AI Drafter 
TaxTMI 
TaxTMI 
2016 (10) TMI 475
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....iness, godown and residential preemies of the respondents on 29.11.2001. Furtherance to investigation, the show cause notices were issued to the respondents on account of that the clearances of four units should be clubbed together and the benefit of SSI exemption should not be given and demanding duty on account of clandestine manufacture and clearance of excisable goods by the respondents. The matter was adjudicated, the Commissioner in the impugned order set aside charges alleged against the respondents and dropped the proceedings initiated through the show cause notices. Aggrieved with the said orders, the Revenue is in appeals before this Tribunal. 3. Learned AR submits that the Commissioner has fell in error and without considering confessional statements made by the respondents during the course of investigation and over emphasised irregularity in search and seizure procedure and completely ignored hostile atmosphere created by the respondents at the time of search. It is his submission that during the investigation, the police was required to be called and thereafter certain records were resumed. He further submitted that the findings of the adjudicating authority is not....
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.... cousins. There is commonality of interest among the business of the factories vis-a-vis financial arrangements, inter-unit transfers of finances, working of the staff under the directions of two persons among the respondents. The arrangement of initial and later investments were made by the two cousins and/or the other family members. Providing of security, by the family members, against the cash credit limits/loans taken from the financial institutions also corroborates the department's allegation of clubbing of clearances. In view of the above submissions, it i prayed that the impugned orders to be set aside. 7. On the other hand, learned Counsel appearing for the respondents submitted that all the four units are created separately and claiming the benefit of SSI exemption. In the adjudication, the SSI exemption sought to be denied by clubbing the clearances of the respondents. The allegation of clandestine clearance is based on the data obtained from the ICC set up under the Punjab General Sales Tax Act and some allegedly incriminating records, allegedly recovered during the search operation. 8. Learned Counsel heavily relied on the impugned order particularly paras 4....
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....al is largely based, do not bear the signatures of panchas or of any representative of the notice party or of the seizing officers. Besides, the physical verification of stocks of raw material and finished goods carried out at different premises is reported to have been completed in all the four entities. The noticees have alleged that it is humanly impossible to verify such huge quantity in such a short period. For example in the case of DPL a huge quantity of 80/874 kg of ERW Pipes of 14 different diameters and different lengths, when the number of packets/bundles were 2365 and number of pipes in a bundle varies, besides huge quantity of scrap, both weighing 169.074 Mts in 2640 packets of different weights are stated to have been weighed within 5.30 hrs. Likewise in the case of GPL a quantity of 1, 19,154 kgs. has been shown verified within three hours while the goods were in 31 different sizes of pipes of 3654 bundles having different sizes an weights. In NIPL the quantity verified goes as kgs in a matter of 3 hours 45 minutes . similarly in the cases of MAPL 62, 225 kgs have been shown verified in a matter of 7 hours. The Dy. Director DGCEI, Ludhiana, in reply....
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.... admission by the Deputy Director, DGCEI that panchas were engaged much later and not at the start of the operation. They have not at all stated that they started with some other panchas in the beginning but changed them later due to any hostilities. Their statement in their letter dated 28.03.2005 that these panchas had to be engaged due to hostilities at the raided venue-when police had to be called-indicate that searches were started if not fully carried out, without panchas, moreover, panchas have admitted that they remained seated in their respective taxies outside the raided premises and that corroborates that panchas did not witness the search operations. Further, in panchnama drawn on 29.11.2001 at the manufacturing premises of M/s NIPL, it has been stated that the search was conducted in a peaceful manner whereas in the letter dated 28.03.2005 of Deputy Director DGCEI, Ludhiana it has been mentioned that the search was conducted in very uncooperative/hostile atmosphere. 4.24 This clearly shows that the show cause notice issuing authority has admitted that all the 4 companies are the manufactures. The above position is further established from the fact that duty fo....
