AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (5) TMI 186
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....,315/-( Higher Ed. Cess)] against M/s Vijaylakshmi & Co. under sub-section (2) of Section 11A of the Central Excise Act, 1944 and direct the noticee to pay the same forthwith; (ii) I confirm the demand for Central Excise duty amounting to Rs. 19,92,386/- Rupees Nineteen lakhs Ninety Two Thousand Three Hundred and Eighty Six Only) [Rs. 19,53,320/- (basic) and Rs. 39,066/- (Ed. Cess)] against M/s Balarajeshwar & Co. under subsection (2) of Section 11A of the Central Excise Act, 1944 and direct the noticee to pay the same forthwith; (iii) I order recovery of interest from M/s Vijaylakshmi & Co. at the appropriate rates on the Central Excise duties confirmed at (1) above under the provisions Section 11AB of the Central Excise Act, 1944 and direct them to pay the same forthwith; (iv) I order recovery of interest from M/s Balarajeshwar & Co. at the appropriate rates on the Central Excise duties confirmed at (2) above under the provisions of Section 11AB of the Central Excise Act, 1944 and direct them to pay the same forthwith; (v) I impose penalty of Rs. 1,36,09,293/- ( Rupees One Crore Thirty Six Lakhs Nine Th....
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....iv) I impose a personal penalty of Rs. 1,00,000/-(Rupees One Lakh Only) on Smt. Tejas Venkataraman, proprietor of M/s Shreenath Enterprises under the provisions of Rule 26 of the Central Excise Act, 1944 and direct her to pay the same forthwith; (xv) I impose a personal penalty of Rs. 1,00,000/-(Rupees One Lakh Only) on Shri P. Ganeshkumar, proprietor of M/s Shree Engineering Works under the provisions of Rule 26 of the Central Excise Act, 1944 and direct him to pay the same forthwith; (xvi) I impose a personal penalty of Rs. 1,00,000/-(Rupees One Lakh Only) on Shri P.Subburaj, proprietor of M/s Ganesh Enterprises under the provisions of Rule 26 of the Central Excise Act, 1944 and direct him to pay the same forthwith;" 2.1 Acting on intelligence that M/s Telebrands (India) Pvt Ltd were getting exercise equipments manufactured (marketed under the brand name "AB KING PRO") through certain manufacturer and that such manufacturing activity was actually controlled by two persons namely Shri G Nandgopal and Shri Prakash Pandya, but the production and clearances were shown in name of various manufacturers to avail the benefit of SSI exemp....
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....xed to the product upto July-04. On receipt of the manufactured gymnasium equipments, the employees of M/s Telebrands then checked the product for any defects and affixed with sticker of brand name AB KING PRO. 2.3 In the year 2004, Shri G. Nandgopal and Shri Prakash Pandya floated two separate proprietary concerns namely M/s Vijaylakshmi & Co. of Shri G. Nandgopal and M/s Balarajeshwar & Co. of Shri Prakash Pandya, which started individually manufacturing and supplying the exercise equipments to M/s Telebrands. The units claimed small scale exemption as envisaged under notification no. 8/2003-CE dated 01.03.2003. Shri G. Nandgopal and Shri Prakash Pandya, introduced persons known to them as manufacturers of gymnasium equipment, who then have "manufactured and supplied" gymnasium equipment to M/s Telebrands. 2.4 In order to take advantage of the SSI concession, Shri G. Nandgopal @ Gopi adopted a modus operandi by introducing several fictitious firms to distribute the actual turnover of his firm viz. M/s Vijayalakshmi & Co. among the said firms: M/s BN Enterprises, M/s GEE KAY & Co., and M/s Venkateshwara Enterprises, with the sole intention to avail be....
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.... 19248939 6587763 7377150 17914332 93357704 2.9 As the aggregate value of clearances of M/s Vijaylaxmi during the financial year 2004-05 exceeded Rs.300lakhs, therefore, they were not eligible for exemption provided under Notification No.8/2003 CE, as amended for the subsequent years. 2.10 Shri Prakash Pandya utilized one firm by name M/s Ganesh Enterprises of Shri P. Subburaj, as a dummy front unit, to facilitate clearances from his unit M/s Balarajeshwar & Co. The total turnover of M/s Balarajeshwar & Co. including the turnover shown in the name of M/s Ganesh Enterprises: (Value in Rs.) Year Value of clearances Balarajeshwar Ganesh Enterprises Total 2003-04 5522790 5522790 2004-05 7694409 7320930 15015339 2005-06 8480000 8712909 17192909 2006-07 7763412 7763412 2007-08 2418839 2418839 Grand Total 26356660 21556629 47913289 2.11. It appeared that the said noticees actual turnovers in the above manner, in order to avail exemption as small had deliberately suppressed their scale units in te....
