TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 1059
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....nd demand from M/s Stewools the Central Excise duty amounting to Rs. 2,48,962/- and Education Cess Rs. 4,984/-, total Rs. 2,53,946/- (Rs Two Lacs Fifty Three Thousand Nine Hundred and Forty Six only) under the provisions of Section 11-A including first proviso of the Central Excise Act, 1944. 3) I confirm and demand from M/s Handy Wires Pvt Ltd the Central Excise duty amounting to Rs. 4,74,216/- and Education Cess Rs. 9,575/-, total Rs. 4,83,791/- (Rs Four Lacs Eighty Three Thousand Seven Hundred and Ninety One only) under the provisions of Section 11-A including first proviso of the Central Excise Act, 1944. 4) I confirm and demand from M/s Handy Products the Central Excise duty amounting to Rs. 31,19,275/- and Education Cess Rs. 62,582/- and Secondary & Higher Education Cess Rs. 19,744/-, total Rs. 32,01,401/- (Rs Thirty Two Lacs One Thousand Four Hundred and One only) under the provisions of Section 11-A including first proviso of the Central Excise Act, 1944. 5) I also demand interest at the rate as applicable from time to time on the amount proposed to be demanded as above, from M/s Spick N Span/ M/s Stewools/ M/s Handy Wires Pvt Ltd &/ M/s Handy Products under the provi....
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....mpanies, it was observed that all the four units were related person. The Constitution of the said companies is as indicated below ion table 1 Table 1 Constitution of the Four Companies Name M/s Handy Wires M/s Stewools India Ltd M/s Handy Products (India) M/s Spick and Span Stewools Pvt Ltd Nature Private Limited Limited Partnership Private Limited Directors/ Partners with their share holdings Shri Shriraj K Doongaji (38.33%), Mr Jehangir Doongaji (30%), Smt Najoo Khurhed ji Doongaji (11.7%) Shri Shriraj K Doongaji (34.37%), Mr Jehangir Doongaji (0 %), Smt Annahita Shiraz (5.54%) Earlier partnership firm of Shri Shriraj K Doongaji, Mrs D J Doongaji, Mrs S H Sethna Shri Shriraj K Doongaji (45%), Mr Jehangir Doongaji (45%), Smt Najoo Khurhedji Doongaji (10%) Smt Annahita Shiraz (12.07%), Mr J K Doongaji (25.36%), Mrs S H Sethna (9%) Note- Shri Jehangir Doongaji is brother of Shri Shiraj K Doongaji Smt Najoo Khurshedji Doongaji is Mother of Shri Shiraj K Doongaji. Smt Annahita Shiraz is wife of Shri Shiraj K Doongaji. 2.2 In view of the close relationship between the Directors and Partners in the four company's the units department found them to be covered by the....
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....ellants have separate manufacturing facility like premises, machinery, electricity connection, sales tax and income tax registration. They procure their raw material independently and are clearing their products separately. They are not related to any person or any other company and have independent existence and identity. Individual clearance of each of them has been much below the prescribed threshold limit for denying the exemption. iii. In the present case the out of four companies whose clearance is sought to be clubbed three are limited company and one partnership firm. Such an approach is contrary to the clarification given by the CBEC vide Circular No 6/92 dated 29.05.1992. They rely on the decision of tribunal in case of NMS Babu [2006 (198) ELT 528 (T) to buttress their argument. iv. Commissioner has sought to apply the concept of related person to club the clearance of the separate units/ entities. Such an approach is not justified in view of the decision of tribunal in case of Kiran Biscuits [2005 (179) ELT 566 (T)] v. It is not even the case of the department that any of the entity/ unit is a dummy unit. In fact four independent show cause notices have been issued i....
