AI Drafter 
TaxTMI 
TaxTMI 
1999 (10) TMI 736
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....d the same set of facts, they are being disposed of by a common Order. 2. Briefly stated the facts of the case are as under:- 2.1 M/s. Ruby Rubber Industries is a factory engaged in the manufacture of Hose Pipes of Vulcanised Rubber falling under Heading : 40.09 and situated at 38/39, Jaibibi Road, Ghusuri, Howrah. At the same address, are working other Units namely, M/s. Diamond Cotton Industries, M/s. Shankar Rubber Industries, M/s. Shankar Rubber Industries (P) Ltd., M/s. Ambica Processing Industries, M/s. Venus Rubber Works, M/s. Victor Rubber Works, M/s. Supreme Belt Industries. Excepting M/s. Shankar Rubber Industries (P) Ltd., which is a Company registered under the Indian Companies Act, 1956, all other Units are Partnership Firms registered under the Indian Partnership Act, 1932. 2.2 The Department's case is that all the Units working from the said premises and having a common Head Office at 74, Jamunalal Bajaj Street, Calcutta-7 and having partners from one family, are so closely interlocked financially and in the matter of control of production by that family close relation that they are in reality only one entity. As such the Units are not entitle....
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....le Tyre & Tube and Hose Pipe (c) M/s. Ambica Processing Industries 1977 1/Processing/1977 Gum Boot, Jungle Boot Ground Sheet/Rain Coat (d) M/s. Venus Rubber Works 1980 44/R-IV/HND/ Mfg./94 Minor Safety Rubber Canvas Boot (e) M/s. Shankar Rubber Industries (Private) Limited 1972 1RP/92 Industrial 'V' Belt (f) M/s. Victor Rubber Works 1981 1/RP/R-7/CAL-VII/81 Braided Hose Pipe (g) M/s. Supreme Belt Industries 1983 1/RP/CAL-VII/R-7/83 Fan/'V' Belt 2.6 Further, it would be convenient if the different partners of the Partnership Units and their relationship, which facts are undisputed on record are also reproduced for the sake of convenience :- Name of Unit Partners Inter-relationship (I) M/s. Ruby Rubber Industries 1. Shri Sreeram Bhuwalka No. 2 is the S/o Shri Sreeram Bhuwalka. 2. Shri Kishan Kr. Bhuwalka (II) M/s. Victor Rubber Works 1. Shri Shiv Kr. Bhuwalka No. 1 Partner is the nephew and No. 2 Partner is the wife of Shri Sreeram 2. Smt. Sa....
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....nce at different points of time and as such, it cannot be said that the same were created by the appellants with an intention to avail the benefit of Notification No. 175/86-C.E. which came into existence in the year, 1986 only. 3.2 He submitted that the allegation was in the show cause notice that all the Units were fragmented with an intention to avail the benefit of Notification Nos. 175/86-C.E. and 1/93-C.E., whereas the Commissioner in the impugned Order has taken a different stand and a new ground, after observing - "S.S.I. exemption benefit was not introduced first, vide Notification No. 175/86. Prior to 1-3-86 also, S.S.I. exemption was available to the small-scale sectors and in that view of fact, 1986 cannot be the cut-off period for dubious method of fragmenting units." Learned Advocate, Shri Banerjee, submitted that the above finding of the Commissioner in the impugned Order travels beyond the allegations in the show cause notice and is liable to be set aside on this ground. In support, he relied upon the Tribunal's decision in the case of Magadh Engineering Works v. Collector of Central Excise reported in 1998 (100) E.L.T. 78 and in the case of Hardcastle and W....
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.... registered Partnership Firms are separately assessed under income-tax and sales tax. The Commissioner has not examined into detail as to whether there was any common funding and financial flow-back. He submitted that the Partnership Agreement made between the parties clearly provides that the capital requirement for Partnership Business shall be contributed by the partners and can be borrowed from others as well. He submitted that it is also mentioned in the said Agreement that partners will be treated as working partners and would be entitled to get remuneration. It is also provided that the profits and losses shall be shared by the partners in the proportion mentioned therein. For his above proposition, he relied upon Rajasthan High Court's decision in the case of Renu Tandon v. Union of India reported in 1993 (66) E.L.T. 375. Reference is also made to the Tribunal's decision in the case of International Dyestuff Mfg. Co. v. Collector reported in 1991 (53) E.L.T. 85 (Tribunal) wherein it has been held that where there is no common funding or financial flow-back and separate statutory records are being maintained, mere blood-relationship among partners and use of some common staf....