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.... • Interest at the appropriate rate should not be demanded and recovered from them in terms of section 11 AB of the CE Act, 1944; • Penalty should not be levied on them in terms of section 11 AC of the CE Act, 1944; • The goods cleared without payment of duty during the period from April- 2004 to June-2007, should not be confiscated in terms of Rule 25 of the CE Rules, 2002, and penalty imposed under the said Rule; 2.15 Shri G. Nandgopal, proprietor of M/s Vijaylakshmi & Cond Prakash K. Pandya, proprietor of M/s Balarajeshwar & Co were asked vide said show cause notice as to why penalty should not be imposed on them in terms of Rule 26 of the Central Excise Rules, 2002, for having dealt with the excisable goods which allegedly were liable to confiscation and resulted in the said evasion of Central Excise duty 2.16 M/s B.N. Enterprises Prop. Shri Bapu N. Dusane, M/s GEE KAY & Co.Prop. Shri G. Konnaya, M/s Venkateshwara Enterprises. Prop. Shri G. Venkataraman, M/s Shreenath Enterprises, Prop. Smt. Tejas Venkataraman M/s Shree Engineering Works Prop. Shri P. Ganeshkumar and M/s Ganesh Enterprises, Prop. Shri P. S....
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....dance by appellants' proprietor to the said five firms for sourcing/ procuring raw materials, introduction to bank for opening their bank accounts and helping them in getting credit facility, do not make the said other firms to be dummies of the appellants. • Bhagwandas Kanodia & ors [1987 (32) ELT 204 (T)] • Santha Industries [1995 (78) ELT 556 (T)] • Having common Chartered Accountant for Tax Audit and filling of returns and common accountant for writing of accounts is no ground for clubbing of clearances. • Thus M/s Geekay & Co of Shri K Govindswamy, M/s Venkateshwara Enterprises of Shri G venkataraman, M/s Shreenath Enterprises of Ms Tejas Venkataraman w/o Shri G Venkatraman, M/s Shree engineering Works of Shri P S Ganeshkumar and M/s B N Enterprises of Shri Bapu Nathu Dusane were not the dummy of appellants. No conclusion to this effect could be drawn on the basis of the admission made by them in view of the decisions as follows: • Basudev Garg [2013 (294) ELT 353 9T)] • J & K Cigarettes {2009 (242) ELT 189 (Del)] • Andaman Timber Industries [2015 (324) ELT 641 (SC)] • Saron....
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....& Co and no part of the profits of B.N.Enterprises flowed to Vijayalakshmi. The income/ profits of B.N.Enterprises are assessed under Income Tax as that of B.N.Enterprises only. Reliance is placed on judgments of which compilation was submitted at the hearing, which consistently hold that in absence of financial flow-back, there can be no clubbing of clearances. • Similarly there is no financial Flow-Back of funds between Ganesh Enterprises and Balarajeshwar & Co and therefore their clearances also Cannot be clubbed 3.4 Learned authorized representative reiterated the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments 4.2 Commissioner has in the impugned order recorded the following findings while adjudicating the show cause notice. 21. I find that the issue involved hereunder is the alleged floating of fictitious firms/units by M/s. Vijaylaxmi & Co and M/s. Balarajeshwar & Co, in order to distribute the actual turnover of their respective units with the sole in....
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.... were interested in bringing in more number of manufacturers to supply the gymnasium equipments. Therefore, S/Shri Nandgopal and Prakash Pandya, proprietors of M/s Vijaylaxmi & Co. and M/s Balarajeshwar & Co. respectively, manufacturers and suppliers of these equipments to M/s Telebrands (India) Pvt. Ltd.; as per their own admissions, utilised this opportunity to introduce persons known to them as manufacturers of exercise equipments. Accordingly, they introduced S/Shri Bapu Dusane, G.Venkataraman, P.Ganeshkumar, Subburaj Perrummal and Smt. Tejas Konayyan Govindaswamy, Venkataraman as proprietors of M/s B.N. Enterprises, M/s GEEKAY & Co. M/s Venkateshwara Enterprises, M/s Shree Engineering Works, M/s Ganesh Enterprises and M/s Shreenath Enterprises respectively to Shri Hitesh Israni Managing Director of M/s Telebrands (India) Pvt. Ltd. This fact has also been corroborated by Shri Hitesh Israni in his statements to the department which were recorded under Section 14 of the Central Excise Act, 1944.Shri Hitesh Israni has also categorically stated that he does not know any persons other than S/Shri Nandgopal and Prakash Pandya. 26. The proprietors of all the firms....
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.... of the Central Excise Act, 1944 that he is employed as a supervisor with M/s Vijaylakshmi& Co. There are no manufacturing activities conducted at the premises of M/s B.N Enterprises which coincidently is the residential premises of Shri Bapu Dusane. As admitted by Shri Bapu Dusane and confirmed by Shri Nandgopal in their respective statements made to the department under section 14 of the Central Excise Act, 1944, the gymnasium equipments shown as manufactured and cleared to M/s Telebrands (India) Pvt. Ltd. from M/s B.N. Enterprises ( under the cover of their delivery challans and invoices were actually manufactured in the premises of M/s Vijaylaxmi & Co. Shri Nandgopal in his statements made to the department under Section 14 of the Central Excise Act, 1944 has confessed to the fact that M/s B.N. Enterprises was floated as a dummy unit to suppress the actual production and clearance of M/s Vijaylaxmi & Co. and only documents were created to show that there was manufacture and supply of exercise equipments by M/s B.N.Enterprises to M/s Telebrands (India) Pvt. Ltd.Thus it is clearly evident that M/s BN Enterprises is a fictitious firm of M/s Vijaylaxmi & Co. 28.3&nbs....
