TaxTMI 
TaxTMI 
2012 (10) TMI 864
X X X X Extracts X X X X
X X X X Extracts X X X X
....iod 1984-85 to 1987-88 should be considered as the clearance of only one unit namely, M/s. Heemanshu Traders and the eligibility to exemptions for small scale units under Notification 83/83, dated 1-3-1983, 85/85 dated 17-3-1985 and 175/86-C.E., dated 1-3-1986 providing exemption to small scale units, should be decided on such basis. The constitutions of these seven units were as under : S. No. Name of the Party Constitution of the Party 1  Heemanshu Traders  Partnership Firm 2  Krishna Industries  Partnership Firm 3  M.K. Industries  Partnership Firm 4  M.G. Industries  Partnership Firm 5.  Hari Industries  Partnership Firm 6.  D.G. Auto Industries  Partnership Firm 7.  Heemanshu Auto (P) Ltd  Private Ltd Co. 3. The adjudicating authority came to the conclusion that the clearance of all the seven entities above should be clubbed in the hands of M/s. Heemanshu Traders and eligibility for small scale exemption decided accordingly. Aggrieved by the order the Applicants filed appeals before this Tribunal. The Appeals were decided by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this order the Appellants again filed Special Civil Application No. 1245 of 2010 before the Honorable High Court of Gujarat. The High Court disposed of the Application vide its order dated 22-02-2010 reading as under : "5. The short issue involved in this petition is that despite the order passed by this Court on 8-8-2006 in Special Civil Application Nos. 8003 of 2006 to 8009 of 2006, permitting the petitioners to withdraw their petitions with a liberty to file Misc. Applications before the Tribunal and to decide the said Misc. Applications in accordance with law, the Tribunal has disposed of Ratification Applications only on the ground that the petitioners had filed applications on 11-10-2006 in the order passed in the year 2002, i.e. after six months and hence applications are barred by limitation. It is very unfortunate that the Tribunal has not considered the order of this Court in its proper perspective and overlooked the circumstances under which the petitioners were permitted to withdraw the said petitions. While passing the order dated 8-8-2006, this Court has recorded the submissions made on behalf of the petitioners that there was an error in the order passed by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the applications for rectification ROM 81 to 87/2006, have now come up for fresh decision before the Tribunal. Since there was argument from the JCDR on the issue as to what extent the decision of the Tribunal dated 19-12-2002 can be altered in consideration of an application for rectification of mistake we want to consider those arguments and give a finding on this issue first. 7. The Ld JCDR who argued the matter followed up his arguments with written notes dated 29-9-2011. His main argument is that in a proceeding for rectification of error in a judicial order, only an error apparent on the face of the record should be corrected. If the application calls for travelling beyond the record such application cannot be entertained. He relies on the decision of the Apex Court in the case of Assistant Commissioner of Income Tax, Rajkot v. Suarashtra Kutch Stock Exchange - 2010 (18) S.T.R. 84 (S.C.) = 2008 (230) E.L.T. 385 (S.C.) in this matter. Para 37 of the order is reproduced below :- "37. In our judgment, therefore, a patent, manifest and self-evident error which does not require elaborate discussion of evidence or argument to establish it, can be said to be an erro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lar issue was also examined in the past for the purposes of regulating the exemption from duty granted under the Notification No. CER 8(5)-Central Excise, dated 1-3-1956 as under :- (i) Different firms will be treated as different manufacturers for the purpose of the exemption limit. But if a firm consisting of certain partners say, A, B, & C has got more than one factory, all these factories should, of course, be combined. Limited companies whether public or private are separate entities distinct from shareholders composing it. Hence each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. (ii) As mentioned above, if there are the two firms with only some of the partners in common, each firm is entitled to separate exemption limit, and hence the question of distributing the exemption does not arise. If one firm or one individual owns several factories he or it gets exemption only in respect of one lot of 125 tons and the manufacturer being only one entity there is no question of distributing the exemption. (iii) If there are more than one mill under the control of one manufacturer there is no question of choosing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r on behalf of the same manufacturer which is to be taken into consideration for purpose of interpreting the exemption Notification. The matter requires to be viewed accordingly. 