TaxTMI 
TaxTMI 
1999 (12) TMI 607
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....on of M/s. Hunter Douglas of Holland, during the period September, 1990 to March, 1994 under the provisions of Section 11A of the Central Excise Act, 1944. 3. I confirm demand of duty amounting to Rs. 27,41,483/- on rest of the items which was marked out after clubbing the total clearance value of goods and taking into consideration the slab rate of duty as applicable in terms of Notification Nos. 175/86 and 1/93. 4. I impose a penalty of Rs. 8 lakhs on IBPL and MIT under the provisions of Rule 9(2) and Rule 173Q of Central Excise Rules for contravention of Rules 9(l), 173B, 173F, 173G read with Rule 173Q of Central Excise Rules and evading central duty to the tune of Rs. 31,45,802/-. 5. I hereby also impose a personal penalty of Rs. 3 lakhs on Shri Arvind Nanda, Director of IBPL and partner of MIT, who played the vital role in designing the modus operandi with the sole intention to evade central excise duty." 2. The issues that arise for consideration are as under : (a) Whether duty can be demanded on goods aluminium shapes and sections, false ceilings, venetian blinds, etc., manufactured and cleared by IBPL (M/s. Interarc....
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....any was changed to IBPL by way of a resolution registered on 9-8-1985. Subsequently, Shri Amit Judge one of the founder Directors of the company was replaced by Shri Gautam Suri. They appeared to have entered into an arrangement with M/s. Hunter Douglas a company of Holland, known for their structural products, firstly to trade their goods in India, secondly to import machines and raw material from them and to use their brand names 'Luxaflex' and 'Luxalon' on similar goods to be manufactured and sold in India. Later on they also developed their own brand names for other goods. Soon thereafter, one of the Directors Shri Arvind Nanda, and another Director's wife Mrs. Shobhna Suri entered into a partnership agreement and formed a firm in the name and style of M/s. Intertec (MIT) on 19-8-1988. The object of this firm was also taken to be the same as that of IBPL. Thus for all the practical purposes the beneficiaries are the same persons or group of persons. What is of importance is that one is a private company and the other is a partnership concern. None of them are what is called a public limited company. There are only two Directors in the Pvt. Ltd., company and of those two one ....
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....tured from either of the units. (d) It is also seen that entire raw material to be used either in the factories of M/s. IBPL or MIT are being imported or indigenously procured by M/s. IBPL and subsequently being supplied or sold to MIT as per requirement of the finished goods in the market. Similarly the entire marketing of the finished goods, either manufactured by M/s. IBPL or MIT being done by the marketing executives appointed by M/s. IBPL. The catalogues, price lists printed for the finished products are one and the same. Even in one catalogue for Luxaflex blinds a copy of which was recovered from both the units, show varieties of venetion blinds and vertical drapes or blinds even though the venetion blinds are manufactured by M/s. IBPL and vertical blinds are manufactured by M/s. MIT and in the space for place of manufacture the name of M/s. IBPL alone has been shown. The dealers are appointed by M/s. IBPL, their meetings and conferences are arranged by them, they procure the orders and then allocate them. From these facts it is clear beyond doubt that M/s. IBPL and MIT do not have separate existence though constitutionally/legally a facade has been created to show th....
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....of production only. The supervision of production, accounts, purchasing was looked after by staff of IBPL. 3. Both MIT and IBPL have a common registered office. 4. Both the units had common raw material and purchase and input of raw material were effected by IBPL who later on supplied them to MIT for use in manufacture. 5. The marketing of finished products of both the firms was done by the staff of IBPL for which common catalogue and price lists were used without distinguishing which product was manufactured by whom. No charges were found to be paid by MIT for various services extended by IBPL. The total expenses of the office were borne by IBPL though it was a common office for both. The foreign brand names Luxalon and Luxaflex were hired by M/s. IBPL under agreement and the brand names Trac, Interarch and Tracteck belonged to IBPL. All these brands were also used by MIT though there was no agreement with brand name owner or with IBPL for use of their brand and no actual payment was made by MIT for use of the same. It is obvious from the above that MIT is fully dependent on IBPL for financial support, procurement of raw material, marketing of finished p....
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....ector of IBPL and he is also the working partner of Intertec and, therefore, he is supervising or controlling the activities carried on in the respective units. 4.3.2 The finding of the Commissioner that there was financial control of IBPL over Intertec is also wholly incorrect in law as well as on facts. This finding is wholly based on the assumption that Arvind Nanda is a Director of IBPL and he is also a partner of Intertec. The Director of the private limited company is distinct from the company which is a separate legal person and, further, the Director is not owner of the private limited company, hence, there cannot be any allegation that IBPL and Intertec are having common financial interest. Intertec has its own capital raised by the contributions made by the partners in their own individual capacity and from their own funds not funded by IBPL. The finding of the Commissioner in the impugned order that both IBPL and Intertec are having common managerial control is also incorrect in law. This finding is based on the fact that Arvind Nanda is a Director of IBPL and he is also partner of Intertec. Apart from this, the impugned order also refers to the fact that Smt. Sh....
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....4.4 Further, for the reason that IBPL had deleted some of the items in their L-4 licence issued under Rule 174 and that Intertec had started manufacturing such items, it cannot be said to be an indication that both the units are one and the same. The fact that IBPL sold some of the raw materials to Intertec also cannot be a ground to hold that Intertec depends upon IBPL for the raw material. Similarly, if the marketing of the product manufactured by Intertec is being done by IBPL, it cannot be suggested that the two units are one and the same, particularly since Intertec has its own marketing staff and Intertec had advertised for its products and enclosed copies of bills raised by the advertising agencies for advertisement orders placed by Intertec, with the reply to the show cause notice. 4.4.1 The finding of the Commissioner that IBPL had allowed Intertec to use the brand name without any consideration also cannot be a ground to hold that the two units are one and the same, more so when the brand names like 'Trac Dec' and 'Interarch' are not registered brand names of IBPL and IBPL had applied for registration of these brand names. 4.5 The Commissioner had als....