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....tion of the accounts. The purpose of these manipulations was to infuse life into the sham that these firms were in existence and conducting business activities of buying raw materials, getting it processed and supplying finished goods to M/s Telebrands (India) Pvt. Ltd. Due to the frequent manipulations, there were also numerous mix up's. It was found that there were several entries where expenditure originally shown in the accounts of one firm were thereafter diverted/shifted against other firms. It was also found from these records that there was an attempt to create the impression that the premises where BN Enterprises and GEE KAY & Co. were shown to be conducting their own manufacturing activities, had been taken by these firms on rent/ lease. Moreover, in his statement recorded on 24.07.2007, Shri Bapu N Dusane - proprietor of M/s BN Enterprises had stated that he is not manufacturing the goods and that the entire manufacturing activities were carried out at M/s Vijaylaxmi & Co. Shri Ashwini P. Gupta has deposed that he was maintaining the accounts of all the firms at the behest of Shri Prakash Pandya and that the documents related to the purchase and sales of all the firm....
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....s of account is a definite attempt to mislead the law into believing that M/s B.N. Enterprises is a firm in existence. 30.4 The distinct facts that emerge from the investigation are that M/s Telebrands (India) Pvt. Ltd. is the authorized distributor of an exercise equipment; viz. AB KING PRO. The product is classifiable under chapter heading 9506 91 90 of the CETA, 1985 and chargeable to duty. M/s Telebrands (India) Pvt. Ltd. have been appointed as distributors for this product in India. M/s Telebrands (India) Pvt. Ltd. have been provided samples of the product. On the basis of these samples, they have got moulds/dies manufactured locally for the different parts. M/s Telebrands (India) Pvt. Ltd. then placed orders for these products with M/s GNG & Co. which is owned by Shri Prakash Pandya and Shri G. Nandgopal. The dies/moulds got manufactured by M/s Telebrands (India) Pvt. Ltd. were given by them to M/s GNG & Co. for manufacture of the parts of the product. Shri Prakash Pandya and Shri G. Nandgopal in turn, got various components manufactured on job work basis, assembled them at M/s GNG & Co. and packed them in cartons. These cartons were then delivered to M/s Teleb....
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....-in-law of Shri G. Nandgopal and Shri G. Venkatraman - Proprietor of M/s Venkateshwara Enterprises is the brother of Shri G. Nandgopal. It is also apparent from the seized records that these units were created to facilitate the artificial distribution of clearances from M/s Vijaylaxmi & Co. by. faking paper transactions to show production and clearances of exercise equipment from these firms. Towards that end and purpose, Shri Nandgopal exercised financial and managerial control and created an elaborate sham in the form of these units where there was no activity whatsoever. 30.6 On careful scrutiny of the turnover of these fictitious units, it was found that the actual turnover of M/s-Vijaylaxmi & Co. for the financial year 2004-05 was Rs. 3,98,20,595/- and they were liable to pay central excise duty on clearances of value in excess of Rs. 100 lakhs; i.e. Rs. 2,98,20,595/-. They were thus liable to pay central excise duty including education cess amounting to Rs. 48,66,721/-. By virtue of the fact that the turnover of M/s Vijaylaxmi & Co. had exceeded Rs. 300 lakhs in 2004-05, they were not eligible to the benefit of the exemption under Notification No. 8/2003-CE dat....
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....1,73,883/-. These duties are, therefore, recoverable from M/s Balrajeshwar & Co. 31.1 The totality of the facts and circumstances discussed above clearly indicate that the whole show was controlled and masterminded by S/Shri Nandgopal and Prakash Pandya. The depositions recorded by the department under Section 14 of the Central Excise Act, 1944 are inscrutable evidences. I find that none of the statements have been retracted and therefore their evidentiary value remains undiminished and I therefore place reliance upon them. In this context I rely on the judicial pronouncement made by the Hon'ble Supreme Court in the case of Mineral and Metal Trading Corpn Vs R.C.Mishra [ 1993 (65) E.L.T 474 (S.C.)] wherein the Apex court has laid down that the disputed issues have to be decided on a totality of relevant factors applying the test of predominance. 31.2 In this regard, I seek to place reliance on the case law of Commissioner of Central Excise, Coimbatore vs. Acufil Machines[2004(177)ELT 326(Tri- Chennai)]. The relevant portion of the headnote is reproduced below. Evidence - Admission - Statements, retraction of Clandestine removal It is not necessary ....
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....njointly. 35. As regards the noticees' plea that separate preparation and filing of Balance Sheet, Income Tax returns and Sales tax returns for each of the said units indicate that all the units are existing independently, I find that the depositions by Shri Ashwini Gupta that the accounts related to all the units were regularly handed over by S/Shri Nandgopal and Prakash Pandya; and examination of the records seized from the possession of Shri Ashwini Gupta clearly indicate that the books of account of all the units were constantly being manipulated at the behest of the said persons. In the case of Lotus Chemical Industries and Aurobindo Chemical Industries, the Tribunal in their final order Nos. 458-459/91-C dated 21-5-1991 had observed that the mere fact that units are separately registered as small scale units or that they are separately assessed for Income-tax or Sales-Tax purposes, will not make any difference for clubbing the clearances of the firms. The ratio of this judgment is fairly applicable in the subject case. Therefore, I am of the view that separate filing of Balance Sheet, Income Tax returns and Sales tax returns do not establish the fact ....
