TaxTMI 
TaxTMI 
2018 (2) TMI 1014
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....ankar, partner/ director of these units and Girija Jayshankar, director of these units under Rule 209A of erstwhile Central Excise Rules and Rule 26 of Central Excise Rules 2001/ Rule 26 of Central Excise Rules 2002. 1. At the outset, ld. Counsel for the appellant submits that Mrs. P.S. Rajishankar has expired and copy of her death certificate has been produced in court. He argued that in view of decision of Tribunal in the case of Shivkripa Ispat Pvt. Ltd. - 2010 (262) ELT 477 the appeal in case of Mrs. P.S. Rajishankar abates. 2. Ld. Counsel argued that it has been held in the impugned order that the four companies are dummy company. They are a facade created for circumventing the small scale notifications and therefore the aggregate value of clearance of all four companies were clubbed and demand was raised from Silicon Carbide Grinding Mills Pvt. Ltd. (SCGM for short) being the oldest company manufacturing excisable goods. 2.1 Ld. Counsel further argued that all four entities were incorporated independently on different times and he submitted the following chart regarding history of each of these entities:- Silicone Carbide Grinding Mills Pvt. Ltd [i.e. Silicon] ....
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....or Vs. C.C.E [1997 (92)ELT 451 (SC) ] ; ii) Nitin Steels Vs. C.C.E [ 2003(151)ELT 422(Tri.Mum) ]& iii) C.C.E Vs. Shiva Exim Enterprises [2005 (185)ELT 169 (Tri.-Del.)] He argued that the three companies were registered as private company with the Registrar of Companies under the provision of Companies Act, 1956. All four units have different factory plots, manufacturing premises with separate storage plant and facility and with independent work force and power and infrastructure for the products manufactured by them. All four units are duly registered with various authorities as can be seen from the table below. Name of Appellant Silicone Carbide Grinding Mills Pvt. Ltd [i.e. Silicon] Lignin Research Center [i.e. LRC] Sweta Electric (P) Ltd [i.e. Sweta] Indostaits (Pvt.) Ltd. [i.e. Indostraits] A) Nature of concern Pvt. Ltd.Co. Partnership Pvt. Ltd.Co. Pvt. Ltd.Co. B) Factory Address Plot No. W-11, MIDC, TTC, Pawne Village, Dist.Thane. Plot No.D/9-4, Kukshet Village, MIDC Indl. Area, TTC, Turbhe, Dist. Thane. Plot No.D/9-3, Kukshet Village, MIDC, TTC, Turbhe, Dist. Thane. Plot No.5, B-29 to 33, Cuncolim Indl. Estate,....
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....ued that the impugned order relies on certain financial transactions between SCGM and Lignin Research Centre (LRC for short). However, no evidence regarding transaction between SCGM and Sweta Electric Pvt. Ltd. (Sweta for short) or Indostraits Pvt. Ltd. (Indostraits for short) has been produced. He pointed that Indostraits and Sweta are geographically also located at different places than SCGM. The only transaction between SCGM and two companies (namely Sweta and Indostraits) is movement of inputs/ processed goods for the purpose of job work, duly covered under challan issued under Rule 57F(4) of Central Excise Rules 1944. He pointed that the inputs which were sent for job work under rule 57F(4) were sent under proper intimation and job work charges have been duly paid. He argued that the same cannot be a ground for clubbing the clearances, or to treat these two as dummy units. He further argued that most of the movement is from SCGM to Sweta and from SCGM to Indostraits, and therefore if at all, SCGM should be referred to as dummy unit and not vice versa, since manufacturing activity on job work basis has been done by Sweta and Indostraits. He pointed that most of the transactions....
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....e transferred from LRC & Silicon to Indostraits by way of commission and profits are transferred from LRC & Silicon to Sweta by way of warehousing. He argued that the allegation that LRC and Silicon are transferring profit to other two companies i.e. Indostrait and Sweta by way of commission and warehousing and in the same breath it is alleged that Indostrait and Sweta are charging less job work charges from LRC and Indostrait, are self contradictory. 3.8 He further argued that three out of the four units were located within the jurisdiction of same Range, same Division and same Commissionerate under excise. He pointed that the registration form illustrates that the factory address along with office address and name of other group companies and name of common director were provided at the time of registration. He further argued that the classification list under 173B was filed by all units were accepted by revenue. 3.9 He further argued that without any seizure, all the goods manufactured and cleared by them during the five year period have been confiscated and redemption fine has been imposed. He argued that without seizure of goods no confiscation can be made and no redempt....
