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2016 (9) TMI 1094
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....on). In the impugned common order, there are demands of Central Excise duty confirmed along with imposition of penalties against M/s Foamsil Chemicals also but presently before us there is no appeal by the noticee, namely Foamsil Chemicals. 3. The operative part of impugned order mentions the confirmation of demands and imposition of penalties "for wrong availing Exemption benefit" of Notification No.175/86-CE under Rule 9(2) of Central Excise Rules , read with Section 11A of the Central Excise Act, 1944 as follows: (i) Against Atlantic Chemicals - Rs.38,45,363/- (ii) Against Foamsil Chemicals - Rs.31,39,343/- (iii) Against Arun Chemicals - Rs. 1,21,360/- 3.1 For the above confirmation of demands of Central Excise duty, following penalties have also been imposed under Rule 9(2) of the Central Excise Rules read with Rule 173Q of the Central Excise Rules: i) Penalty of Rs. 35 lakhs on Atlantic Chemical Industries; ii) penalty of Rs. 27 lakhs on Foamsil Chemicals;....
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.... is 1989-90 to 1990-93 and show cause notice is dated 16.3.94. 6. These eight appellants have been represented by the ld. Advocate Shri Rahul Tangri, at the strength of written submission he submits as under: 6.1 Appellants' main pleadings on 'denial of SSI notification and consequent demand on the ground of clubbing of value of clearances': (a) It is submitted that once the clearances are to be clubbed then it is necessary to identify one manufacturer and the demand has to be confirmed against such manufacturer. In the present case no such exercise has been carried out and the impugned order does not hold one person as the manufacturer and the others as dummies. In such a situation the demand on account of clubbing of clearances is not sustainable in view of the judgment of the Hon'ble Supreme Court in the case of Gajanan Fabrics Distributors Vs CCE - 1997 (92) ELT 451 (SC). (b) The appellants further rely on the Circular No. 6/92 dated 29.5.1992 where in the context of Notification No. 175/86-CE dated 1.3.1986 it has been clarified that different firms are treatable as separate manufacturers and each eligible for exemption. ....
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....Chemicals and Foamsil Chemicals. The Commissioner has confirmed the demand on the ground that Arun Chemicals purchased 2,12,150 kgs of sodium bicarbonate and converted the same into 4,15,166 kgs of RBA and sold the same clandestinely. The quantity of RBA assumed to have been manufactured has been determined based on the test report of the sample drawn. (d) It is submitted by the ld. Counsel for the appellant that Arun Chemicals admittedly did not have any facility to manufacture as is evident from paras 108 and 111 of the impugned order. Further, there is no specific finding given in the entire order as to how the demand of Rs. 22,51,582 is to be confirmed against Arun Chemicals. Only at para 152 the duty demand confirmed has been indicated, which is based on the test report of the sample of RBA drawn from the premises of Atlantic Chemicals and Foamsil Chemicals. The adoption of this test report to Arun Chemicals is not sustainable, since no sample was drawn from their premises as no RBA was manufactured by them. (e) There is no evidence whatsoever to show the removal of RBA without payment of duty. There is also no evidence to show the procurement of raw material....
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....ged the same. e) The appellants have always sold RBA with the minimum quantity of pure blowing agent ranging from 60-80%. The price of the RBA accordingly varies based on the content of pure blowing agent. The demand in the present case has been raised on the ground that the appellants manufactured the RBA with around only 48.9% of the pure blowing agent and that the balance quantity comprised of the sodium bicarbonate. On this basis the demand has been worked out assuming that, the appellants, manufactured extra quantity of the RBA from the DNPT obtained and that this extra quantity has been removed clandestinely. f) The entire basis of the demand is erroneous, in as much as there is no evidence whatsoever by the department to show that the appellants had used only 48.9% of the pure blowing agent in the final product during the entire period of dispute . On the basis of the test report of one sample the department has worked out that the demand for the total period of 5 years from 1989-90 onwards which is not permissible. 6.4 Appellants' main pleadings on 'demand on the ground of removal of RBA in the guise of sodium bicarbonate': a) The Commiss....
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....and Shri Amar Kumar Jain. The extended period of limitation has also been invoked on the ground that the appellants did not inform the departmental authorities about the existence of other units being run by the members of the same family. In regard to the confirmation of the duty demand on the alleged clandestine removal of the goods, demand has been confirmed on the ground that the appellants had suppressed the ratio of Sodium Bicarbonate consumed in the final product which resulted in suppression of production which has been clandestinely removed b) The appellants had set up their unit in 1984/1988 and since then were manufacturing RBA under the brand name Foamtax and Foamsil. The fact of manufacture of these goods under the brand name of Foamtax and Foamsil indicated by the appellants in the classification lists filed from time to time. The fact of using the brand name of other manufacturers was also indicated in their classification list and these manufacturers were also working under the jurisdiction of the same Officer. Thus, the departmental authorities at all times had verified the owner of the brand name and as to whether the appellants were entitled for the bene....