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....e subject case, although all the named units masquerade to appear to be separate, the sum of the facts and circumstances establish that M/s B.N.Enterprises, M/s GEEKAY & Co., M/s Venkateshwara Enterprises, M/s Shreenath Enterprises, M/s Shree Engineering Works and M/s Ganesh Enterprises are dummy units. 38. In their submissions, the noticees have requested for permission to cross examine following persons: (a) Shri Hitesh Israni. (b) Shri Ashwini Gupta. (c) Shri Bapu Dusane. (request made by M/ Vijaylakshmi & Co. only) (d) Shri Nandgopal. (request made by M/ Vijaylakshmi & Co. only) (e) Shri Pramod Popat. (request made by M/ Vijaylakshmi & Co. only) (f) Shri Subburaj Perumal (request made by M/s Balarajeshwar & Co. only) (g) Shri Kiran Shelar ( request made by M/s Balarajeshwar & Co. only) In this regard, I find that all the statements given by the said persons to the department were recorded under Section 14 of the Central Excise Act, 1944 which is deemed to be a "judicial proceeding" within the meaning of ....
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....fiscable. However, confiscation implies appropriation to seizure. In the present case, since the possession of goods is not with the department, I neither confiscate the goods nor impose any redemption fine. In this context, I place reliance upon the following judicial pronouncements : (i) The Tribunal in the case of Ram Khazana Electronics Vs Air cargo Jaipur [ 2003(156) ELT-122(TRI) held that - where no enforceable security is available with the department and the goods are not available for confiscation, redemption fine cannot be imposed. (ii) The Tribunal in the case of CC, Kandla Vs Sahil Traders [ 2004 (177) ELT 732 (Tri-Del)] and G.M.Exports Vs C.C, Bangalore (2008(226)ELT 571 (Tri-Bang) held that redemption fine cannot be imposed in respect of goods which were not seized and unless the goods are seized there cannot be any confiscation thereof. (iii) The Larger Bench in the case of Shiv Kripa Ispat Pvt. Ltd Vs CCE, Nasik (2009 (235) ELT623(Tri-LB)] observed that "Precedents - Appeal against Tribunal order dismissed and such decisions affirmed by Binding precedent- Supreme Court - Similar view taken by High ....
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.... Venkateshwara Enterprises, M/s Shreenath Enterprises, M/s Shree Engineering Works and M/s Ganesh Enterprises were being falsified with the sole intent of passing them off as working units. By their acts of aiding Shri Nandgopal and Shri Prakash Pandya in perpetuating this fraud and passing of the products as having been manufactured by them, they have concerned themselves with these goods. These goods were subsequently being cleared to M/s Telebrands (India) Pvt. Ltd. without payment of duty by wrongly availing the benefit of exemption under Notification No. 8/2003-CE dated 01.03.2003 and hence were liable for confiscation. As such these persons have by their acts of omission and commission rendered themselves liable to be penalized under the provisions of Rule 26 of the Central Excise Rules, 2002. The fact that the goods have not been confiscated will not have any bearing on the imposablity of penalty. In this regard, I place reliance upon the case law of Nandesari Rasayanee Ltd. vs. Commissioner of Central Excise & Customs, Vadodara[2009(244) ELT 289(Tri-Ahmd.)]. Penalty - Personal penalty Export goods diverted by merchant-exporter in local market - Submission tha....
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.... Consultant engineer/ Supervisor working on salary Rs 2500/- per month increased to Rs. 8000/- per month at the time of investigation. Name of Unit Proprietor Relationship with Prakash Pandya Balrajeshwar & Co Prakash Pandya Self Ganesh Enterprises P Subburaj Employee of Prakash Pandya Commissioner has in the impugned order recorded specific finding in respect of the each of the entity concerned and how the same has been floated by Shri G Nandgopal, from time to time to remain within the exemption limits as per the Notification no 8/2003-CE dated 01.03.2003. 4.4 Interestingly all the unit concerned are the proprietary ship concern of the person closely knitted with Shri G Nandgopal. Ms Tejas Venkatraman in her statement recorded under Section 14 specifically stated as follows: • The firm M/s Shreenath Enterprises was floated as per the instructions of her husband Shri G Venkatraman. • She never enquired why the firm was needed to be floated nor was she aware of the business to be conducted from the firm. • Only subsequently her husband informed her that firm was engaged in....
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....idential premises. I have signed the said panchanama in token of having seen the same. On being asked I state that I agree with the fact recorded in the said panchanama dated 05.07.07. • Now I have been shown the files bearing serial number 21 and 22, produced by Shri. Kiran Hirji Khirashiya, Chartered Accountant in his statement dated 05.07.2007. I put my dated signature on the first and the last page of the said files in token of having seen and perused by me. I confirm that these two files contains the delivery challans and the sale invoices, for the period from 30.04.2003 to 19.03.05 (file no. 21) and from 02.06.2005 to 01.02.2006 (file 30.22) issued by M/s. B. N. Enterprises, Trimurti Hsg. Society, Plot No.30, East, Mumbai - 400 081 for supply Room No.C/3, MHADA Colony, Mulund East - Mumbai 400081 for supply of gymnasium equipments, only to M/s. Telebrands (I) Pvt. Ltd., Devidayal Compound, Bhandup. I confirm that the same are prepared in my own handwriting in a capacity as proprietor of M/s. B. N. Enterprises. On being asked I state that these delivery challans and the invoices were prepared by me as per the instructions/directions given by Shri. G. Nandgop....