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....tal Share Holding Designation Relationship with Shri S.V.Jaysankar M/s. Silicon Carbide Grinding Mills (P.Ltd.) Authorised Shares -5000 Issued & Paid up shares - 1300 S.V.Jaysankar - 600 Girija Jaysankar - 25 P.S.Rajisankar - 675 Managing Director Director Director Self Wife Mother M/s. Indostraits P. Ltd. Authorised Shares- 10000 Paid up Shares - 10000 S.V.Jaysankar - 3100 Girijay Jaysankar-2100 P.S.Rajisankar - 4800 Director Director Director Self Wife Mother M/s. Sweta Elect. P. Ltd. Authorised shares -250000 Issued & Paid up shares 35000 S.V.Jaysankar - 100 Girija Jaysankar - 100 P.S.Rajisankar - 100 M/s. Indostraits P. Ltd. - 34700 Director Director Director Self Wife Mother M/s. Lignin Research Centre (Partnership firm) S.V.Jaysankar - 50% P.S.Rajisankar - 50% Managing Partner Partner partnre Self Mother e further argued that SCGM and LRC were paying commission @ 2% of total sales and 3% of the value of job charges to Indostraits. He argued that it amounted to sharing of profits. 4.4 He further argued that there was a mutuality ....
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....C cleared the same on 14.01.03 from customs without payment of custom duty by using its advance licence No.051063069 dated 16.10.02. Further, the said material was used by M/s. Silicon by adopting the device of loan/transfer of material from LRC. This he argued shows the purpose and intent of the parties, to make arrangements in such a way transfer profit and financial accommodation to each other. 4.5 Common control of production, marketing. Ld AR argued that the movement of material under job work challans is restricted to the group units only. The material were never sent out to any other factory except to the group concerns (on few occasions material was sent to M/s. Vimax). When the material sent by one group concern to another for conversion on job work basis, all the material required for conversion are not sent together but are sent in piecemeal. The materials of group concern received on job work basis are not stored separately and also the finished product manufactured out of the same is not stored separately but they are stored in a common storage tank. Further there are instances of transfer of material from one group concern to another through job work challans....
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....at job work is excluding profit margin. 5 We have gone through rival submissions. We find that the allegations have been made for clubbing the clearance of all the four units. However, most of the evidence that have been produced relates to transaction between SCGM and LRC. Almost the entire evidence regarding common flow of funds, movement of raw material, payments on behalf of each other relates to transactions between SCGM and LRC. The specific example of use of fund of SCGM for opening L/C of LRC for import of October 2002 also relates to transaction to SCGM and LRC. Even the direction given for transfer of raw material to the employees relate to movement of raw material from LRC and SCGM and vice versa. The evidence relating to Sweta and Indostraits in almost negligible. 5.1 In so far as clubbing of clearance of Sweta and Indostraits is concerned, the evidence is limited to common share holding, alleged depressed job charges, payment of commission and warehousing charges and some stray cases of payment made by SCGM on behalf of Indostraits. The total amount of payment made by SCGM towards salary of Jagdish Kale on behalf of Indostraits is meagre and cannot be considered ....
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....00 Paid up Shares - 10000 S.V.Jaysankar -3100 Girijay Jaysankar-2100 P.S.Rajisankar - 4800 Director Director Director Self Wife Mother It is seen that the entire holding of shares is between same three persons and within the family, however this by itself is not a sufficient ground for clubbing. 5.4 The transaction relied upon by show-cause notice in the impugned order between LRC and SCGM are as follows:- Free flow of finance/financial interlinking/financial accommodation: The following is the chart shows various interest free temporary advances given by parties to each other. 1998 - 1999 Returned on 01. Temporary advance given by M/s. LRC to M/s. Silicon : Rs.2,30,483.04- 1998-99 02. Temporary advance given by M/s. LRC to M/s. Silicon: Rs.2,52,360.39- 03. Temporary advance given by M/s. Silicon to M/s. LRC: Rs.6,07,225.00- 1998-99 1999-2000 01. Excess Debit in Silicon's creditor a/c. Transferred to Debtor's A/c. Rs.23,84,933.00 02. Temporary advance given from M/s. LRC to M/s. Silicon: Rs.4,87,910.28- 1999-00 03. Tem....
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....was required to pay an amount of Rs. 12,451/- and M/s. LRC was required to pay Rs. 11,95,700/- to each other. Therefore, M/s. LRC was to pay Rs. 11,83,159/- (i.e. Rs. 11,95,700 - Rs. 12,451). However, M/s. Silicon paid Rs. 20,57,478/- and M/s. LRC paid Rs. 12,03,856/-, to each other. In April,2002 to December,2002, M/s. Silicon was required to pay Rs. 4,14,521/- to M/s. LRC was required to pay Rs. 3,89,774/-. Therefore, M/s. LRC should have paid Rs. 24,747/-, whereas M/s. LRC paid Rs. 28,78,751/- and M/s. Silicon paid Rs. 1,25,000/-, to each other.' However it is apparent that the two units were commercially interacting with each other as in they were buying and selling material to each other. Therefore a few transactions do not by any manner indicate that there was a common pool of funds. In case of Bright Gems Company - 2004(173)ELT 173 tribunal in similar circumstances has observed as follows: "4. We have heard both sides. It is submitted by learned Counsel for the appellants that the findings of the Commissioner are not enough to sustain the Department's allegation of mutuality of interest between the two firms. We have also heard learned DR on this aspect.....
