TaxTMI 
TaxTMI 
1987 (9) TMI 281
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.... clearances of both units were to be taken together to arrive at eligibility for benefit under Notification Nos. 83/83 as well as 77/83 and therefore benefit under Notifications No. 309/79 and 179/77 could not be available to the appellants. They were called upon to show cause why action in respect of demand of duty, etc., should not be taken accordingly. The appellants replied claiming that they were distinct from M/s. Naveen Enterprises and that there was no common interest between the two firms and therefore the proposed action was not justified. After adjudication the Asstt. Collector of Central Excise, Division-II, Ghaziabad under his order dated 2-12-1985 held that Naveen Enterprises was simply a ruse and a device to evade excise duty....
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....ty of M/s. Naveen Enterprises on the ground that the same was brought into existence only for purposes of tax evasion. It is this view that is assailed by Shri Sogani. 5.  The reasons for which the Assistant Collector came to his conclusion have been set out in the orders of the Assistant Collector [and recapitulated in the order of the Collector (Appeals)] as follows: (1) that there was only one building with no demarcating walls in between; (2) that there is only one office, said to be of M/s. Kinjal Electricals (P) Ltd. but situated in the portion claimed to belong to M/s. Naveen Enterprises; (3) two telephones existed in the name of M/s. Kinjal Electricals (P) Ltd. and were fitted in the office premises of M/s. Kinjal E....
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....dings of the Assistant Collector the Collector came to his conclusion for the reasons extracted below : "However, the facts not in dispute are that the machines requiring use of power and supposed to be put to use only in the premises of M/s. Naveen Enterprises belong to M/s. Kinjal Electricals (P) Ltd. and have been on lease to the former. Further, M/s. Naveen Enterprises working with several machines, requiring use of power, function without an engineer. Even according to the admission of the appellants themselves, the engineer of M/s. Kinjal Electricals (P) Ltd. inspect their machines and equipments installed in the premises, said to belong to M/s. Naveen Enterprises. Though the finished products of M/s Naveen Enterprises are claimed ....
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....d at could not be supported on the said facts since the authorities failed to take into consideration the other relevant considerations. The question whether the two firms were independent would depend much on the question whether they had separate legal identities and functioned independently of each other though they may have transactions between themselves. One of the primary considerations for a resolution of such a dispute would be whether there was any financial flow back from one to the other except in the course of normal commercial transactions. If such a financial flowback or adjustment is established that would furnish strong proof of the two firms being one, though purporting to be different. In the present instance stance there....
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....y and properly. The fact of such payment of rent as well as payment of electric charges separately is said to be reflected in the books of account maintained by both firms. As regards the sales of their product by M/s. Naveen Enterprises the lower authorities only go by the fact that most of it was sold to the appellants but failed to attach importance to the fact that at least a part was being sold to outsiders. There is neither allegation nor proof that sale to the third parties was either fictitious or that the proceeds thereof went to the appellants only. As earlier noted, there is no finding that there is any arrangement for financial flowback from one firm to the other. On the other hand each has its own separate accounts as well as s....