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....y company were maintained by Shri Ashwin. Gupta and Kiran Khimshiya, C.A. along with all other companies run by Shri Gopi. • I was not aware of the income or expenditure or receipt or out going from my said accounts as the same were looked after by Shri Gopi. • I have also not received or I am also not aware whether there was any profit or loss to my company. On being asked I state that once or twice as instructed by Shri Gopi I have signed the balance sheets of the company along with the sales tax returns. I am not aware who has filed the said returns with the said departments. • I am not confirm but initially Shri Hitesh Israni the owner of M/s Telebrands (1) P. Ltd must be financing M/s. Vijay Laxmi & Company or Shri Gopi. On being asked I state that in M/s Vijay Laxmi & Co. use to manufacture gymnasium equipments only for M/s Telebrands (I) Pvt. Ltd., and not anybody else. • I was working with M/s Vijay Laxmi & Co. for more than five years. I am aware of the suppliers of raw materials but I was not aware of how much and which raw material was being shown in the name of M/s. B. N. Enterprises. ....
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....Equipment per year. During the period from October, 2004 to June, 2007 the company has manufactured around 16000 pieces of Gym Equipments and supplied to M/s Telebrands (1) Pvt. Ltd. Bhandup. The value of per piece is Rs. 1237/-. ..." "Today you have shown me a statement of Mr. Bapu N. Dusane dt. 24/7/07 recorded under section 14 of the Central Excise Act 1944. I have carefully gone through the said statement dt. 24/7/07 and put my dated signature on it token of having read and perused the same. In this regard. I state that Mr. Babu Dusane has been working as Consultant Engg.with M/s Vijay Lakshmi & co. Bhandup-west on the monthly basis for the last 5 years. I agree with contents of the statement of Mr. Bapu Dusane that M/s B.N. Enterprises was floated as a manufacturing unit for manufacture of Gym. Equipment for M's Telebrands (I) Pvt. Ltd. from the residence premises of Mr. Bapu Dusane that is flat no. 30.. Trimurthi Co-op Hsg. Scy. R.no. C/3. MHADA colony, Mulund-east. Mumbai- 400081 in the name of Mr. Bapu Dusane as proprietor. I confirm that the Gym. Equipments shown as manufactured and cleared to M/s Telebrands (1) pvt. Ltd. under the cover of Delivery challans a....
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....e M/s Balarajeshwar & Co. and I floated a firm by name M/s Vijaylaxmi & Co. These two firms independently started to manufacture the gymnasium equipment which was supplied to M/s Telebrands. I also wish to clarify that the process involved in the manufacture of this gymnasium equipment is only in the nature of assembly and checking of the various parts, for defects if any. I say that there are standard designs as per which the raw material i.e. the M S Pipes were bent and welded by the job worker. Even the seat to be attached and the rexine covering, powder coating of the equipment was standard as per the sample. The assembly process only required big Staplers and drilling machines. Due to the simple nature of the assembly, there is no need to have any qualified worker to do the job of assembly, though, I admit that the job work of bending of pipe, welding and powder coating may require some technical knowledge. I say that there is no contradiction in the statement of Shri Hitesh Israni that he was in touch with Shri Prakash Pandya and Shri Nandgopal. I further say during the period 2004-05 and 2005-06, there was a tremendous pressure to supply quantity of the exercise ....
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....hreenath Enterprises. I have now been asked to comment on the statement of Shri Ashwini P. Gupta, dated 10.01.08, wherein he has stated that he has not visited the factory/ office premises of M/s BN Enterprises, M/s GEE KAY & Co, M/s Shree Engineering Works, M/s Shreenath Enterprises and M/s Ravi Coats. To this, I say that Shri Ashwini Gupta was introduced to myself and Shri Prakash Pandya by Shri Kiran Khimasiya, a Chartered Accountant, who was regularly filing the returns of M/s GNG & Co, as we had requested that there is no competent person to look after the day to day accounting of our firm, which led to accounting problems. Shri Ashwini Gupta is a free-lance accountant who showed his willingness to handle the regular accounts of our firms. I say that he has started looking after the accounts work on our behalf only after July, 2005. I say that M/s Ravi Coats of Shri Naresh Dedhia was operating prior to this period and was not into any manufacturing activity after Shri Ashwini started handling our accounts, and hence he may not be aware of the manufacturing premises of M/s Ravi Coats. As regards M/s Shreenath Enterprises, I say that at the ti....
