TaxTMI 
TaxTMI 
2016 (11) TMI 868
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.... 16.9.2015 remands the case to CESTAT to decide afresh on the following issues: (i) As to whether any case for clubbing of excisable goods manufactured by the holding company and the subsidiary company is or is not made out on facts. (ii) As to whether or not there has been suppression of material facts by both the aforesaid companies. 1.2 Consequent to above directions of Hon'ble Supreme Court in respect of two issues mentioned above, the matter has been taken up for decision afresh by this Tribunal. The following are the appellants and Revenue is the respondent. Sl. No. Appellants Appeal No. 1 NMS Babu E/1407/2004 2 Pradeep Jaipuria E/1408/2004 3 Margo Bio-controls Pvt. Ltd. E/1409/2004 4 Praveen Jaipuria E/1410/2004 5 P.J. Margo Pvt. Ltd. E/1411/2004 2. The appellants, M/s. P.J. Margo Pvt. Ltd. and Others have been represented by the learned advocate, shri V. Raghuraman and the Revenue has been represented by learned AR, Shri Mohammed Yousuf. 3. The learned advocate, Shri V. Raghuraman, based on the written submissions and compilations submitted to the Tribunal, inter alia pleads as follow....
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....,943 2252,327 2,11,88,321 (v) The appellants had filed an appeal before Hon'ble Tribunal against the above referred order of Commissioner demanding excise duty on Clubbing of Clearances along with other issues viz., clandestine manufacture of Econeem, repacking of Pheromones, re-classification of Ecoderma, Ecohume. (V-A) Hon'ble Tribunal vide Final Order No. 1837-1841/2005 dated 25.10.2005 allowed the appeals of the appellant dropping all the duty demands and penalties. (V-B) Aggrieved by the above referred Final Order dated 25.10.2005 issued by Hon'ble CESTAT, the respondent-Commissioner of Central Excise, Bangalore II filed five appeals before Hon'ble Supreme Court numbered as Civil Appeal No.5851 of 2006. (V-C) The Hon'ble Supreme Court held that whether the excisable goods manufactured by the holding company and the subsidiary company have to be clubbed together has not been satisfactorily answered either by the learned Commissioner or by the CESTAT in the impugned judgment. Supreme Court held that CESTAT, without adverting to either the facts stated in the show cause notice or the reply thereto, directly arrived at a conc....
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.... ii. Affirmed in CCE Vs. Saron Mechanical Works 2016 (332) ELT 80 (P & H) d. No clubbing of clearances could be made between two limited companies clarified by Board Circular No. 6/92- 29.05.1992. In support, following case laws are relied upon: i. Supreme Washers (P) Ltd., Vs. CCE, Pune 2003 (151) ELT 14 (SC). ii. CCE, Bangalore Vs. Aschem Agrotech P Ltd., 2015 (315) ELT 618 (Tri. Bang.) iii. Ennar Cements Pvt Ltd., Vs. CCE, Bangalore 2013 (292) E.L.T. 245 (Tri. - Bang.) iv. Indore Steel Casting P Ltd., Vs. CCE, Indore 2015 (317) ELT 556 (Tri. Del.) v. Nova Industries Pvt Ltd., Vs. CCE, Chandigarh 2015 (327) ELT 103 (Tri. Del.) e. The Hon'ble Supreme Court in Commissioner v. Modi Alkalies and Chemicals Ltd.: 2004 (171) E.L.T. 155 (S.C.) in the context of clubbing of clearances held that the pervasive financial and management control are prima facie indicators of interdependence between the units. However, it was held that whether a unit is dummy is to be based on the facts of each case and there could not be any generalization or rule of universal application. f. It is submitted that the holding compan....
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....0 lakhs and duty could be demanded only on the balance amount of clearances of Rs. 2.91 crores for the financial year 2001-02. v. Limitation: Whether or not there has been suppression of material facts by both the aforesaid companies. a. Commencement of manufacturing activity by MBC is intimated vide letter dated 20.07.1998. b. Application dated 10.8.1998 for registration under Central Excise. c. Marketing pattern filed u/r 173C (3A) indicating routing of goods through related party (MBC). d. Price declaration dated 14.10.1996. e. Copy of Dept Letter dated 15.9.98 & reply by PJM. f. Appellant had filed price declaration and other details starting from 1996 and continued to file during 1998 as well. g. Show cause notice dated 12.3.2001 has been issued two years after the intimation and 4 years after registration by MBC. h. No SCN could be issued by invoking extended period after a gap of many years after intimation and filing of price declaration having details of subsidiary. 3.4 The learned advocate for the appellants additionally submits as under: * The reliance by the respondent during th....
