TaxTMI 
TaxTMI 
2017 (12) TMI 226
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.... recovery of documents. The data stored in two computers containing accounts pertaining to M/s. Airflow and M/s. Bala were extracted by transferring them to CD ROM. Shri D. Venkatesan, and his wife Smt. V. Revathy, are Managing Director and Director of M/s. Airflow respectively. 2. On the rear of the premises of M/s. Airflow, one more unit by name and style M/s. Bala Enterprises (hereinafter referred to as M/s. Bala) is situated. Shri G. Dakshinamurthy, father of Shri D. Venkatesan is the proprietor of M/s. Bala, which is also said to be engaged in the manufacture aluminum grills, dampers, louvers etc. On the evidence unearthed and investigation conducted it appeared that > M/s. Airflow had manufactured aluminum products and cleared them under invoices of Bala > M/s. Airflow had deliberately suppressed the actual production and clearance in their statutory documents by showing part of the clearances as being cleared by Bala > M/s. Airflow and Bala had cleared goods to different parties under invoices having same serial number, in other words, they had maintained parallel set of invoices to clear the goods. > M/s. Airflow did not obtain Central Excise registration even afte....
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....ate electricity connection and sales tax registration. They were also assessed to income tax separately. From the balance sheet of M/s. Bala for the relevant years, it could be seen that they had owned the machineries and therefore it cannot be considered that M/s. Bala is a dummy unit of M/s. Airflow. (ii) That the department has been carried away by the fact that Shri G. Dakshinamurthy, who is the sole proprietor of M/s. Bala is the father of the D. Venkatesan who is the Managing Director of M/s. Airflow. Though they are having father and son relationship, two units are separate and the department has not been able to show any flow of profit from one unit to another. Without such flow of profit, the value of clearances of the two units cannot be clubbed together. (iii) The premises of both M/s. Airflow as well as M/s. Bala is owned by Shri G. Dhakshinamurthy and a portion of it is leased out to M/s. Airflow. Thus, the department has assumed that M/s. Bala is a dummy unit of M/s. Airflow merely because the units were functioning from adjacent premises. (iv) Even though the department alleges that M/s. Bala is a dummy unit, the existence of the said unit is not at all dispute....
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....h grinder, (h) power press, (i) power operated drilling machine and (j) compressor. M/s. Airflow did not have the machines for powder coating and such machines namely thermax powder coating booth and drying oven was installed in the premises of M/s. Bala. Thus, the machinery required for manufacture of grills, dampers etc. are installed in the premises of M/s. Airflow and machineries required for powder coating are installed in M/s. Bala. Further, there was no separate office premises for M/s. Bala and the office and staff of M/s. Airflow were being utilized for the manufacturing activity of M/s. Bala. Thus, M/s. Bala was not having any manufacturing facility though they were clearing aluminum products such as aluminum grills, dampers etc. Further, day to day affairs of M/s. Bala was run by Shri D. Venkatesan, who is the Managing Director of M/s. Airflow. That Shri G. Dhakshinamurthy, father of Shri D. Venkatesan admitted this in his statement dated 29.7.2004. That therefore the contention that both are separate entities cannot be accepted. Even though, M/s. Airflow is a company having independent legal existence, the corporate veil can always be lifted to find out the persons who ....
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....a. They have filed replies refuting the allegations especially contending that both units are separate and that their clearances cannot be clubbed together. The reasons by department to club the clearances are as under. (i) Air Flow and Bala are closely related companies wherein the father is proprietor of Bala and his son & daughter-in-law are the M.D. and Director of Air Flow. (ii) Both the companies are functioning in the same premises even though separate door numbers have been provided for correspondence purposes. (iii) Day to day activities of Bala is being looked after by Shri. D. Venkatesan, M.D. of the Air Flow. iv) There are no employees in the roll of Bala and the employees of Air Flow only are being utilized for Bala. (v) Purchase orders have been placed by customers on Bala, but the goods have been delivered under the invoices of Air Flow. (vi) There were no machineries for the manufacture of goods at Bala except powder coating unit and drier. Therefore, the goods could not have been manufactured at Bala, even though on record sales invoices have been issued in the name of Bala. (vii) Air Flow had made payments in respect of raw materials purchased in the....
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....clarified as under:- "It should be understood that industrial undertaking is different from its forms of ownership. The forms of ownership as stated in the notification are of three types vig; proprietary, partnership and company. As per clause C(i), C(ii), and C(iii) of the notification the provisions of controlled and clubbing will apply only to similar forms of ownership of industrial undertakings. e.g; an industrial undertaking owned by a proprietary concern cannot be clubbed with one owned as a company OR an industrial undertaking owned by a partnership firm cannot be clubbed with an industrial undertaking owned as a proprietary concern irrespective of the concerned persons (proprietor, partner or equity holder.) being common. In other words in the above examples, the provisions of controlled and clubbing will not apply." 11. The Hon'ble High Court of Karnataka had discussed this very issue in Kentrode Pvt. Ltd Vs. Jt. Director (SSI) Government of Karnataka 1999 (108) ELT 616 (Kar.). In the case before us, even though M/s. Bala has paid sales tax and income tax, the clearances made by M/s. Bala is clubbed with M/s Airflow. The lower authority observed that though M/s. Airfl....