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....he is just the front and the entire show is managed by Shri Gopi and Shri Prakash Pandya. You may please comment on the above. A. I have carefully read the question written above. I agree to the fact that we, namely myself and Shri Prakash Pandya had offered to Shri Ganesh Kumar an opportunity to manufacture and supply gymnasium equipment to M/s Telebrands, and in this connection, apart from introducing M/s Shree Engineering Works to M/s Telebrands and all the raw material suppliers, we had also assisted him in opening a bank account. Here I will like to clarify that we had asked Shri Ganesh Kumar to start a new firm because he was earlier a job worker and was not maintaining any books of accounts properly, and M/s Telebrands being a reputed company, they were keen to get supplies from firms who were registered with the Sales Tax authorities, and to avoid any complications with the sales tax authorities, we had suggested that he start manufacturing activity in a new firm. Further, since all payments from M/s Telebrands are through cheque, we had also assisted in introducing the firm of Shri Ganesh Kumar for opening of a Bank Account. I also clarify that M/s Tel....
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.... of the moulds supplied by M/s Telebrands, Shri Gopi and myself identified certain job workers, who were located in and around Saki Naka, who were competent to do the work of pipe bending, welding, powder coating etc. After identification of the job workers, we also identified certain suppliers of the main raw material required, like MS Pipes of various sizes, PVC coated fabrics, plywood supplier etc. Subsequently, we manufactured this exercise equipment in our firm M/s GNG & Co, which was supplied to M/s Telebrands. I here want to clarify that at the time of clearance of the exercise equipment, there was no brand name or trade name affixed by us. equipment was delivered to M/s Telebrands in loose condition. I further say that as explained by me in my earlier statement, the main raw material, MS Pipe is bent to required shape, welded, powder coated and this material was received at our factory premises at Bhandup. Here, the parts were assembled with the help of screw driver and a few other tools. I say that after our supply passed the quality test of M/s Telebrands, they placed bulk orders on us. However, there was certain mis-understanding between Shri Gopi and myself on the finan....
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....so been shown the statement dated 03.10.07 of Shri Subburaj Perumal of M/s Ganesh Enterprises. I have carefully read these two statements and I have put my dated signature on both these statements in token of having read them carefully today. I have also been shown the statement dated 16.10.07 of Shri Sunil Alwani, of M/s Sunil Enterprises, supplier of PVC Coated fabrics. I have carefully read this statement and put my dated signature on it today in token of having read it carefully. My attention is now invited to the statement of Shri Sunil Alwani, wherein he has stated that M/s Ganesh Enterprises was represented by Shri Gopi and Shri Prakash. I have now been asked to clarify on this statement. After careful perusal of this statement I say that myself and Shri Gopi may have initially introduced Shri Subburaj Perumal to Shri Sunil Alwani, for arranging supply of raw material to his firm. My attention is now invited to the statement of Shri Subburaj Perumal, wherein he has stated that though there are different addresses shown for manufacturing of the exercise equipment, the actual manufacturing process took place at Panna House, Devidayal Compound. On being specifically asked, I sa....
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....tary evidences relied in the impugned order also suggest the same. 4.10 M/s Appellants have challenged the findings recorded in the impugned order, specifically citing the judgements wherein it has been held that the financial flow-back has to be established before the clearance of the various units can be clubbed. However we are not in agreement with the above submissions for the reason that the issue involved in the present case is not of the clubbing of clearance of distinct manufacturing units, but is the case wherein persons involved in manufacture and clearance of the goods is found to be one. Instead of treating as case of clubbing, the present case is a case where in the corporate veil needs to be lifted to determine who is the person involved in the manufacture and clearance of the goods, in the name of various units which may be dummy or otherwise. If on lifting the corporate view it is found that the same person is undertaking the manufacture and clearance of goods by utilizing the name of various entities, the clearances made in the name of various entities are to be treated as clearances made by that person. The findings recorded by the Commissioner on t....
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....tic personality of the corporation. It may be that in course of time these exceptions may grow in number and to meet the requirements of different economic problems, the theory about the personality of the corporation may be confined more and more." 13. In Life Insurance Corporation of India v. Escorts Ltd. & Ors. [(1986) 1 SCC 264], this Court again considered this question and said : "While it is firmly established ever since Salomon v. A. Salomon & Co. Ltd. [(1897) AC 22 HL] was decided that a company has an independent and legal personality distinct from the individuals who are its members, it has since been held that the corporate veil may be lifted, the corporate personality may be ignored and the individual members recognised for who they are in certain exceptional circumstances. Pennington in his Company Law (4th Ed.) states : Four inroads have been made by the law on the principle of separate legal personality of companies. By far the most extensive of these has been made by legislation imposing taxation. The Government, naturally enough, does not willingly suffer schemes for the avoidance of taxation which depend for their success on the e....
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.... a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected etc." 14. In M/s. Mcdowel and Company Ltd. v. Commercial Tax Officer [(1985) 3 SCC 230 = (1985) 154 ITR 148], this Court examined the concept of tax avoidance or rather the legitimacy of the art of dodging tax without breaking the law. This Court stressed upon the need to make a departure from the Westminster principle based upon the observations of Lord Tomlin in the case of IRC v. Duke of Westminster [(1936) AC 1] that every assessee is entitled to arrange his affairs as to not attract taxes. The Court said that tax planning may be legitimate provided it is within the framework of law. Colourable devices, however, cannot be part of tax planning. Dubious methods resortin....
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....se authorities are barred from probing anything further to find out who is the person behind these two companies. It is difficult to accept such a narrow interpretation. True that shareholdings in a company can change but that is the very purpose to lift the veil to find out if the two companies are associated with each other. ........ 4.12 Following this decision tribunal has in case of British Scaffoldings India Pvt Ltd. [2014 (313) E.L.T. 87 (Tri - Del)] affirmed by Hon'ble Supreme Court as reported at [2015 (325) E.L.T. A145 (S.C.) held as follows: "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 ....
