AI Drafter 
TaxTMI 
TaxTMI 
2004 (3) TMI 783
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....- under Rule 209A of the CE Rules, 1944. 2. The Appellants viz. M/s. MM Sons & Cones are engaged in the manufacture of paper tubes and cones of various seizes. The departmental officers on a visit to the said factory premises found that the following machines were installed therein : (1) Automatic cone making machine -   3 Nos. (2) Nosing machine -   1 No. (3) Semi Velvet Machine -   1 No. (4) Printing Machine -   1 No. (5) ABR model cone functioning machine -   2 Nos. (6) Jumbo Cone Semi velvet machine -   1 No. (7) Heater machine -   2 Nos. (8) Cone cutting machine -   2 Nos. (9) Paste making machine -   1 No. 3. Shri Selvaraj, Supervisor of M/s. MMSC informed officers that he was also working as Supervisor for the other factory viz. M/s. MPPP for short which is situated adjacent to M/s. MMSC. He has also stated before the officers that semi-finished paper cones manufactured at M/s. MPPP were being brought to the other premises for nosing, end cutting and velvet finishing process and the....
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....that there was flow of funds between the two units. The proprietrix of M/s. MPPP also corroborated the statement given by Shri Richard Durairaj. Statements were also recorded from the machine operator of M/s. MPPP and Shri P. Kannan, Supervisor of M/s. MPPP who all stood by what they stated when the officers visited the factories. Proceedings were therefore, initiated by issue of show cause notice dated 18-12-96 addressed both to M/s. MMSC and M/s. MPPP alleging contravention of various provisions of the Act and the rules made thereunder and the proceedings culminated in the order impugned order as aforesaid. Aggrieved by the said order, appellants viz. M/s. MMSC have in appeal on the following grounds : (a) Both the units are separate legal entities. The orders of the Commissioner clubbing of clearance of the two units are not sustainable. (b) Both the units came into existence as early as 1985 and 1986 whereas the excise duty came to be levied only as late as 1-4-94. They were functioning for 8 to 9 years before the levy the same way as after the levy with the same pattern of manufacturing a....
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.... submitted that during 1985-86 cones were exempted from payment of duty and hence there was no necessity to start another unit for the purpose of claiming exemption under the Notification 1/93. He has also submitted that the show cause notice has been issued after a period of six months and hence the demand is hit by limitation. He also submitted that longer period of limitation is not invocable in the present case inasmuch as the department was aware of the activities being undertaken in the unit. He further submitted that the period of dispute in this case is between 1-4-94 to 16-2-96 i.e. much before the introduction of Section 11AC with effect from 28-9-96 and it is well settled that the provisions of the said Section cannot be invoked retrospectively. As regards imposition of penalty on the other appellants under Rule 209A, he submitted that there was no case for imposition of penalty on them and he prayed for setting aside the impugned order and allowing the appeal. He has also cited various case laws such as : (a) Kaur & Singh v. CCE, New Delhi reported in 1997 (94) E.L.T. 289 (S.C.) wherein it was held that show cause notice issu....
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....ival submissions and gone through the case records and perused the various case laws cited by the learned Counsel for the appellants. We observe that the gravamen of the department is that both the units are separate only on paper and M/s. MPPP have been created for the purpose of claiming the benefit of the exemption Notification and therefore their productions should be clubbed with the production of M/s. MSSC for excise purpose. Examining this issue, we note that Selvaraj, Supervisor of M/s. MMSC has admitted that he was functioning as the supervisor of both the units. He has also clearly stated that semi-finished paper cones manufactured at M/s. MPPP were being brought to the other factory for nosing, end cutting and velvet finishing. His admission is corroborated by the availability of nosing machine. cone cutting machine, velvet machine at M/s. MSSC and non-availability of these machines at M/s. MPPP. This statement was corroborated by the statement of Shri Kannan, Supervisor of M/s. MPPP who stated that semi-finished goods used to be sent to the other factory for cutting, nosing and velvet finishing and these were packed and despatched from that factory itself. Shri Richard ....