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....cers took the record to the factory of M/s NIPL, officers did not take the physical stock, he had not explained any document. Statement was dictated to Sh. Subhash Chander by the officers, Sha Subhash Chander disowned the note book 007 and other note books were not recovered from him and his statement subsequent to search were recorded under threat of arrest. The learned counsel explained that the search was conducted in a vexation manner with clear malicious intention of building a false case. He has pointed out that Panchnama in M/s GPL was not signed by any representative of M/s GPL. The factory of M/s NIPL was set up in the year 1997-98 since the numerous officers of Central Excise Deptt has visited the factory and found the record lying there and signed them. Similarly, the factories of M/s GPL, and M/s MAPL were inspected, thus the allegation that the record of M/s MAPL and M/s GPL were found in the M/s NIPL does not stand to reason. In fact, all records were available in the premises of the representative units and were takne deliberately to M/s NIPL. He has pointed out that Sh. Megh Raj was summoned for recording the statement by the officers of DGCEI on 09.01.2002 when his....
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....s. CCE, 2005 (183) ELT 385 (Trib Bang) 19. Arya Fibres Pvt. Ltd. Vs. CCE, 2014 (311) ELT 529 (Tri. Ahmd.) 20. Gian Castings Pvt. Ltd Vs. CCE, 2015 (319) ELT 339 (Tri. Delhi) 21. Continental Cement Co. Vs. UOI, 2014 (309) ELT 411 (All.) 22. CCE Vs. Renny Steel Castings P, Ltd., 2013 (288) ELT 45 (P&H) 23. Suntrek Aluminium p. Ltd. Vs. CCE, 2013 (288) ELT 500 (guj) 24. Kuber Tobacco Products Ltd. Vs. CCE, Delhi, 2013 (290) ELT 545 (Tri. Delhi) 10. He also relied on the CBEC circular No.6/92 dated 29.05.1992 wherein the Board has issued the direction that limited companies whether the public or private are separate entities, distinct from the shareholders composing it and hence each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. 11. With regard to the issue of clubbing of clearance, he submits that the demand has been raised on the basis of data collected from ICCS of the Punjab Govt. It was alleged in the show cause notice that sales were being effected by the manufacturing units through three trading firm. It is his submission that sales tax assessments of three firms have be....
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....er of grave irregularities have been alleged by the noticees in matters relating to search and seizure operation. These have been already mentioned in the reply of the noticees. I consider it relevant to recall only a few: The panch witness in respect of operation carried out at M/s North India pipes ltd. and M/s Garg Pipes ltd., dan't know to read, write or speak English, the language in which panchnama was prepared. They were the drivers of the taxies, which brought the raiding officers from Ludhiana to Dirba and received-remuneration from the raiding organization and did not belong to the locality where the searches were carried out. They have admitted that, as taxi drivers, they remained seated outside in their respective taxies when the searches were carried out and merely signed the papers at the behest of the officers without being able to read or understand the contents. Sh. Mandeep Singh pancha admitted that he studied Only upto class IV, does not know English nor can read Punjabi. He was not read out anything before being made to sign various papers, whose contents he had no idea' Nearly same is the case with other pancha Sh. Pawandeep Singh. In the case ....
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....s pointed out that the loss of Annexure 'A' of the panchnama was noticed in September, 2004 which has been intimated, inter allia, to the police. Page 3 of the panchnama of the search at the residential premises of Sh. Megh raj was also found lost in sept 2004. Likewise private diaries marked 17,18 & 68 in Annexure 'A' of panchnama at the premises of NIPL were found missing in Sept., 2004. The existence of these documents is now being established by DGCEI, Ludhiana on the basis that when Sh. Ashok Kumar applied for anticipatory bail, their bails were granted after perusal of the case file by Hon'ble Session judge of Ludhiana. Since only valid and authentic documents could be file in the court of law, it would be reasonable to presume that such documents were indeed lawfully created. As regards, the background of the panch witness, it has been stated by DGCEI, Ludhiana that the search was conducted in a very un-cooperative/ hostile atmosphere and in these circumstances it was not possible to get the witnesses from the locality and further that the panchnama was explained to the panchas in local language. It has a/so been stated by the officers that photocopies co....