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.... of common management which has been made the strong basis for arriving at a finding against the appellants, Shri Banerjee submitted that all the Units are manufacturing different excisable goods. The allegation that Shri Sreeram Bhuwalka as the Head of the Family runs the entire business and is the sole decision making authority, has been made without appreciating the law. According to Shri Banerjee, the Commissioner should have examined and discussed the basic issue whether forming of a Partnership Firm by inactive members of a Hindu Undivided Family with Karta, is permissible or not. The Commissioner should have appreciated that the decisions, if any, taken by Shri Sreeram Bhuwalka, were in his individual capacity and not as a Karta of H.U.F. He was simply contributing labour and services or much more valuable expertise, skill and knowledge for making the Partnership Firm more prosperous. In this connection, he relied upon the Hon'ble Supreme Court's decision in the case of Chandrakant Manilal Saha and Another v. Commissioner of Income Tax, Bombay reported in AIR 1992 (S.C.) 66. He, further, submitted that the services being rendered by Harchandrai Sreeram were being paid by eac....
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.... these records were sent back to the appellants under a letter dated 13-6-85. Drawing attention to the said letter, he submitted that as all the Units mentioned in this letter by the Assistant Commissioner, are parties in the present proceedings, it can be inferred therefrom that the Department was in the knowledge of the composition of the said Units and the longer period of limitation cannot be invoked. He also submitted that the same Assistant Commissioner was having jurisdiction over all the Units involved in the present proceedings. Declaration as regards the machineries and equipments were availed at the time of taking of licences and L-4 licences were issued to them only after examining the premises and the machinery installed in each and every Unit. As such, the finding of the Commissioner that the demand has been correctly made by invoking the larger period of limitation is not tenable at all. He also relied upon the Tribunal's decision reported in 1997 (92) E.L.T. 502. 6.1 Shri Ashoke Bhattacharya, learned Advocate, appearing on behalf of the other appellants adopted the same arguments of Shri Banerjee, learned Advocate for the main appellant-firm. He specifically....
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.... by all the Units, which is decisive of clubbing of clearances of various Units, but it is the cumulative effect of all the factors and evidences in a particular case which should be taken into consideration for arriving at the identity of the Units. He also drew attention to the findings of the adjudicating authority that the business of all the eight Units is being run by Shri Sreeram Bhuwalka as a head of the family and he is the sole decision making authority. There are evidences of financial transactions among the Units during the running of the business and the initial resources for establishing the Units have also been contributed from the family fund. As such, there is common funding and financial intertwining between the Units. Challenging the contention of Shri Banerjee, learned Advocate submitted that there is no financial inter-mixing between the Units, he also submitted that the funding of the Units for the initial set-up had not been disclosed by the appellants at any stage. If the resources were independent, nothing prevented the appellants to disclose the same. He submitted that the balance sheet of M/s. Ruby Rubber Industries shows the unsecured loans of Rs. 56.00 ....
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....he Department should be inferred with, he submitted that the commonness of all the Units came into notice of the Department by way of investigations conducted by them and the same is never looked into by the Officers at the time of issuance of the licences. The Assistant Commissioner having jurisdiction over the factories which fell under him, is not supposed to know the composition of each and every Unit and the special relationship which some or more Units might enjoy having interest in the business of each other. The appellants on their own never informed the Department that the Units belonged to the same family members and were being controlled by the Head of the Family. As such, submitted the learned S.D.R. that the normal period of limitation is not available in these circumstances inasmuch as the Units have been fragmented with a clear intention to avail the small-scale benefits available under the various notifications and the proviso to Section 11A has been rightly invoked by the Department. 6.6 As regards the penalty on the other appellants, he submitted that all the Units were working in connivance with each other for common interest and as such, penalties upon t....
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....es, common head office, common partners and sharing of common facilities may not by themselves, be factors enough to hold that the Units involved are not independent Units. But it is the cumulative effect of all these, which is to be seen coupled with other factors on record. Apart from the fact that all Units were situated in the same premises and were having one common registration office, details of the constitution of the Units (as reproduced in the preceding paragraphs) would show that the Partners or Directors of all the Units were members of the same and one Hindu Undivided Family which was being controlled by Shri Sreeram Bhuwalka. Though the learned Counsel for the appellants has submitted that rent was being paid by each and every Unit, nothing in the shape of evidence has been produced before us. Similarly, we find that though the Units were set up in different years, but the L-4 licences were taken after a considerable gap of time. From the L-4 numbers given by the appellants, we can make out that the same were taken much later than the actual birth of the Units. As the last Unit in the L-4 number usually denotes the year in which the same was issued, it was noticed tha....
