TaxTMI 
TaxTMI 
1992 (7) TMI 165
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....re evading Central Excise duty by showing their production in the name of M/s. Saraswati Engineering Works and M/s. Suvidha Products and were wrongly availing of the exemption under Notification No. 105/80 and 77/83. The Department carried out checks on 25-9-1984 at Plot No. 20 of Vithal Udyognagar where the two appellants Units M/s. Saraswati Engineering Works and M/s. Swastik Engineering Works were shown. The other Unit M/s. Suvidha Products was at No. 213, Vithal Udyognagar and another Plot No. 1105/1-2 was shown for M/s. Saraswati Engineering Works. The Department on investigation came to the conclusion that all the three units worked together in assembling of Gharghanti and no separate independent manufacturing activities were carried out by the two other units M/s. Saraswati Engineering Works and M/s. Suvidha Products. For this conclusion the Department relied upon the following circumstances : 1. At plot No. 15A, near the premises of M/s. Swastik Engineering Works the etching work of Grinding stones of Gharghanti's was being carried on for all the units at same place. 2. Casting was carried on in M/s. Swastik Engineering Works in portion behind plot No. 20. &n....
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.... the complete Gharghanti was manufactured and sold from M/s. Swastik Engineering Works. Shri N.S. Mistry of M/s. Saraswati Engineering Works in his statement of 25-9-1984 also stated that the cabinets manufactured in M/s. Saraswati Engineering Works were sent to M/s. Swastik Engineering Works for stone fitting and testing and the fully manufactured Gharghantis were sold from M/s. Swastik Engineering Works. Another person Shri N.A. Suthar deposed in his statement that he was working earlier with M/s. Swastik Engineering Works and he also stated that the fully manufactured machine was cleared from M/s. Swastik Engineering Works. Shri C.B. Rana working with M/s. Suvidha Products said that his name was shown in the muster roll as labourer and was engaged in the work of removing complete body on Gharghanti to M/s. Swastik Engineering Works. Shri R.H. Chauhan also deposed on the same fact as stated by Shri Rana. Following further investigation proceedings were initiated against the appellants herein, by issue of show cause notice dated 12-8-1986 as it appeared to the Department that the Gharghanti was manufactured only at M/s. Swastik Engineering Works while M/s. Saraswati Engineering Wo....
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....nged in appeal and the Collector (Appeals) had held that these firms can not be treated as related persons as it had not been proved that they had interest in each other business. The learned Consultant further contended that the use of the same brand name of Milcent Gharghanti had been clearly explained even in the panchnama stage by Shri Patel who had said that the other units were paying royalty to M/s. Swastik Engineering Works for using the trade mark. The panchnama prepared at the premises of M/s. Saraswati Engineering Works also shows that unit had independent production capacity. The learned Consultant also relied upon the affidavit of the Panch witnesses to show that other units have independent manufacturing capacity. The statement of Rohit Patel on 25-9-1984 was given when he was not in a mentally steady condition and, therefore, contents of the statement cannot be relied upon. The learned Consultant further pointed out that the subsequent affidavit of the Rohit Patel had given the correct position. He had said therein that he informed the officers that once the process in their premises is over no other process is required for completion of manufacture, but that the ....
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....el who had said that he did not find anything adverse regarding the declaration filed by the units. He had also said that he has seen workers doing assembling works for Gharghanti in all the three premises. The deposition of the Superintendent, it was argued clearly support the appellants herein. Thereafter the learned Consultant referred to a series of case law on the subject to say that there was no circumstances in the present case for clubbing of the clearances and for treating all the units as one unit only for manufacture of complete Gharghantis: 1. 1981 (8) E.L.T. 59 (Ker.) - Rice and Oil Mills Partnership Finn Kandassankadavu v. Dy. Superintendent of Central Excise, Trichur. 2. 1982 (10) E.L.T. 329 (C.B.E. & C.) - In Re : Smt. Shyam Kumari, Baraut and Others. 3. 1983 (13) E.L.T. 1215 (CEGAT) - Government Ceramic Service Centre, Cannanore v. Collector of Central Excise, Cochin. 4. 1983 (14) E.L.T. 1994 (CEGAT) - G.D. Industrial Engineers. Faridabad v. Collector of Central Excise, Chandigarh. 5. 1985 (19) E.L.T. 441 (Tribunal)- Jagjivandas & Co., Thane v. Collector of Central Excise, Bombay-II. This decision was subsequently confirmed by the S....
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....hat Shri Rohitbhai J. Patel as the common partner in all the three units was managing the affairs of all the units and the partners in all the three firms were close relation of Rohitbhai Patel. Hence the Collector was right in concluding that the units other than M/s. Swastik Engineering Works had been created only to evade central excise duty. He referred to the declaration filed by appellants M/s. Suvidha Products and M/s. Saraswati Engineering Works giving the process of manufacture which indicated that they were to make cast iron parts whereas these units do not have the machinery to make these parts which on the other hand was being done only by the other appellants M/s. Swastik Engineering Works. The learned Departmental Representative urged that it is well settled that deliberate arrangement by which one person controls other units as a design to evade duty is not permissible and also that where it is in evidence that only one unit is having the capacity to manufacture fully finished articles having other sub-units the clearances are to be clubbed. He cited and relied upon the case of McDowell & Company Limited v. Commercial Tax Officer, reported in 1985 (5) E.C.C. 259, ....
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....available in the Panchnama made out on 25-9-1984. Shri Jitendrabhai Patel who was present at that time of preparation of the Panchnama had been questioned and his response is recorded therein. The Panchnama states, "Concerning the Gharghanti stones lying in this place Shri Jitendrabhai states that these stones belong to all the three firms. The stones which come from Rajasthan are being heated and etched here. The number of stones lying at different stages of processing are found to be 1700 pairs. The account of the 1700 Flour Mill stones are being maintained by each of the unit individually and separately in their own manner. On being asked Shri Jitendrabhai states that is not possible to make out instantly about how many pairs of stones belongs to each individual units". Therefore, it has been explained that though the grinding stones for etching had all been found together they were individually accounted for by each unit. The other piece of evidence held against the appellants is that all the Gharghantis were using the same trade mark 'Milcent'. For this again even on the date of visit the position has been explained by Shri Jitendrabhai Patel in which he has said as recorded i....
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....had emerged only belatedly in the affidavit filed which are, therefore, to be dismissed as after thought. This is because the subsequent version finds support in the deposition of the Supdt. of Central Excise Incharge of these units. Yet another aspect which remains unrebutted by the Collector's order, is the claim of the appellants that the three units came into existence during different years and that, therefore, it cannot be said that the other units were created as a front to evade duty and to enjoy exemption. It has been stated that M/s. Swastik Engineering Works was established as earliest 1946 and that in 1960 domestic flour mill was invented and the same was registered in the trade namely 'Milcent'. M/s. Suvidha Products was established in 1974, and also produced Gharghantis in 1976, owing to labour problem and fall in demand for: the product manufacturing activity was discontinued. In 1980, they re-started the manufacturing activities. M/s. Saraswati Engineering Works was established in August, 1982 also producing Milcent brand Gharghanti. It is seen from the above, that the units M/s. Swastik Engineering Works and M/s. Suvidha Products had been started much before the No....