2. The Board had then felt the position as mentioned above including in respect of Notification No. CER-8(5)-C.E., dated 1-3-1956 was sufficient to deal with the interpretation under Notification No. 176/77 dated 18-6-1977. Now in exercise of the powers conferred under Section 37B of the Central Excise Act, 1944 (1 of 1944), for the purpose of ensuring uniformity of levy of duties of excise, the Central Board of Excise and Customs have ordered that the general principles as mentioned above in the context of Notification No. 176/77 dated 18-6-1977 will be applicable to Notification No. 175/86 also. The Board have issued the above order on 29-5-1992. Sub :- The text of the Direction issued under Section 37B is as follows :- "In exercise of the powers conferred under Section 37-B of the Central Excise Act, 1944, for the purpose of ensuring uniformity of levy of duties of excise the Central Board of Excise & Customs has ordered that the following general principles will be applicable to Notifi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pose of levy of central excise duty. 2. The Tribunal while dismissing the appeals of the appellants herein agreed with the Collector of Central Excise, Pune that the three units (the appellants herein) procured raw materials together, they had common credit facilities from the suppliers, had common stock accounting and planning, they are inter-dependents in manufacturing operations, had common stock of raw materials and semi furnished goods, were having common use of the machinery between the three units, were having common marketing arrangements and free flow of finance between themselves. On these basis, the Tribunal concurred with the Collector that the three units In fact are so inter-related that the Department was justified in clubbing their total production as production from one unit for the purpose of Central Excise Act. 3. In these appeals, Shri Joseph Veilapally, learned Senior Advocate appearing for the appellants contended, even according to the material relied upon by the respondents, it is clear that the three units are independent units, though, may be having certain common facilities for the sake of convenience, which does not make the unit inter-re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pose of exemption limit. If that be the position in law, then there may be some justification for the appellant to urge, so far as M/s. Supreme Washers (P) Ltd. is concerned, it being a limited company, its production cannot be clubbed with the other units. However, since this aspect of the case and applicability of the Circulars referred herein above was not brought to the notice of the Tribunal we are in agreement with the suggestion made by the learned Attorney General that it will be just and proper to remand this matter, for this limited purpose, to the Tribunal for examining the applicability of the Circular relied upon by the Appellants, M/s. Supreme Washers (P) Ltd. 7. For the reasons stated above, we confirm the finding as to the inter-relationship between the three units, as found by the Tribunal, and remand the appeals back to the Tribunal for the limited purpose of deciding the applicability of the Circular referred herein above. 8. The appeals are, therefore, allowed and remanded for the fresh disposal by the Tribunal in accordance with law to the extent indicated herein above." 13. On remand, this matter was decided by the Tribunal and the deci....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Circular No. 6/92, dated 29-5-1992 and Circular No. 5 issued vide F. No. 21/31/56-CX.MI, dated 10-8-1956. Notification No. CER(5)CE, dated 1-3-1956 referred in the circular dated 29-5-1992 taken note of by the Hon'ble Supreme Court as such is not produced before us. But on going through the circular dated 10-5-1956, it is seen that paragraphs (i) to (iii) contained therein are quoted verbatim in circular dated 29-5-1992 as if those provisions stood contained in Notification dated 1-3-1956. Both sides submit before us that what is referred in circular dated 29-5-1992 and as contained in Notification dated 1-3-1956 are the same as is found in the circular dated 10-8-1956. We proceed to consider the matter on the above basis. Paragraph (i) of the circular dated 10-8-1956 reads as follows :- "(I) Different firms will be treated as different manufacturers for the purpose of the exemption limit. But if a firm consisting of certain partners say, a, b & c has got more than one factory, all these factories should of course be combined. Limited companies whether public or private are separate entities distinct from shareholders composing it. Hence each limited company is a manufactu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....substance about the existence of the three companies independently. The Circular No. 6/92 dated 29-5-1992 has no relevance because it related to Notification No. 175/86-C.E., dated 1-3-1986 and did not relate to Notification No. 1/93. 