TaxTMI 
TaxTMI 
1996 (5) TMI 173
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....rivate limited company having four directors. M/s. Process Control is a partnership firm having three of the directors of M/s. Geeta Valves and one minor son of the fourth director, as partners. It is also re- gistered as a SSI unit for the manufacture of various types of valves, they have filed a declaration for availing exemption from licensing control, stating that they are eligible for exemption under Notification No. 105/80 in respect of the valves manufactured and cleared by them upto the prescribed value limit. On a visit to both the units, the Central Excise Officers noticed that both are family concerns and the factory of M/s. Process Control was not having ade- quate machines to produce valves of bigger sizes and it was alleged that the clearances of valves shown as having been effected by M/s. Process Control were manufactured and cleared by M/s. Geeta Valves without payment of appro- priate central excise duty leviable thereon. On the basis of panchnama drawn showing the machines installed in the premises of M/s. Process Control and after recording statements of various persons, show cause notice was issued to the appellants. In the adjudication proceedings held by the ....
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....ow that there is a common purchase of raw materials by Geeta Valves and no payment is made for that by Process Control. Hence, no commonality on financial flow has been established for clubbing the clearance of Process Control with that of M/s. Geeta Valves. 3.7 Referring to the documents such as purchase orders, bills etc. relating to Process Control, he pleads that all these are from Municipal bodies and Government Departments. They had dealings only with Process Control. They are to be satisfied with the quality of the valves, which are tested at the factory premises, before removal. When these Government purchasers have dealt with only Process Control and paid for the goods received only to Process Control, in the absence of any positive evidence that all these goods were cleared only from Geeta Valves, no adverse conclusion can be drawn against the appellants. 4. Shri V.K. Puri, the learned SDR mainly contended as below : 4.1 Panchnama clearly indicates that even testing equipment is not there. It brings out that with the machines available in Process Control, only phasing work can be done. Hence, Process Control was only doing job work for Geeta Valves....
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....eeta Valves for demanding duty on the latter. 7. The following facts are not disputed by both the sides : (i) Geeta Valves is a private limited company and Process Control is a partnership company. Three of the directors of the Geeta Valves are partners in the firm of Process Control; (ii) Each is having separate sales tax registrations and are holding certificates of registration for manufacture; (iii) The various purchase orders were placed on Process Control, who, as per the documents, have supplied the valves to the various Government purchasers like Municipality, State Government etc. (It is however alleged by the Department that these were actually produced and cleared from Geeta Valves) (iv) The manager Shri Modi working in Process Control was drawing his salary from Geeta Valves; (v) Some workers were employed in common by both the units. 8.1 In the context of the above factual position undisputed, we looked into the factors reading to the demand. The main question to be considered in this regard is whether Process Control can be construed to be a manufacturer of the various valves cleared in their name or it is only a....
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.... figuring in the purchase orders, invoices and bills to establish that they got the goods only from Geeta Valves, but prepared the documents in the name of Process Control as per instruction of Geeta Valves. When quite a few of the buyers are found to be Municipality and State Government Department, normal presumption is that they would have got the goods from Process Control and their dealings may not be with a Benami. No evidence is brought in to rebut this normal presumption. Lack of machines for producing bigger size valves may arise a suspicion but that suspicion has to be investigated into for supporting the case. Mere suspicion cannot substitute evidence for establishing the case. In any case, in these circumstances, benefit of doubt is to be given to the appellants. 8.5 Though it is not disputed that Manager of Process Control is drawing salary from Geeta Valves, it is explained by the Director of Geeta Valves in his statement that this arrangement was to enable the person to get protection in respect of GPF and other terminal benefits and the salary paid by them to him is reimbursed by Process Control. Unfortunately, no investigation appears to have been carried ou....