of the other four units. Here again, Shri Gopal Prasad contends that the various account books and other accounts maintained by the appellants establish that there had been such periodical adjustments between the different units. He comments that since the four units were functioning adjacent to each other the same worker may work under different units at different periods on different days and, in some instances, even on the same day. Since advances were being distributed to the workers these advances were to be adjusted subsequently with reference to wages payable by each unit to different workers and such accounting could be done periodically only. Shri Gopal Prasad explains that a running account was being maintained with reference to amounts of advances received, the amount advanced to each worker, amounts adjusted in respect of each worker with reference to the work car....
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....above fact would not be a proper reason for concluding that the 4 units were not functioning independently but were controlled by a single controlling authority. 12. We may also note that though initially the Department proceeded on the basis that the work sheets prepared in issuing the show cause notice would suffice as evidence to prove that the 16 powerloom units were run jointly, the special officer himself came to the conclusion that it would not be so (para 32 of his order). 13. In view of the above discussion, we hold that the conclusion of the lower authorities that though the 4 units were separate legal entities they created a separate 5th entity akin to a consortium (which is similar to an unregistered partnership) is not correct. We are satisfied that the 4 units were functioning independently, though there was some amount of pooling of resources but with separation of benefits and liabilities periodically and adjustment of accounts. 14. Shri Gopal Prasad raised a further contention regarding the jurisdiction of Shri R.B. Sinha, Officer on special duty, to conduct the adjudication and pass the order that he did on 30-12-1966. Shri Sinha's assignment for adj....
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.... noted that separate Central Excises Licences were issued by the proper office in 1960 in the names of the 4 units (Manmohan Textiles, Vinod Textiles, Vijay Textiles and Rajendra Textiles) and that these licences had been renewed from year to year. It has been further noted that each of the 4 units had obtained a certificate from Area Inspector of Central Excise that the unit was licensed for four looms and that the cloth produced by these looms was, therefore, exempted from excise duty (the latter part of the certificate could, as the Board has rightly observed, be ignored as, of no consequences since it is without reference to any time frame and without citing any supporting authority). The Collector has, therefore, concluded that the four ostensible owners of the powerlooms were, in the eyes of law, separate legal entities. Thereafter he proceeds to analyse the evidence in the shape of common purchases of yarn, common source of funds etc. (as set out, and commented upon, in Shri Raghavachari's order) and concludes that, in reality, the four units were producing powerloom fabrics for and on behalf of the same person and, on that basis, denies the exemption to the fabrics cleared ....