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....t all these transactions have been recorded in accounts by charging the same to correct entity. Thus the errors made at the time of payment have been corrected in accounts by charging the same to correct entity. 5.5 Another piece of evidence produced by revenue relates to October 2002 when an amount of 15 lakhs was transferred from LRC to SCGM and the same was used as L/c margin for import by SCGM. Later on the material was sold by SCGM to LRC on high sea sale basis. The material was cleared by LRC without payment of customs duty by using advance licences. Ld. Counsel has explained the issue and the same also appears in grounds of appeal. The explanation is that the said transactions was a pure commercial transaction. He explained the imported naphthalene liquid was required for manufacture of export products. Since SCGM did not have pending export order it sold the material to LRC on high sea sale basis and the same was cleared by LRC on the advance licence to the export order. The facts mentioned in defence have not been challenged by the revenue as false or incorrect. 5.6 It has also been pointed out by revenue that whenever there is shortage of raw material to the one uni....
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....al Finance in an around 2002. -->The Private Limited Co was formed in an around 1942 for trading and commission agent by Director Shri. P.S.Shankar; Shri. V.K.Menon, Shri. P.S. Krishnan and Shri. A.Madan. -->Shri. Menon and Shri. Madan expired and new Directors Shri. P.S. Vijayshankar, Shri. S.V. Jayshankar and Smt. P.S.Raji Shankar were inducted. -->Shri. P.S.Shankar and Shri. P.S.Vijayshankar also expired and Smt. Girija Jayshankar was inducted as Director. -->In an around 2000, the company procured factory premises at Go a, installed plant & machinery for manufacturing various chemical products at Goa. It can be seen that the SCGM and LRC came into existence as totally different units. SCGM came into existence in1982 while LRC was formed in 1966. The original shareholding pattern was very different at the time of formation. Later by resignation and induction of partners the shareholding pattern evolved to present state. Ld Counsel has relied on the following facts Name of Appellant Silicone Carbide Grinding Mills Pvt. Ltd [i.e. Silicon] Lignin Research Center [i.e. LRC] Sweta Electric (P) Ltd [i.e. Sweta] Indostaits (Pvt.) Ltd. [i.e. Indostraits] ....
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....hanical Engg Corpn - 2003(152) ELT 194 has in almost identical circumstances held that clearances cannot be clubbed. The facts in the said case were as follows: 6. We have heard both sides and gone through the facts on record. The bare perusal of the impugned order shows that the learned Commissioner has ordered the clubbing of the above referred three firms (appellants no. 1 to 3) on the ground that the firm, appellants no. 1 during the Period January, 1997 to March, 1997 borrowed Rs. 13 lakhs from the firm, appellants no. 3 and also lent almost an equal amount to the firm, appellants no. 2 without charging interest; that all the three firms had a common accountant who was drawing salary from the firm, appellants no. 1; that one pressing machine belong to the firm, appellants no. 2 was found installed in the premises of the firm, appellants no. 1; that firm, appellants no. 2, had no facility of shearing machine, press machine and roll forming machine; that few orders were procured by the firm, appellants no. 1 and the same were later on executed by the firm appellants no. 3; that all the three firms were being run by Shri Rajwansh Bedi, appellants no. 4, who was the propr....
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....L.T. 648 (T), it has been observed that the allegations that the partners in the two partnership firms were related to each other or common, that there were common workers, common machineries, and that the same person was looking after the affairs of both the firms, were not sufficient for ordering the clubbing of the clearances of both the firms in the absence of the evidence that the firms were funding the expenses of each other or that there was flow back of the profit or money from one firm to another. This judgment of the Tribunal had been even upheld by the Apex Court as reported in 1999 (106) E.L.T. A-66. This very view has been reiterated in the case of CCE, Ahmedabad v. Ambica Scale Mfg. Works, 1996 (86) E.L.T. 229 (T) and Binod Kumar Maheswari v. CCE, Calcutta, 1997 (90) E.L.T. 83 (T)". The said decision was upheld by Hon Apex Court as reported in 2008(229)ELT 321. We find that the facts are practically identical to the instant case. 5.9 To summarise we find practically no evidence of any significant transaction between Sweta and Indostraits among themselves or with SCGM and LRC. Some instances of transactions have been pointed out between SCGM and LRC, but they are....