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....incipal and other dummy. In the present case department has itself by issuing separate show cause notice individually to each of them and subsequently confirming demand against each separately have recognized their independent existence. They rely on the decision of this tribunal in case of Rao Industries vs CCE Bangalore [2009 (237) ELT 128 (T)], Shiva Exim Enterprises [2015 (322) ELT (A 32) SC], Jindal Steel Fabricators vs CCE [2005 (180) ELT 238 (T)]. v. They also rely on the Board Circular No 6/92 dated 29/05/1992 in their support. vi. Since no fact has been suppressed by them extended period of limitation as per proviso to section 11A(1) cannot be invoked in this case. {Gufic Pvt Ltd Vs Collector [1996 (85) ELT 67 (T)], Arihant Arts [2004 (173) ELT 194 (T-MUM)] and Pushpam Pharmaceutical Co [1995 (78) ELT 40 (SC)]. vii. Commissioner (Appeal) has vide his order No SR/310/NGP/2011 dated 31.03.2011, in the case of M/s Spick N Span Wools Pvt Ltd has held "21. Keeping in view the above facts, the application of Section 4(3)9b) of the Central Excise Act, 1944 in the present circumstances by the lower authority is unwarranted. Based on the judicial pronouncements discussed above ....
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....at the seven units which are the appellants before us "are only a corporate facade although registered with the various authorities with a view to camouflage their actual identity and thereby avail of the exemption which, otherwise, would be inadmissible to them". The Tribunal failed to give due attention to the fact that the Collector had confirmed, in the sum of Rs. 11,84,708.51, the demand made in the show cause notices upon all seven units and their partners or Directors. Having regard to his conclusion that all units other than Gajanan Weaving Mills were fictitious units, the sequitur, one would have assumed could only be that it was Gajanan Weaving Mills which was the assessee and liable to satisfy the demand. By confirming the demand upon all the seven units the Collector appears, however, to have treated them all as assessees and, implicitly recognised their independent existence." 5.2 In case of Rao Industries, relied upon by the Appellants this tribunal has held- "7. On a very careful consideration of the entire issue, we find that there is a fundamental flaw in the show cause notice as well as in the Impugned order when there is a clubbing of clearances and a proposal....
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.... concern of Shri V.V. Rajani and Shri Shantilal Somani. Constituted in 1988 and registered as SSI unit by District Industries Centre in 1988; (iii) M/s. Sonic a proprietary unit of Mrs. Anilaben Majithia, wife of Shri M.M. Majithia, constituted in 1989 and exempt from licensing; and (iv) M/s. Stelex came into being as a proprietary concern of Shri M.M. Majithia in Sept. 1993. It was sold to Krishna Textile Works who used the same till Shri Majithia took over the same on monthly basis from 1-7- 1997 to 31-10-1997." 3. The period of demand is from 1993-94 to October, 1997. The units were visited by the officers of the excise department on 15th October, 1997 and pursuant to the enquiries made and statements recorded of the supervisors and Shri Majithia, a case was made out and accordingly a show cause notice dated 7-4-1998 was issued. The notice proposed that M/s. Sotex was the main unit and that other units were only name sake and were declared to be separate unit on papers. The notice relied upon: (i) common procurement of raw material; (ii) some workers being common; (iii) main raw material viz. SS coils being slitter at M/s. Sotex or at Precision Slitters, Amod. 4. A....
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....of limitation." 6.0 The entire case of revenue in the show cause notice and the impugned order is based on the fact to show that all the four units are interconnected units and hence related to each other in terms of Section 4(3)(b) of the Central Excise Act, 1944. And since they are related there clearances has been sought to be clubbed. The approach of the revenue in the entire matter reflects the poor appreciation of law. The concept of related person as have been incorporated in the Section 4 and Valuation Rules, is for the purpose of determination of the correct assessable value in cases where the goods are being cleared though the related person. The admittance of relationship between the two units for the purpose of said section goes to signify the existence of two separate entities which may have some relationship impacting the transaction value between the two. The application of said provision cannot be for holding that one unit is dummy of other, for the purpose of clubbing the clearance of the said two units. It is now settled by various judicial pronouncements that two club the clearances of the two separate entities one should be shown to be the dummy of the other. ....
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....s are not sold to such buyers, to buyers (being related person), who sells such goods in retail : Provided that in a case where the related person does not sell the goods but uses or consumes such goods in the production or manufacture of articles, the value shall be determined in the manner specified in Rule 8. From the above Rule 9 it is very clear that only in cases where goods are sold through the person as specified under clause (ii), (iii) or (iv) of clause (b) of Section 4 the transaction value at which the goods are sold by the said person shall apply and not the sale price at which goods are sold to these three categories of person are made. Provision of Rule 9 also shows that merely buyers is interconnected undertaking that alone is not sufficient for holding as related person. We have gone through the Board Clarification referred by the ld. Counsel in Circular No. MF/DR/F/354/81/2020-TRU, dated 30-6-2000 is reproduced below. F. No. 354/81/2000-TRU Subject : Central Excise - Section 4 - Transaction Value - Regarding. I am directed to say, that as you aware, Section 4 of the Central Excise Act, as substituted by Section 94 of the Finance Act, 2000 (No. 10 of 20....