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....I Notification mentions that wherever manufacturing is done by one manufacturer in one or more factories, if aggregate value of the clearances from these different factories exceeds the value limit given in the Notification, duty of Central Excise becomes chargeable. (iii) Reference is made to Circular No.6/1992 dated 29.5.1992 issue by CBEC, Ministry of Finance which clarifies that if the clearances are on behalf of the same manufacturer, it should be taken into consideration for purposes of interpreting the exemption Notification concerning SSI. In the present case, the two units under the name of PJ Margo and Margo Bio-controls Pvt. Ltd. (MBC) are units of one manufacturer only and their clearances are to be clubbed. (iv) In support, reliance is placed on the following case laws: a. British Scaffolding India Pvt. Ltd. vs. CCE, Delhi: 2014 (313) E.L.T. 87 (Tri.-Del.) b. NEC Industrial Project vs. Commissioner : 2015 (325) E.L.T. A145 (S.C.) c. Euro Scaff (India) Ltd. vs. Commissioner: 2015 (323) E.L.T. A124 (S.C.) d. Premium Suiting (P) Ltd. vs. CCE: 2016 (331) E.L.T. 589 (All.) e. Modern Engg. Plastics Pvt. Ltd. vs. ....
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.... that there are substantial facts to treat these two appellants viz., PJM and MBC as separate manufacturers. At the same time, the submissions from the Revenue very much indicate that there are certain facts based on which it can be stated that these two units PJM and MBC are one and the same only. In this regard, Revenue inter alia cites the following facts. (i) Authorised signatory is common, who is paid by PJM. (ii) Administrative office and branches/depots are in common premises (iii) Entire quantity of one the products econeem manufactured by PJM is sold through MBC and no commission is paid to MBC by PJM. (iv) Entire funding to float MBC is done by PJM only. 7.3 We find that by and large PJM and MBC have separate existence in terms of separate factory premises, separate machinery, separate product items and so on. However, there are some key features/elements, whereby this separation (separate private limited companies) merges into one and these two units give the appearance of one only. The said features which merge these companies into one and preponderantly indicate that they are one manufacturer only are: (i) The Deputy Mana....
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....d by PJM only. Further when the authorised signatory, who looks after day-to-day work is one common person only, even then considering other facts mentioned above, these two appellants having separate existence under Company Law cannot become entitled to the benefit of two separate SSI units under law of Central Excise. (vi) Here the key factors and key features discussed above lead us to conclude that productions in these two units viz., PJM and MBC are by one common manufacturer, who for the purpose of liability of duty of Central Excise is PJM only. Therefore, all the liability of Central Excise duty and other taxes becomes payable by PJM only. Consequently, the clearances from both these units have to be clubbed together and thereafter it has to be decided if they are entitled to SSI benefit and what is their liability of payment of duty of central excise. 7.3.1 It is to be noted that the value of manufacturing and clearances of exempted goodsfrom any unit (PJM and MBC) has to be excluded, when the clearances of both the units are clubbed to determine the eligibility of SSI benefit to the appellants. 7.4 We have held that both the companies are one and the same. ....
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....ion notification is that where a manufacturer clears specified goods from one or more factories, the Exemption in his case shall apply for the total value of clearances mentioned against each of the serial numbers in the said table and not separately for each factory. Another condition of the Notification is that the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories during the preceding financial year does not exceed a particular threshold limit, as mentioned in the Notification. Thus, when a manufacturer has four factories located at different locations, and the SSI Exemption Notification prescribes nil rate of duty for first clearances of specified goods worth Rs. 50 lakhs in a financial year, each of these factories would not be separately eligible for full duty exemption in respect of its first clearances worth Rs. 50 lakhs in a financial year and for the purpose of this exemption, it is aggregate value of clearance of all the factories put together which would be considered. Similarly, eligibility for SSI Exemption during a particular financial year, shall be determined on the basis of aggregate value of clea....
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.... 7.1 However in most of the cases, the fact of common ownership of different units by a person is not so obvious and may be carefully camouflaged. For example - if there is a manufacturing unit of a proprietorship concern of a person X, there is a second manufacturing unit owned by a partnership concern A with X and his wife Y as partners, there is a third manufacturing unit owned by a private limited company B with shareholding by X, his son Z and the partnership concern A and there is a fourth manufacturing unit owned by another private limited company C with shareholding by A, B and another son Z2 of X and if these four units owned by X, A, B and Care each availing of SSI Exemption, a question arises as to whether they are to be treated as separate entities or units owned by the same person, for the purpose of SSI Exemption. 7.1.1 While a company is a legal person entirely distinct from its shareholders, in terms of Apex Courts Judgment in case of Income Tax Commissioner, Madras v. Meenakshi Mills, Madurai, reported in AIR 1967 Supreme Court 819, in certain exceptional cases, the court is entitled to lift the veil of corporate entity and to pay regard to the economic ....