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....ablish the individual identity of the Units by stressing that all of them were separate sales tax and income-tax payees. They were holding separate L-4 licences and were registered as separate small-scale industries. However, we are not convinced with the said argument of the learned Counsel inasmuch as it is on record in the shape of statement of Shri Bimal Sarkar that the Servicing Company, M/s. Harchandrai Sreeram, whose Proprietor is Shri Sreeram Bhuwalka, who is the Karta of Hindu Undivided Family, was arranging purchase of raw materials, procuring Purchase Orders, selling the manufactured goods and also fixing the prices of the commodities of the various Units. The said statement has not been retracted. We fully agree with the learned S.D.R.'s contention that a Servicing Company is meant for providing services to a particular Unit and cannot attain such a high status so as to dictate its terms on its customers in the shape of even fixing the sales price of the goods. The price at which the goods were to be sold is the prerogative of the manufacturing company. The fact that the sales price was being fixed by the Servicing Company, puts the matter beyond doubt that all the Unit....
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....t only the original First Appellant and Appellant Nos. 2 and 3 were partners but a son of each of them was also a partner. There was thus identity of interest, held the Supreme Court, between the two firms, and further noted that both these firms had their offices in the same premises and held that these two firms, therefore, cannot be said to be at arm's length or independent parties and the prices at which the medicinal preparations were supplied by Bhavsar Chemical Works to M.B. Bhavsar & Sons, cannot be taken up the real value of the said proportions. In view of the above criteria laid down by the Hon'ble Supreme Court in the said two cases, it is this aspect of identity of interest amongst the firms and the intention of the partners, which is the guiding factor for justifying clubbing of clearances of the separate firms. 7.8 The above two cases were taken note of by the Tribunal in the case of H.T. Bhavnani Chemicals (P) Ltd. v. Collector of Central Excise (supra), By observing that four units having two common Directors one of being the Chairman of all the four units who controls the production, procurement of raw materials of all units, common employees controllin....
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....issing and therefore, to withdraw the assessment or club the clearances is wholly unjustified and illegal and without jurisdiction." A reading of the above paragraph would show that the High Court rejected the contention of clubbing of clearances of two units by observing that the most important aspect about having common funding and financial flow-back was missing. It was also observed by the Hon'ble High Court that mere proximity of the two units or having common employees cannot be made the basis for clubbing the clearances of two Units unless there is a clear and specific evidence that there is mutuality of business interest between the two units. There can be no dispute about the above legal position. However, as observed by their lordship of the Rajasthan High Court, it is the availability of evidence which is the guiding factor, which we found in ample in the present case. 7.11 Learned Advocate has referred to the various decisions (as reproduced in the initial paragraph). The ratio of all these decisions would show that in the absence of the finding that there is common funding and financial flow-back, clubbing of clearances of various units is not permissible in....
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....llate Tribunal, which reads as under:- "Whether, in the facts and in the circumstances of the case, the Tribunal was right in holding that the registration or continuation of registration could not be refused to the assessee?" As such, as the said decision was not in the context of the Central Excise Law and more particularly, on the availability of small-scale exemption Notifications, the ratio thereof, is not applicable to the facts of the instant case. 7.14 The other decisions relied upon by the learned Advocate are in the cases of Pudumjee Agro Industries Ltd. v. C.C.E. reported in 1997 (20) RLT 407 and Cardcure Engg. Co. v. C.C.Ex. reported in 1996 (86) E.L.T. 351 (T) = 1996 (14) RLT 878 and in the case of Rang Udjog and Others v. C.C.Ex. reported in 1996 (83) E.L.T. 648 (T) = 1996 (14) RLT 267 and in the case of Alpha Toyo Ltd. v. C.C.Ex. reported in 1994 (71) E.L.T. 689. These are all decisions on the common procurement of raw-material, financial relation, common management, etc. But as already observed that it is the cumulative effect of all the factors and the presence of peculiar evidences in a particular case, which have to be considered for arriving ....