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....ed the papers at the behest of the officers without being able to read or understand the contents. These facts have not been denied by the Revenue, in that circumstance, panchnama drawn during the course of investigation have no evidentiary value. Therefore, the statement recorded and records seized during the course of investigation have no evidentiary value therefore, these documents cannot be relied upon to allege the allegation of clubbing of clearances of the units on the basis of said records as the panch witnesses are independent persons were not present at the time of search. In the show cause notices, the photocopies of the documents which are not available in original has been relied on by the revenue is not admissible evidence in light of the decision of the Apex Court in the case of J.Yashoda vs. Shobha Rani-2007 (212) ELT 458 (SC). 16. In view of the above, we hold that panchnama is not admissible evidence as discussed above and the photocopies of the documents are not admissible evidence. Therefore, the issue No.1 answered in favour of the respondents. Issue No.2 17. To deal with the issue of clubbing of clearances, we find that the organisational structure o....
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....gh the documents were signed by Shri D.V.Khanna for filing returns or correspondence with the department but they were not objected to. 18. Therefore, on organisational structure, it cannot be held that all the units are controlled by one person. All the units are independent separately incorporated private limited companies under the Companies Act, 1956; All the units are separately registered under the Central Excise although and fall within the same the Central Excise range and division; All the units registered as SSI unit with the Directorate of Industries, they have their own investment of capital, machinery and work force; They have their own financial sources and credit facilities; All units have separate factories and manufacturing facilities; All the units have purchased the machinery owned by them and also all the raw materials required for manufacturing from their own resources; All the salaries, wages are paid by the all the units from their own sources of finance; All the units have their own Sales Tax and Income Tax Registration; All the units had paid their own electricity Bills; ....
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....of Industries, etc. as separate units. The registration of Central Excise was granted to both the units although the documents were signed by Shri D.V. Khanna for filing returns or correspondence with the department but they were never objected to. We also find that in this case although both the companies are having different brand names of their product such as NOVA/DSA. The units are having their own separate machinery having manufacturing the goods and same have been cleared on payment of duty by availing SSI exemption of both the units separately. The only allegation is that sometimes, salary of one of the employees was paid by the other firm or they are managed by one person. Moreover, the dealers get the commission on the combined sales of both the companies. These things cannot constitute that there was a mutuality of interest and therefore, clearances of one unit cannot be clubbed with the clearance of other unit. 17. We find that this issues has come before the Tribunal in various cases whereas in the case of Bullows India Pvt Ltd, v. CCE, reported in 2012 (284) E.L.T. 584 (T) (supra) wherein this Tribunal has observed as under: We find that in the prese....
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.... the units are independent units. The various decisions of the Tribunal referred to and relied upon by Commissioner (Appeals) in his impugned order are applicable to the facts of the present case. It stands held in precedent decision that financial flow back and financial intertwining between the two units is the main reasons for reflecting upon the fact of their being independent or not. One such reference can be made to in decision of the Hon'ble High Court in the case of M/s. Renu Tandon Union of India - 1993 (66) E.L.T. 375 (Raj.). Similarly, in the case of M/s, Electro Mechanical Engg. Corporation v. CCE Jaipur - 2003 (152) E.L.T. 194 (Tri.) Girish Electricals Industries v, CCE, Mumbai - 2004 (167) E.L.T. 299 (Tri.) it was held evidence of common office premises, common staff and common maintenance of records, etc. cannot be held to be sufficient to club the clearances of the units, who have different registration in all the departments and in the absence of any financial flow back. 19. We further, analyse the decision of Ennar Cements Pvt. Ltd v. CCE reported in 2013 (292) E.L.T. 245 (T) (supra) wherein this Tribunal has observed as under : "We have gone....