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....anagement of other companies, irrespective of the latter having separate sales tax, income tax and central excise registration, their clearances have to be clubbed for determining their eligibility for the SSI Exemption Notification No. 1/93-C.E. In this regard, Para 87 of the judgment is reproduced below :- "Whether there is inter-dependence and whether another unit is, in fact, a dummy has to be adjudicated on the facts of each case. There cannot be any generalization or rule of universal application. Two basic features which prima facie show interdependence are pervasive financial control and management control. 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 lakh....
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....osed. The question whether there was manufacture or not was not in issue before the Commissioner. The plea that there was no manufacture has also to be rejected in view of the fact that exemption was claimed by the three companies as manufacturers to avail the benefit of Central Excise Notification No. 1/93. Same view has been expressed by the Apex Court in its judgment in case of Supreme Washers Pvt. Ltd. (Supra). 7.1.2 The Board's Circular No. 6/92, dated 29-5-1992 clarifying that limited companies, whether public limited or private limited are separate entities and each such limited company is a manufacturer 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 Court's 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 S....
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....rent manufacturers, but finished goods are produced using the machinery and product facilities in the unit of the appellant in appeal No. 196 of 2005. We must note here that even in the reply of the appellants in both the appeals to the show cause notice, this factual allegation is not disputed. Therefore, it was rightly held that the clearances are required to be aggregated in terms of the Notification No. 1/93-C.E. We have perused the decision in the case of Gajanan Fabrics relied upon by the appellants. The said decision deals with the peculiar facts of the case before it. In the present case, in view of the admitted facts, clause 3 of the amended Notification No. 1/93-C.E. will apply. Hence, on the aspect of clubbing, it is not possible to find fault with the finding in the impugned judgment." 4.14 In case of Amar Enterprises [2017 (347) ELT 548 (T-Del)] held as follows: "11.1.3 After having gone through the facts on record and the submissions of both sides, we are of the considered view that manufacture and clearances made by the respective noticees/appellants - M/s. Atlantic Chemical Industries, M/s. Foamsil Chemicals (not appellant here) and M/s. Arun Chemi....
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....iling exemption under Notification No. 175/86C.E. by 'artificial fragmentation when there was no distinction in management of the firms'. Therefore, M/s. Arun Chemicals (who is one of the appellants) deserves to be penalized under Rules 9(2) and 173Q of Central Excise Rules. We are giving no specific findings on M/s. Foamsil Chemicals as they are not the appellant here. 11.1.7 From the facts (impugned order Para 99), it is clear that noticee appellants M/s. Atlantic Chemicals played a major role in the manufacturing of the item RBA. Many of the machinery items and facilities for manufacturing are available only with M/s. Atlantic Chemicals. Therefore, after clubbing of clearances of the subject three units, liabilities for payment of duty of Central Excise is hereby fixed on M/s. Atlantic Chemicals. Consequently, the appellant M/s. Atlantic Chemicals is to pay total duty of Central Excise of Rs. 71,06,066/- (i.e. Rs. 38,45,363/- + Rs. 31,39,343/- + Rs. 1,21,360/-) for the RBA manufactured and cleared during 1989-90 to 1993-94. In this regard, corresponding penalty of Rs. 70,20,000/- is also imposed on M/s. Atlantic Chemicals under Rules 2(2) and 173Q of C. Excise Rul....
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....um powder which is the brand name of M/s. Lakme Ltd. We therefore, hold that the three units are the dummies of M/s. Lakme Ltd. 10. The second question was whether the three units were entitled to the benefit of notification No. 140/83, we find that Clause (4) of this Notification reads : 4. Nothing contained in this Notification shall apply, (i) if the aggregate value of clearances of all excisable goods from any factory by or on behalf of one or more manufacturer for home consumption, during the preceding financial years had exceeded rupees twenty lakhs, (ii) if the aggregate value of clearances of the said goods from any factory by or on behalf of one or more manufacturers, for home consumption, during the preceding financial year, had exceeded rupees fifteen lakhs." We find that this Clause is a specific inasmuch as the clubbing of clearances of excisable goods is concerned, it was argued before us, that the three units were independent and they had filed the declaration required under Central Excise Rules for availing the benefit of exemption Notification. In the preceding paragraph, we have already hel....
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....or was a copy of the agreement sent to the Department along with the declaration and therefore, we hold that there was suppression of material facts. Now to examine whether this was done with the intention to evade payment of duty, we find that this arrangement was thought of only to evade payment of duty. This is very clear from the statement of Shri Manish R. Patel and Shri Jayant Divekar. Having regard to the submissions made before us, we hold that there was suppression of material facts and therefore, the demand for a period of five years can be raised. As the show cause notice was issued on 6-9-1990 and the period was after 26-12-1985, we hold that the entire demand is within time." 4.16 In the case of Modi Alkalies [2004 (171) E.L.T. 155 (S.C.)] Hon'ble Supreme Court has held as follows: "8. Whether there is inter-dependence and whether another unit is, in fact, a dummy has to be adjudicated on the facts of each case. There cannot be any generalization or rule of universal application. Two basic features which prima facie show interdependence are pervasive financial control and management control. In the present case facts clearly show financial contr....