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....s and circumstances of those cases are not similar to the facts of the present case. In the above circumstances, we are of the considered view that the conclusion arrived at by the adjudicating authority that the production of both the units is required to be clubbed cannot be found fault with and we uphold the order of the lower authority in this regard. 9. Coming to the next question regarding invocation of the longer period of limitation in term of proviso to Section 11A(1), we observe that the appellants have taken the plea that longer period of limitation cannot be invoked in this case because there had been no suppression of facts as the existence of the units was known to the department. They have also cited various case laws wherein it has been held that there should be specific mention of the commissions and omissions on the part of the assessee in the show cause notice, for the purpose invoking the proviso to Section 11A(1). We have gone through the show cause notice and we find that Para 8 of the show cause notice clearly indicated that the interrogation and investigation clearly revealed that the production was centralised and clearances were bifurcated among th....
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....lity committed prior to insertion of the said Section. In the present case, the period involved is 1-4-94 to 16-2-96 whereas Section 11AC was inserted with effect from 28-9-96. Further, the penalty under Rule 173Q has not been apportioned. Therefore, penalty imposed under Section 11AC and Rule 173Q on the appellants viz. M/s. MMSC is set aside. 11. Now coming to the sustainability of imposition of penalty on appellants M/s. MPPP under the provisions of Rule 209A, we observe that though they were privy to the commission of offence committed by M/s. MMSC as evidenced by the statements given by various persons, the main appellants i.e. M/s. MMSC whose proprietor Richard Durairaj, was the person behind organizing the centralised production and clearances as noted above, have not been imposed any penalty under Rule 209A of the CER. Therefore, the penalty imposed on the other appellants M/s. MPPP cannot be sustained and is set aside. 12. In the result appeal of M/s. MMSC is partially allowed by setting aside the penalty imposed on them under Section 11AC and Rule 173Q while appeal of the other appellants is allowed. Sd/- (Jeet Ram Kait) Member (T) 13.&em....
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....n which was not even in existence at the time of creation of the units. It is also to be noted that it is not for a small period prior to leviability of cones to excise duty when the units came into existence. They were in existence for the last ten years and as such on the face of it, the Revenue's contention that they were created with an ulterior motive, cannot be accepted. 17. It is further seen that both the units are registered separately with the Central Excise Department as also with the Sales Tax and Income Tax Authorities. During all these years, they were being accepted by all the Revenue Departments as separate legal entities. The appellants were given a Central Excise Registration. They were regularly filing all the returns that are all assessed. Not only that, they were given permission to do job works on behalf of the other undertaking for certain processes like nosing, end-cutting and velvet finishing processes. For the above purposes, permission under Section 57F(3) was also granted to them. In these circumstances, merely because M/s. MMPP were not having the requisite machinery to complete the paper cones in their factory, they were getting it done from M/....
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....horities. In these circumstances, it cannot be said that there is any positive suppression on the part of the appellants thus allowing the Revenue to invoke the extended period of limitation. As such, the demand being beyond the period of six months, is barred by limitation. 19. In view of foregoing, I allow both the appeals with consequential relief to the appellants by concurring with the learned Brother that penalty on M/s. MPPP is to be set aside. Sd/- (Archana Wadhwa) Member (J) DIFFERENCE OF OPINION Whether the appeal of M/s. M.M. & Sons Cones is required to be rejected and appeal of M/s. Muthusavaari Pillai Papers Products is to be allowed as held by Member (Technical) or both the appeals are to be allowed as held by Member (Judicial). Sd/- (Jeet Ram Kait) Member (T) Sd/- (Archana Wadhwa) Member (J) 20. [Order per : S.L. Peeran, Member (J)]. - The difference of opinion between the Members in the above matter has been placed before me for decision as a Third Member in terms of the Hon'ble President's direction. 21. The point of difference of opinion is stated in the differing order. 22. I have heard ld. Counsel Sh....
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....of the Member (Technical). 23. On a careful consideration of the submissions made by both sides I notice that the Tribunal in the case of Alpha Toyo Ltd. (supra) has laid down the concept of a dummy unit and as to how the unit is required to be considered so for the purpose of clubbing the clearance. On a perusal of the entire records I notice that the department has not alleged that MPPP is a dummy unit of the other unit. The Hon'ble Member (Technical) has, in the facts and circumstances of the case and on the basis of the statements of the employees has held that the second unit did not have machinery for completing the work. In this regard Member (J) has come to a precise conclusion in Para 18 of the order that "The appellants have strongly contended that the pattern of movement of goods and their apportionment was exactly the same even after March, 1994 when their product became excisable. As such, in my view, this is not a proper case for clubbing the clearances of both the units. I order accordingly." I notice that this point has been arrived after due consideration of the facts and the appellants being independent in nature. On the other hand, I notice that the Membe....