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....ard's Circular, the clearances of the limited companies cannot be clubbed. The Commissioner has clubbed it and demanded duty collectively. This is not legal and correct and it is contrary to the Board's Circular," 20. We further find that in the case of Alpha Toyo Ltd. v. CCE, New Delhi reported in 1994 (71) E.L.T. 689 (Tribunal) this Tribunal has observed as under : SSI exemption - Clubbing of clearances common Managerial Control, a few common directors and advancing of interest free loans by main unit to other units not sufficient to make other units as dummies when they are having independent control or money flow back to the main unit - Clearances not clubbable - Situation not to be confused with that of related person concept under Section 4(4)(c) of Central Excises & Salt Act, 1944 - Notification No. 175/86-C.E. dated 1-3-1986 - Section 5A ibid. 21. In the case of Renu Tandon v. Union of India reported in 1993 (66) E.L.T. 375 (Raj.) Exemption - SSI Exemption - Clubbing of clearances - Two units situated at same premises, manufacturing similar product, having some common management, office and labour and common electric connection - ....
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....f the schedule of the Central Excise Tariff Act, 1985 (in short 'Tariff Act'), But with a view to evade payment of excise duty it floated three front companies, namely respondent nos. 2 to 4 i.e. M/s. Mahabaleshwar Gas Chemicals Pvt. Ltd. (for short 'MGCPL'), Shri Chamundi Gas and Chemicals Pvt. Ltd. (for short 'SCGCPL') and M/s. Nippon Gas and Chemicals Pvt. Ltd. (for short 'NGCPL'). All the three front companies were in vicinity of the factory of MACL What in reality happened was that through pipelines Hydrogen gas was sent to the three front companies for compressing and bottling the gas. The sole object was to avail benefit of exemption given to small scale industries under the Central Excise Notification No. 1/93, dated 28-2-1993 and thereby evade payment of central excise duty. With a view to unravel the truth Director General of Anti-Evasion (for short 'DGAE') searched the factory and office premises of MACL and the three front companies on 27-9-1996. It was found that all the three bottling units were located in one single shed and were separated from each other by small brick walls of about 4 ft. height. The Directors of the three front ....
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....dated 7-4-88 for M.S. Scrap issued by M/s. Heemanshu Auto Ltd. The driver, however, did not produce any Central Excise gate pass. In his statement, the Excise clerk of Heemanshu Traders deposed that as per oral instruction of Shri Girisbhai Shah, he prepared a challan for dispatch of 12.285 Kgs. of M.S. Scrap from M/s. Heemanshu Traders in the name of M/s. Heemanshu Auto Ltd. Scrutiny of records of Heemanshu Traders revealed that duty determined under Gate Passes for the period from 4th April, 1988 to 7th April, 1988 had not been debited. Some goods such as Electric horns received by different customers, from M/s. Heemanshu Traders, were also seized. Detailed examination of records of Heemanshu Traders, Heemanshu Auto Pvt. Ltd., Shri Krishna Industries, M.K. Industries, Shri Hari Industries revealed that all the partners and/or Directors are members of the Shah family and they had mutual interest in the business of each other and that Heemanshu Traders was controlling the overall activities of manufacture and sales of these units. The Department was of the view that Heemanshu Traders had by recourse to fraud, wilful mis-statement and suppression of facts evaded payment of duty in r....
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....n the basis of clandestine clearance, we have seen that the demands were raised on the basis of data collected from ICC of Punjab Gov. and it has been alleged that the sales were being effected from the manufacturing units through three trading firms. We have seen that Sales tax assessments of all the four firms have been finalized for the period in dispute after verifying the data recovered from the ICC and it has been held that there is no clandestine sale of the finished goods, therefore, through these trading firms as no sales took place as per sales tax assessment and there is no corroborative evidence to allege that clandestine removal of the goods by the respondents, moreover, the demand on clandestine clearance is made on assumption and presumption. No calculation has been given and the demand was sought to be distributed in all four respondents manufacturers equally which is against the judicial discipline. Further, as no corroborative evidence to support the allegation of clandestine manufacture, therefore, in the light of the decision of the Arya Fibres Pvt.Ltd. (supra), wherein this Tribunal has observed as under: 40. After having very carefully considered the ....