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.... (a) if one body corporate manages the other body corporate, or (b) if one body corporate is a subsidiary of the other body corporate, or (c) if the bodies corporate are under the same management, or (d) if one body corporate exercise control over the other body corporate in any other manner; (iv) where one undertaking is owned by a body corporate and the other is owned by a firm, if one or more partners of the firms, (a) hold, directly or indirectly, not less than fifty per cent of the shares, whether preference or equity, of the body corporate, or (b) exercise control, directly or indirectly, whether as director or otherwise, over the body corporate. (v) if one is owned by a body corporate and the other is owned by firm having bodies corporate as its partners, if such bodies are under the same management. (vi) If the undertakings are owned or controlled by the same person or (by the same group). (vii) If one is connected with the other either directly or through any number of undertakings within the meaning of one or more foregoing sub-clauses. Explanation I. - For the purpose of this Act, (two bodies corporate), shall be deemed to be under the same management....
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....cord specific finding regarding the dummy character of any of these two firms. He has likewise confirmed the duty against both of them and had made them liable to pay individually or severally. Therefore, not only the show cause notice issued but also the impugned order are bad in law. It is well settled in a case of clubbing of clearances of two units, it has to be alleged and proved by the Department that which one was only a dummy and non-existent unit and which was the principal/main unit. The duty liability can be fastened, in such a case, only on the principal/main unit and not on the so called dummy or non-existent unit. In this view, we stand fortified by the ratio of law laid down in Gajanan Fabrics Distributors (supra) wherein it has been so observed. 11.The ratio of law laid down in H.T. Bhavnani Chemicals P. Ltd. (supra), Quality Steel Industries (supra) and Mohanlal Maganlal Bhavsar (Deceased) through LRS and Others (supra) referred by the SDR, is not attracted to the facts and circumstances of the present case detailed above. In the first case, there was flowback of finance from one unit to another and the production procurement of raw materials of all the units was....
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....ins entirely separated from ownership in professionally managed business. Therefore, this finding of the Commissioner is not sustainable at all. Even otherwise, a finding that Mrs. Rita Dutta is the manufacturer in both the units is not viable at all in the facts of this case. Such a finding takes away the legitimate rights of others and is not warranted by the ownership pattern. In M/s. Superior Pet Pvt. Ltd. Mrs. Rita Dutta's share holding is only over 18%. The company cannot be held to belong to such a person. The principle involved in lifting corporate veil is clear. An identifiable person should be found to enjoy the benefits not due to him upon lifting of corporate veil. The reality should be different from what is covered by the veil. There is no finding that Mrs. Rita Dutta is the beneficiary of the corporate arrangement and that the tax evasion facilitated by this corporate facade benefited her. It is also on record that either entity is not a dummy. Both have separate capital, premises, machinery and labour. Both are carrying out separate operations. The commonality of share holders and Partners and a common manager do not destroy the separateness of the two units. That t....
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....applicable as the case dealt about smuggling activity and Customs evasion, which is not the case here. 9.2 In case of Kiran Biscuits supra, Bangalore Bench has in identical case held as follows: "4.On a very careful consideration of the matter, we find that the Revenue while holding that M/s. Kiran is a dummy of M/s. Herren has not at all issued any show cause notice to M/s. Herren. This is fatal to the entire case as Hon'ble SC in the Gajanan Fabrics and Distributors case has held that the Collector recording the findings and the same upheld by the Tribunal that all seven units except Gajanan Weaving Mills were only a corporate facade although registered with various authorities with a view to camouflage their actual identity and thereby avail of the exemption which otherwise would be inadmissible and yet confirming the duty demand upon all seven units and their partners or Directors is not correct and the demand ought to have been confirmed only against Gajanan Weaving Mills who were the assessee and liable in the present case also. The Commissioner after coming to the conclusion that the appellant is a dummy has denied the SSI benefit to them and also demanded duty. Since the....