TaxTMI 
TaxTMI 
2004 (8) TMI 108
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....ell are as follows : Respondent no. 1 - M/s. Modi Alkalies & Chemicals Ltd. (in short 'MACL') is engaged in the manufacture of caustic soda of which Hydrogen gas is a by-product. The Central Excise Authorities noticed that in reality MACL was engaged in the manufacture of Hydrogen gas falling under sub-heading 2804.90 of the schedule of the Central Excise Tariff Act, 1985 (in short 'Tariff Act'). But with a view to evade payment of excise duty it floated three front companies, namely, respondent nos. 2 to 4 i.e. M/s. Mahabaleshwar Gas & Chemicals Pvt. Ltd. (for short 'MGCPL'), Shri Chamundi Gas and Chemicals Pvt. Ltd. (for short 'SCGCPL') and M/s. Nippon Gas and Chemicals Pvt. Ltd. (for short 'NGCPL'). All the three front companies were ....
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....efore, concluded that MACL had control over Hydrogen gas even after the stage of bottling till it was sold to the customers. The Balance-sheets and other financial statements of the three units revealed that whatever income they earned had gone to MACL in the form of lease rent of cylinders. One Mr. Sita Ram Goswami, Accountant of MACL and Mr. Ashok Kumar, Chief Operating Officer of MACL admitted that some amount of cash was also collected by MACL over and above the invoice prices of Hydrogen gas supplied by three companies. It was noted that while front companies were being supplied gas by MACL @ 0.50 per unit, till August 1996, the same gas was sold by the three companies @ Rs. 5/- per unit. Keeping in view all these factors the authoriti....
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....e companies, no adverse inference was to be drawn. Even if common staff maintained the records and operated units that would not prove that the companies did not exist or that MACL was the company having manufacturing activities in their premises. Similar replies were filed by the three companies who denied that they were fake units or front companies. It was pointed out that all requisites of central excise laws were followed. There was nothing suspicious in the transactions entered into by them with MACL. 4.After consideration the show cause reply, the Commissioner of Central Excise (Adjudication), Delhi (for short the 'Commissioner') analysed, the factual position and found that this is a clear case where the three companies were dumm....
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....hare capital of Rs. 200 each. The CEGAT has also recorded wrong findings as regards the management and marketing. Though the issue as to whether there was manufacture was never agitated before the Commissioner, the CEGAT on its own came to hold that there was no manufacturing. The conclusion is not supportable on facts and in law. 7.In response, learned counsel for the respondents submitted that the CEGAT has rightly analysed the factual background and came to the right conclusions. It was submitted that the three companies have separate corporate existence, are assessed separately to sales tax and income tax and have central excise registration. They submitted records to the Central Excise Authorities which were being verified by them. ....
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....khs while to SCGCPL it was about Rs. 65 lakhs. The finding of the Commissioner that the financial assistance from the financial institutions were availed with the aid and assistance of MACL has not been seriously disputed. Apart from that, the cylinders were brought on lease by MACL from another concern and were sub-leased to the three companies. The cylinders bore the name of MACL. If the three companies had separate standing as contended it could not be explained why they could not get the cylinders directly from the lessors on lease basis and the need for introducing MACL as the lessee and then the three companies becoming sub-lessees. As noted by the Commissioner, entire receipts were paid as lease amount to MACL. Here again, the under-....