TaxTMI 
TaxTMI 
2008 (1) TMI 725
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....3-2001. As a result of certain investigations carried out, it appeared that this company was floated by M/s. Desmo Exports Ltd. incorporated in 1993 at Thane who also was engaged in manufacture of solvents and thinners and both were availing SSI exemption under Notification No. 8/2001-C.E., dated 1-3-2001. Investigations revealed that the two companies were controlled by the same management having common shareholders wherein one Shri Dilip Kumar Jindal and his family were having 97% of the shares in both the companies and there was transfer of raw materials from one unit to the other, exchange of funds belonging to each other by providing or procuring unsecured loans to each other. Some directors were found to be dummy holding no shares in any of the company, some directors were common. The two companies were known as Jindal group of companies and one Shri Dilip Kumar Jindal was actively involved in the functioning of the two units and in communications to the banks has signed as director both for M/s. Desmo Exports Ltd. as well as M/s. Penco Trade Chem (P) Ltd. The share-holders of the two companies were giving loans to the companies which was equal to the dividends received by th....
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.... submitted that the clearances have been clubbed solely on the ground that there were common directors or share-holders in the two companies and that there was transfer of raw materials or funds from one to another. Neither the impugned order nor the show cause notice brings out as to who is the parent manufacturer to whom both the units belong. The two units are located far from each other i.e. one at Nasik and the other at Thane and are under the jurisdiction of two different commissionerates. However, show cause notices on identical grounds have been issued to both the units and duty has been demanded from both the units. The show cause notices have been adjudicated by different Commissioners without having a common adjudicating authority. If it is revenue's case that both the units belong to same manufacturer, the duty should have been demanded from only one of the manufacturer which it considered was real manufacturer. While show cause notice alleges that M/s. Penco Trade Chem (P) Ltd. has been floated by M/s. Desmo Exports Ltd. duty has been demanded form M/s. Penco Trade Chem (P) Ltd. in the present case which cannot be done if the revenue's case is that M/s. Desmo Exports L....
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....cognizing their independent existence, then in such case the clearance of all the units cannot be clubbed together. Similar view was taken in the case of Unity Industries cited supra and Universal Industries, 2000 (115) E.L.T. 704 (Tri.). In view of this it was submitted that the demand is liable to be set aside along with penalties imposed on each of the applicants. 6. Ld. DR however submitted that in this case the two units were found to be inter-dependent upon each other where one Shri Dilip Kumar Jindal and his family members were holding more than 97% share of both the companies. There was frequent exchange of funds from one to another without any interest. The raw materials were also transferred to each other. Both the finished products as well as raw materials were similar in nature. Both the companies were known as Jindal group of companies and Shri Dilip Kumar Jindal was the most active director who was representing both the companies in its correspondence with the banks and other agencies as a director and therefore they have to be considered to be working under the same management and in such a case the corporate veil is required to be lifted to know as to who is....
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....ght and one cannot be said to be owned by the other. The Apex Court's decision in the case of Modi Alkalies & Chemicals Ltd. is entirely on different footing where both the show cause notice and the order-in-original proceeded on the ground that Modi Alkalies & Chemicals Ltd. have folated their other front companies only with a view to avail SSI exemption. In that case Modi Alkalies & Chemicals Ltd. were manufacturing hydrogen gas which was sent through pipe line to the other three from companies which were located adjacent to each other and were separated by just a small brick walls of four feet height. The directors of the three front companies were also employees of Modi Alkalies & Chemicals Ltd. and were frequently changed. They had common staff for maintenance of records, and operation of the units. The main plant and machinery i.e. cylinders had been supplied only by Modi Alkalies & Chemicals Ltd. and the total finance was provided by Modi Alkalies & Chemicals Ltd. as unsecured loans which run into crores and in some cases the finance was arranged by Modi Alkalies & Chemicals Ltd. The share capital of the three companies was just Rs. 200/- each. Marketing of the product of al....