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....nly. All these firms were operating from registered address of M/s Atlantic Chemicals. (Para 93, Para 96 and para 97 of OIO). (e) M/s Foamsil Chemicals was using water, electricity and machinery of M/s Atlantic Chemicals without making any payment therefor.(Para 99 and Para 100 of OIO). (f) M/s Atlantic Chemicals, M/s Foamsil Chemicals and M/s Arun Chemicals had a common financial management, without any interest liability to each other.(Para 103 and para 105 of OIO). (g) M/s Arun Chemicals, shown as manufacturer of RBA was found non-existent on the date of visit by the officers of DGCEI.(Para 106, Para 108 and Para 111 of OIO). (h) All the units are proprietary concern, owned by three members of one family, engaged in the manufacture of common single goods namely 'RBA' and having common brand names, 'foamsil', 'foamtax' 7.2. Revenue's submissions on 'procurement of raw material and disposal of finished excisable goods members of one family played active and decisive role': a) M/s Arvind Rubber Mills (owned by Father Shri J. S. Jain and another brother Shri Amar Kumar Jain) a....
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....gned order (OIO). (c) For the quantity of 'RBA' having trademark 'Lotus' being used by M/s Atlantic Chemicals, which belongs to M/s Lotus Chemicals, Ernakulum, the appellants failed to produce any evidence that this brand name/owner was eligible to avail SSI exemption.(Para 117 of the impugned order (OIO). (d) Any person not having any unit to manufacture goods is not eligible for SSI exemption under Notification No. 175/86-CE dated 01.03.1986, for the brands owned by him.(Para 120 of OIO). (e) M/s Arun Chemicals was not registered with the directorate of Industries or the Development Commissioner(SSI Industries). It is un- disputed fact that this firm had cleared RBA without payment of Central Excise duty availing exemption. Thus, there is a clear contravention of Para 3 and Para 4 of Notification No. 175/86-CE dated 01.03.1986. (Para 112 of OIO). 8. We heard the parties at length and gone through submissions; case laws cited carefully. 9. It may be mentioned that duty demands and penalties confirmed by the impugned order on respective noticees firms and personnel are as under: Sl.No. ....
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....hemicals (vi) Lotus Chemicals. 11. Our views on above four parts of the impugned matter are as below. 11.1 1st Part: Manufacturing of RBA & clearance thereof during 1989-90 to 1993-94 by availing exemption benefit of Notification No.175/86-CE & 1/93-CE:- 11.1.1 In respect of this issue, the Commissioner (Adjudication) in the impugned order inter alia observes as under: 96. It is observed that all the firms, namely, (i) ) M/s Atlantic Chemicals (ii) M/s Foamsil Chemicals and (iii) M/s Arun Chemicals (iv) Amar Enterprises and (v) Arvind Rubber Mills were operating from A 1/11-B, Pahwa Mansion, Asaf Ali Road, New Delhi (hereinafter referred as Pahwa Mansion Office) which was declared registered office of Atlantic Chemicals. Shri J.S. Jain in his statement dated 20.4.93 admitted that the sale and purchase work of Atlantic Chemicals, Amar Enterprises and Arvind Rubber Mills was being carried on from the said premises; that the rent of the said office and electricity bills were paid by Amar Enterprises; that payment of bills 2 & telephone installed in the said office was made by Atlantic Ch....
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.... reply dated 9.1.95 of Atlantic Chemicals was admitted that Shri J.S.Jain, being MD of Arvind Rubber Mills remained stationed at this office premises and being the head of the family, he was respected by the customers who used to place orders with him which he passed on to the respective companies who executed the orders. Further, it was also stated that J.S. Jain being head of the family and by virtue of his senior position he was rendering advice to the various proprietors of the firms which obviously belong to the same group. The admitted position about the above facts and the role played by Shri J.S. Jain lend support to the allegations made in the SCN in respect of clubbing proposition". 11.1.2 Further, the Commissioner (Adjudication) in the impugned order, inter alia in paras 103 and 124 observes as under: " 103. The SCN refers to specific instances and entries in the financial accounts of Atlantic Chemicals and Foamsil Chemicals which indicate that the said firms also had a common financial management. These cases include transactions under which money was transferred through cheque by Foamsil Chemicals to Atl....
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.... price; they were under the common management and financial control of only one family living in one house, and the business of all the firms was conducted jointly from one and the same office premises. On record, the firms were under the proprietorship of different person, but the whole show was being managed by Shri J.S. Jain and Shri Amar Kumar Jain. As per the noticees submissions, Foamsil Chemicals came into existence in June 1987, and Arun Chemicals in April 1988 or Jan 1989 (about inconsistency regarding precise period of Arun Chemicals being in operation refer para 110 supra). There was no distinction in the management of the firms and these firms were artificially fragmented only for the sake of availing exemption under the Notification No.175/86-CE (later 1/93-CE). Thus, the clearances of all the units were required to be clubbed for computing the value of clearances for the applicability of Notification No.175/86 CE (later 1/93 CE).When this is done, the value of clearances of RBA from the said 3 units exceeded the eligibility limit in a financial year and hence the benefit of Notification No.175/86 CE was not available to any th....