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....trol. In the present case facts clearly show financial control. Undisputedly, the share capital of each of the three companies was Rs. 200/-. Though it was claimed that financial assistance was availed from the financial companies, it is on record that the unsecured loans advanced by MACL to the three companies were substantially heavy amounts as on 1-4-1998. NGCPL received an amount of Rs. 1.55 crores. About 14 lakhs appeared to have been paid after the issue of show cause notice. Loans advanced to NGCPL was about Rs. 52 lakhs while to SCGCPL it was about Rs. 65 lakhs. The finding of the Commissioner that the financial assistance from the financial institutions were availed with the aid and assistance of MACL has not been seriously disputed. Apart from that, the cylinders were brought on lease by MACL from another concern and were sub-leased to the three companies. The cylinders bore the name of MACL. If the three companies had separate standing as contended it could not be explained why they could not get the cylinders directly from the lessors on lease basis and the need for introducing MACL as the lessee and then the three companies becoming sub-lessees. As noted by the Commiss....
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....ufacturer by itself and would be entitled for SSI Exemption separately, has not considered the principle of lifting of corporate veil in the cases where different corporate entities appear to be just colorable devices for tax evasion, and hence this circular is not in accordance with the provisions of law. In accordance with Apex Courts Judgment in case of CCE v. Ratan Melting & Wire Industries, reported in 2008 (231) E.L.T. 22 (S.C.) = 2008 (12) S.T.R. 416 (S.C.), a circular which is contrary to the statutory provisions, has no existence in law. Though in case of Supreme Washers Pvt. Ltd. (supra), after upholding the principle of lifting of corporate veil the Apex Court taking note of the Boards Circular No. 6/92, dated 29-5-1992, had remanded the matter to the Tribunal for examining the applicability of this circular, since this circular being contrary to the law laid down by the Apex Court in the case of Income Tax Commissioner, Madras v. Meenakshi Mills, Madurai (supra), M/s. Calcutta Chromotype v. CCE (supra), Delhi Development Authority v. Skippe Construction Co. (P) Ltd. (supra), Associated Rubber Industry Ltd. (supra) and CCE v. Modi Alkalies & Chemicals Ltd. (supra), has n....
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....ing financial year. 7. Admittedly, from the evidence that has come on record, the manufacturer has two factories. One factory is engaged in the manufacture of cloth and the second factory is engaged in the manufacture of Polymer Vinyl Acetate, etc. Both the goods manufactured in two separate factories are excisable goods. The exemption therefore can be claimed only if the aggregate value of the clearances of all excisable goods does not exceed Rs. 3 crores. The fact that the two factories are of one manufacturer is clear from the fact that common balance sheet is being filed. It is, therefore, irrelevant to contend that the two factories have separate entrances, managing staff or central excise registration. What is relevant is that a manufacturer, if he has one or more factories, would be entitled for exemption at concessional rate of duty if the aggregate value of clearances of all excisable goods does not exceed Rs. 3 crores. Since the appellant has another factory, which is manufacturing an excisable commodity, its clearances have to be added while considering the exemption notification. Since the aggregate clearances exceeded the limit of Rs. 3 crores, the appellant w....
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.... These observations further support our conclusion that PSM and MBC are one manufacturer for purpose of leviability of Duty of Central Excise. It is also to be made clear that the facts of each case are unique and the matter has to be decided after examining those facts. Our conclusion is based on the facts present for this case, the submissions of both the sides along with the case laws cited. 7.5 The appellantsargument that they have different plant and machinery, different manpower, different factory premises, therefore, they are two separate companies, has not been found to be of assistance to the appellants in their stand and these submissions/arguments do not stand the scrutiny of law as discussed above, when the key features of the appellantsunits and the case laws given above overwhelmingly support us to conclude that they are one and the same manufacturer, where clearances have to be clubbed together to decide on the eligibility of claiming SSI benefit under the respective Notification(s). 8. Limitation: The appellants plead that all the facts were in the knowledge of the Revenue/Department, therefore, the demands of Central Excise duty cannot go beyond one year an....