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....f the three companies independently. The Circular No. 6/92, dated 29-5-1992 has no relevance because it related to Notification No. 175/86-C.E., dated 1-3-1986 and did not relate to Notification No. 1/93. The extended period of limitation was clearly applicable on the facts of the case, as suppression of material features and factors has been clearly established. If in reality the three companies are front companies then the price per unit to be assessed in the hands of MACL is Rs. 5 and not Rs. 0.50 as disclosed. The question whether there was manufacture or not was not in issue before the Commissioner. The plea that there was no manufacture has also to be rejected in view of the fact that exemption was claimed by the three companies as manufacturers to avail the benefit of Central Excise Notification No. 1/93." 4.17 The reasons recorded by the Commissioner for not allowing the cross examination as requested finds support from the decision of Hon'ble Supreme Court in Case of K I Pavunny [1997 (90) E.L.T. 241 (S.C.)] wherein following has been held: "26. In Naresh J. Sukhawani v. Union of India - 1996 (83) E.L.T. 258 (S.C.) = 1995 Supp. 4 SCC 663 a two-Judge Bench....
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....n 120B etc., are involved. Generally, the evidence in support of the violation of the provisions of the Act consists in the statement given or recorded under Section 108, the recovery panchnama (mediator's report) and the oral evidence of the witnesses in proof of recovery and in connection therewith. This Court, therefore, in evaluating the evidence for proof of the offences committed under the Act has consistently been adopting the consideration in the light of the object which the Act seeks to achieve." 4.18 In case of Telestar Travels Pvt Ltd. [2013 (289) ELT 3 (SC)] Hon'ble Supreme Court has held as follows: "11. The Tribunal has relying upon the decision of this Court in K.T.M.S. Mohd. v. Union of India - (1992) 3 SCC 178, K.I. Pavunny v. Assistant Collector (HQ), Central Excise Collectorate, Cochin - (1997) 3 SCC 721 = 1997 (90) E.L.T. 241 (S.C.) held that retracted statements could furnish a sound basis for recording a finding against the party making the statement. There is, in that view, no gainsaying that the Adjudicating Authority and the Appellate Tribunal have both correctly appreciated the legal position and applied the same to the case at hand, whi....
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....us boils down that the authority or any Court intending to act upon the inculpatory statement as a voluntary one should apply its mind to the retraction and reject the same in writing. It is only on this principle of law, this Court in several decisions has ruled that even in passing a detention order on the basis of an inculpatory statement of a detenu who has violated the provisions of the FERA or the Customs Act etc. the detaining authority should consider the subsequent retraction and record its opinion before accepting the inculpatory statement lest the order will be vitiated..." (emphasis supplied) 18. There is, in our opinion, no merit even in that submission of the learned counsel. It is evident from Rule 3 of the Adjudication Rules framed under Section 79 of the FERA that the rules of procedure do not apply to adjudicating proceedings. That does not, however, mean that in a given situation, cross examination may not be permitted to test the veracity of a deposition sought to be issued against a party against whom action is proposed to be taken. It is only when a deposition goes through the fire of cross-examination that a Court or Statutory Authority may ....
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....itioner." 19. We may also refer to the decision of this Court in M/s. Kanungo & Company v. Collector of Customs and Ors., (1973) 2 SCC 438 = 1983 (13) E.L.T. 1486 (S.C.). The appellant in that case was carrying on business as a dealer, importer and repairer of watches in Calcutta. In the course of a search conducted by Customs Authorities on the appellant's premises, 280 wrist watches of foreign make were confiscated. When asked to show cause against the seizure of these wrist watches, the appellants produced vouchers to prove that the watches had been lawfully purchased by them between 1956 and 1957. However, upon certain enquiries, the Customs Authorities found the vouchers produced to be false and fictitious. The results of these enquiries were made known to the appellant, after which they were given a personal hearing before the adjudicating officer, the Additional Collector of Customs. Citing that the appellant made no attempt in the personal hearing to substantiate their claim of lawful importation, the Additional Collector passed an order confiscating the watches under Section 167(8), Sea Customs Act, read with Section 3(2) of the Imports and Exports (Control)....
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....roducing the documents is not subjected to cross-examination. Such being the case, the refusal of the Adjudicating Authority to permit cross examination of the witnesses producing the documents cannot even on the principles of Evidence Act be found fault with. At any rate, the disclosure of the documents to the appellants and the opportunity given to them to rebut and explain the same was a substantial compliance with the principles of natural justice. That being so, there was and could be no prejudice to the appellants nor was any demonstrated by the appellants before us or before the Courts below. The third limb of the case of the appellants also in that view fails and is rejected." 4.20 In view of the discussions as above we are of the view the appellants namely M/s Vijaylakshmi & and Co and M/s Balarajeshwar & Co, have in fact suppressed their turnover under the cover of corporate veil to avail the exemption under notification no 8/2003-CE dated 01.03.2003, knowingly. Hence their intention to evade payment of duty by resorting to suppression, misstatement is established beyond doubt accordingly the extended period of limitation as provided by proviso to section 11A (1)....