12. What this Court was emphasizing in the aforesaid decision was not only the fact that Circular 6/92 has no effect upon commencement of Notification No. 1/93, but also the fact that the distinct legal nature of Companies cannot be used as eyewash to portray its independent nature. Where the companies are indeed interdependent and possibly even related through financial control and management, the value of clearances has to be clubbed together in the interests of justice. The operation of Circular 6/92 admittedly protected entities like the appellant prior to the commencement of Notification No. 1/93, but certainly not after the same. In this case, this Court has been presented with a preponderance of evidence to suggest that the companies are related not only in terms of financial control, but also through management personnel. In Modi Alkalies & Chemicals Ltd. & Ors (supra) this Court has held that two basic features which prima facie show ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... If the goods manufactured by an entity are cleared by issuing bills in the name of a limited company whether such company was eligible for a separate quantum of exemption as a small scale unit for goods billed in the name of the limited company. (iii) In this case clearances of 7 entities were ordered to be clubbed, out of which one is a limited company. It is to be decided whether for the reason that one entity is a limited company clubbing of even the six partnership firms will also fail. 18. It is very clear that the circular and the decision in the case of Supreme Washers (P) Ltd by the Tribunal are with reference to a situation whether the entities are just a legal facade is also to be answered in the negative because no such situation is discussed. From a reading of the Circular it is clear that it is issued in the context of clubbing the clearances of different factories for the reason that the ownership of the factories is in the hand of persons some of whom may be common by constituting different entities with different legal structures like partnership, limited company etc. The observation of the Apex Court in para 12 of the case of Par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n this context the following are relevant : (a) Para 3 of the decision of the Apex Court in the case of Supreme Washers; (b) Para 3 of the decision of the Tribunal while disposing of the case while deciding the case afresh in the context of directions from the Apex Court and (c) Para 5 of the order dated 22-2-2010 of the High Court of Gujarat. - These show that doubts are raised and required to be decided only in the matter of clearances shown in the name of the limited company with clearances of the other six firms and not about clubbing the clearances shown in the name of the six firms together. 21. Against the backdrop of the findings on the three issues the facts of the case can now be studied. Extracts from para 35 of the SCN and the relevant paragraphs in the impugned order dealing with clearances shown in the name of Heemanshu Auto (P) Ltd. are extracted below : 21.1 Extracts from para 35 of the SCN detailing the statement given by Shri. Deepakbhai Budhidhan Shah Director of Heemanshu Auto Pvt. Ltd. on 27-7-1988 : 'To a specific question whether they are affixing any brand ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llan No. 862 dated 7-4-1988 was made by the excise clerk of M/s. Heemanshu Traders on the name of M/s. Heemanshu Auto Pvt. Ltd., Umbergaon. When the statement of Sh. Mahendra Kumar Kantilal Shah Excise Clerk of M/s. Heemanshu Traders, Umbergaon on 7-4-1988 was recorded, he stated that the challan was made on the name of M/s. Heemanshu Auto Pvt. Ltd. on the direction of Sh. Girish Bhai Shah, brother of Sh. Priyakant Shah though the said G.B. Shah has no legal locus standi in M/s. Heemanshu Traders as he is neither an authorized signatory nor a partner in the said firm. This aspect I have discussed in detail in the earlier part of the order. Thus, from the above, it would be seen that in order to remain within the exemption limit, M/s. Heemanshu Traders have been issuing challans for their goods on the name of Heemanshu Auto Pvt. Ltd. their sister unit. 32.3.4 Further, the following points & instances will establish inter-relationship of M/s. Heemanshu Traders, Umbergaon amongst the other noticee units to show mutuality of interest as well as financial flow back amongst them. 33. (a) I note that M/s. Heemanshu Traders, Umbergaon received Bill No. 717 dated 30-....