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....r is their constitution, (these are proprietary concerns), are under common management and closely controlled by only one person Shri J.S. Jain, who is one of the appellants here. The facts and circumstances have warranted to examine the reality of these units; and after going behind the mask of these entities, it has been revealed that activities of these units i.e. manufacture, clearance etc. has to be clubbed together. In this regard, we take support from the Honble Supreme Court's observations in the above case of Calcutta Chromotype Ltd. (supra) which are given below: 14. In M/s. Mcdowel and Company Ltd. v. Commercial Tax Officer [(1985) 3 SCC 230 = (1985) 154 ITR 148], this Court examined the concept of tax avoidance or rather the legitimacy of the art of dodging tax without breaking the law. This Court stressed upon the need to make a departure from the Westminster principle based upon the observations of Lord Tomlin in the case of IRC v. Duke of Westminster [(1936) AC 1] that every assessee is entitled to arrange his affairs as to not attract taxes. The Court said that tax planning may be legitimate....
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..... 38,45,363/- + Rs. 31,39,343/- + Rs. 1,21,360/-) for the RBA manufactured and cleared during 1989-90 to 1993-94. In this regard, corresponding penalty of Rs. 70,20,000/- is also imposed on M/s Atlantic Chemicals under Rule 2(2) and 173Q of C.Excise Rules. Further M/s Arun Chemicals have been involved in continuing this operation of wrongly claiming exemption Notification No.175/86-CE ; therefore, the penalty of Rs. 1,20,000/- imposed on them is hereby sustained. 11.2 2nd Part: The impugned order at para 155 (v) and (vi) confirms the demands and imposes penalties against M/s Atlantic Chemical Industries, M/s Foamsil Chemicals and M/s Arun Chemicals in respect of RBA manufactured and not accounted for and removed clandestinely in the guise of soda bicarbonate. 11.2.1 After hearing interested parties and on careful examination of all the facts on records, it appears that the appellants have unsuccessfully tried to convince that they did not unaccountedly manufacture and clandestinely remove RBA in the guise of soda bicarbonate. In this regard, there are clear facts on record mentioned in the sho....
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....ir business relation with Sh. Jain does not seems to be convincing especially when one considers the cost-profit consideration as determinative force being any business transactions. This is equally relevant in respect of all the consignments supplied by Amar Enterprises, Arun Chemicals and Atlantic Chemicals to India Rubber & Chemicals, Ceyenar Chemicals and Lotus Chemicals. 146. From the discussion in the foregoing paras it is evident that Soda bi Carb was supplied by Laxmi Commercial Corpn. In bags of 50 bags of 50 kgs. Each as received from Tata Chemicals. The delivery of Soda bi Carb was taken by representatives of Atlantic Chemicals from Laxmi Commercial Corpn. The over-writing on bills/ invoices issued by Laxmi Commercial Corpn. in the weight of the packages was done from 50 kgs. To 25 kgs. The bills/ invoices issued by Amar Enterprises also showed that standard packing had been shown as 25 kgs. Each bag. There is no evidence that Amar Enterprises had sold the so called Soda bi Carb after repacking the same as they neither had the facility of godown nor any expenditure on labour, etc. for repacking purposes has been shown in....
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....rs and also collected the differential amount between the price of such supplied RBA and price of Soda bi Carb and arranged then remittance to Atlantic Chemicals and Sh. J.S. Jain. In their defence submissions dated 9.1.95, India Rubber & Chemicals, Ceyenar Chemicals & Lotus Chemicals have denied the allegations and contested the proposed penalty in the SCN. However, these submissions are not supported by any evidence. On the other hand, there is overwhelming evidence indicating the receipt and disposal of RBA transported under the garb of Soda bi Carb as discussed above. It is, therefore, held that they have been concerned in the receipt and disposal of the said offending goods and hence liable to penalty under Rule 209A of the CER". 11.2.3 After careful consideration, we agree with the findings and the conclusion of the impugned order on the issue of manufacture and clearance of RBA in the guise of soda bi carb. However, as it is on record that M/s Arun Chemicals did not have required manufacturing facility (though they were actively involved in the clearance of RBA in the garb of soda bi carb) the demand of Central Excise ....
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....case records and the submissions of both sides, it is evident that this change of extra production is based solely on the 'test reports' and the Revenue has not been able to give any other corroboratory evidence to support this charge of extra production against the respective assesees. Further, when M/s Arun Chemicals do not have required manufacturing facility available with them there cannot be any production of RBA on record by them. Moreover, unless there are sufficient corroboratory evidences on records to support this charge of extra production of RBA (based on the test reports), we are of the considered view that there would be no sufficient justification to sustain the charge of extra-production of RBA (based on mere test reports), where the Revenue claims that central excise duty was not paid by the respective noticees/appellants. In other words, when we do not find any corroborative evidence(s) to sustain the charge of extra unaccountable production of RBA (based on test report), we have no option but to hold that this charge of unaccounted production of RBA (based on sample test reports) by the noticees namely, Atlan....