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... such your bill should have been prepared in their name. Accordingly, your aforesaid bill is returned herewith which may please be treated as cancelled and a fresh bill in the name of Heemanshu Auto Pvt. Ltd. should be sent to them, at the under mentioned address. Heemanshu Auto Pvt. Ltd., 1305, Prasad Chambers, 13th Floor, Near Roxy Cinema Bombay-400004. (emphasis provided) Yours faithfully, For Heemanshu Traders Sd/-- Partner The above letter clearly establishes that they M/s. Heemanshu Traders were even manipulating bills to remain within the exemption limit. (b) I further note that M/s. Heemanshu Traders, Umbergaon, received stamping lamination from M/s. Heemanshu Auto Pvt. Ltd. (invoice No. A/42/43 dated 31-8-1982 and A/39/43 dated 31-8-1987) M/s. Heemanshu Traders, received electrical stamping and laminations from M/s. M.K. Industries, Umbergaon. M/s. Heemanshu Auto Pvt. Ltd dispatched C.B. Points to M/s. Heemanshu Traders, Umbergaon (Invoice No. A/36/43 and A/35/43 dated 8-6-1987) M/s. M.K. Industries sold electrical stamping and laminations to M/s. Heemanshu Traders (Invoice No. C/351/43 dated 7-8-19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edger of Heemanshu Auto Pvt. Ltd. for the year 1986-87 (Exh. 149) I find that inter alia, the following debit/credit entries find place in the name of Heemanshu Traders and M.K. Industries. M/s. Heemanshu Traders SY 2043 page : 41 10-2-87 To Bank - 11000 17-3-87 : By Bank - 50000/- 30-5-87 To Bill - A/9-29268/- 4-6-87 : By Bank - 1,50,000/- 26-6-87 To bill A/13-33633/- 28-3-88 : By Bank - 10,000/- 13-7-87 Bill A/15 - 15487/- 24-8-87 To bill No. A/35-560/- M/s. M.K. Industries - SY 2043 page No. 29 19-10-83 To bank - 25000/- 3-3-1987: By bank-20,000/- 9-3-87 By bank - 1,000/- 18-7-87 By bank - 20,000/- 33.1.4 From the perusal of General Ledger for the year 1987-88 of Heemanshu Auto Pvt. Ltd. (exhibit 162), I find that inter alia, the following debit/credit entries finds place in the name of Heemanshu Traders and M.K. Industries. M/s. M.K. Industries - SY-2044 Page : 29 2-1-88 : To Bank 7800/- 27-10-87 by bill D. 4 - 696.64 2-2-88 : To bank 10000/- 4-11-87 by bill D.14- 7293.68 10-11-87 : By bill D.22 - 2868.01 M/s. Heemanshu Traders - S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, M/s. Heemanshu Auto Pvt. Ltd,. Sh. Hari Industries, M.K. Industries, and D.G. Auto Industries. (a) M/s. Heemanshu Traders made payment to M/s. P.B. Shah family Trust, Shri Hari Industries, M.K. Industries and D.G. Auto Industries, Ankleshwar. (b) M/s. M.K. Industries issued revised price list to their different customers from office of M/s. Heemanshu Traders, Bombay. The party namely M/s. Bajaj Auto, M/s. Jai Hind Industries, M/s. Scooter India Ltd, M/s. Vishal auto Pvt. Ltd. and all placed the orders against the said price list to M/s. Heemanshu Traders, Bombay. (c) I have perused horns and C.B. points price list file as on 1-9-1986 (Exhibit 79) : M/s. M.K. Industries issued revised price lists to the following customers viz 1. M/s. Bajaj Auto Ltd. Akurdi, Pune 2. M/s. Jai Hind Motors 3. M/s. Scooter India Limited 4. M/s. Vishnu auto Pvt. Ltd. new Delhi All these letters were addressed by the partner of M/s. M.K. Industries from their Bomb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n transferred/amended from your name into M/s. Heemanshu Auto Pvt. Ltd., Umbergaon Road as per your directive. We sent you above bill in duplicate to your Bombay office and copy of bill is sent to you alons with this letter. Kindly check it and arrange its early payment to us and oblige............"          (emphasis supplied). Therefore from the above letters I find that the manner the bills were deliberately amended/modified in order to remain within exemption limit by the sister units of M/s. Heemanshu Traders. (h) I further note that M/s. Heemanshu Traders also directed Shri Pandya to prepare a bill of copper wire and electrical stamping from M/s. Heemanshu Auto Pvt. Ltd., Umbergaon and further enquired whether the bills of stamping were being issued from M/s. M.K. Industries or otherwise, as there was a problem of excise. Further, directions were issued that all the sales of M/s. M.K. Industries should be from Heemanshu Traders as the benefits of excise was being taken from Heemanshu Traders. "(n) I further note that M/s. Heemanshu Traders also directed Shri Pandya to prepare a bill of copper wire and electric....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ltd. 33.5.5 From the perusal of the Box File No. 79 which relates to the Sales Bills from 301 to 450 for the year 1986-87 of M/s. Heemanshu Traders which proves that the correspondence has been made by the administrative office of M/s. Heemanshu Traders, Bombay. 33.8.2 In this case, the veil of corporateness or legal personality of each entity shall have to be lifted as this veil of corporateness is at times lifted by the courts and they look behind the legal facade or the veil to discover realities lying behind the veil, known as 'lifting the corporate veil'. The veil could be lifted when it becomes necessary to know the character of a corporate person, or when a corporation has been created to avoid some legal obligation or when the device of corporate personality is used to perpetuate fraud, as to evade tax or when it is used to evade a statute" 22. Against the finding as in para 33.8.2 in the impugned order as reproduced above, which was affirmed by the Tribunal in its order dated 19-12-2002, which is sought to be corrected, need no correction in view of our legal finding in para 18 above. Further as can be seen, at least in the case of seized goods, ....