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Jagjivandas and Co. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)LC17Tri(Delhi)
AppellantJagjivandas and Co.
RespondentCollector of Central Excise
Excerpt:
.....used by other two concerns ; viii) that a letter was written to the government of maharashtra by jagjivandass & co. requesting the government to combine the units of energy consumed by the five units (belonging to the same management) for calculating their quota of electric energy; (iv) that the telegraphic address 'gaushala' was common for all the three concerns.we may first discuss items 2, 6, 8 and 9 of the circumstances relied on by the learned collector. it is well known that in bigger cities telephones are difficult to obtain and, therefore, if the three firms which consist of relations gave out common telephone as their address, it cannot be considered a strong circumstance for concluding that their manufacture or clearances were on behalf of one. about item 6, shri sahni.....
Judgment:
1. The question for decision in this appeal, originally filed as Revision Application to the Government of India, relates to correctness or otherwise of Order-in-Original dated 21-4-1982 passed by the Collector of Central Excise, Bombay-II. By the said order, the Collector held that the goods manufactured by M/s. Babu Lal Bhoti Lal & Co. and M/s. Hind Industries were in fact manufactured by or on behalf of one manufacturer i.e M/s. Jagjivandas & Co. He accordingly ordered M/s. Jagjivan Dass & Co. (hereinafter called M/s. Jagjivan Dass and the other two concerns hereinafter called M/s. Babu Lal and M/s. Hind) to pay Central Excise duty amounting to Rs. 3,15,728.27 and he further imposed a penalty of Rs. 10,000/- on the appellants and the other two purported concerns.

2. Facts material for decision of this appeal are that Notification No.176/77-C.E., dated 18-6-1977 as amended grants exemption in the matter of Central Excise duty on the basis of clearances. There is no dispute that if the clearances of the appellants and two other concerns described above are clubbed together, they would exceed the stipulated limit under the Notification, aforesaid. The proceedings against the appellants commenced as a result of search dated 21-2-1979 by the Officers of the Directorate of Revenue Intelligence (AntiEvasion Wing), Central Excise, Bombay. The Officers after the search and investigation felt that the clearances made by the other two firms viz. M/s. Babu Lal and M/s. Hind were for and on behalf of M/s. Jagjivan Dass. Show Cause Notice dated 14-8-1979 was then served on the appellants M/s. Jagjivan Dass, M/s. Babu Lal and M/s. Hind. The three firms filed replies denying the allegations and contended that the firms were separate and distinct and their clearances could not be clubbed. The Collector after complying with the usual procedure demanded Central Excise Duty and imposed penalty, as already described above.

3. Aggrieved with the order, the appellants filed Revision Application which is the present appeal to the Tribunal. Point as to M/s, Babu Lal Bhoti Lal & Co. and M/s. Hind Industries not having filed appeal to the Tribunal raised at the fag end of the hearing may be disposed of first.

The appeal was heard on a number of days and finally on 17-9-1984. This objection as to M/s. Babu Lal Bhoti Lal and M/s. Hind not having filed an appeal was not taken at the earliest opportunity. Besides, the memo, of appeal shows that though these parties may not have described themselves as appellants in the title of the appeal, they figure in para 5 of the Memo, of appeal. The fact that they are not included in the title of the appeal is only of an academic importance particularly when only one common order in respect of the three parties is passed.

Besides, the order is joint and several and the order against the appellants M/s. Jagjivan Dass is not separable from the order against M/s. Babu Lal Bhoti Lal & Co. and M/s. Hind Industries. This apart, the Collector has proceeded on the basis that the two firms M/s. Babu Lal Bhoti Lal and M/s. Hind are only purported concerns of M/s. Jagjivan Dass. Taking all this into consideration we attach no importance to the fact that M/s. Babu Lal Bhoti Lal and M/s. Hind have not joined in the title of the Memo, of appeal as appellants. We reject this belated objection.

4. Shri P.S. Sahni, learned Advocate for the appellants, in his written and oral submissions argued that there is only one common partner in the three partnership firms M/s. Jagjivan Dass & Co., M/s. Babu Lal Bhoti Lal and M/s. Hind Industries. The three firms were registered on 8-12-1960, 1968 and 1966 respectively long before Tariff Item 68 came on the Statute book. Therefore to say that the firms were not real or were illusory and were brought into existence to evade payment of Excise duty was wholly unjustified. The site plan for the three factories was separately approved. Each of the three firms is separate and independent in the eyes of law. The nine circumstances pieces of evidence on which the Collector concluded the clearances of the latter two firms as being that of appellants M/s. Jagjivan Dass were strongly criticised by him. He said that the circumstances were either not proved or were so innocuous that the adverse conclusion could not be drawn. He also urged that in any case demand of duty should have been restricted only to a period of 6 months preceding the date of show cause notice in which case it would work out only to Rs. 5,568.43. He also argued that the three firms were separately registered and had separate incometax and sales tax numbers, separate SSI registeration numbers, separate approved site plans, line of products of all the three firms is by and large separate. He also argued that disputes between employees and employer were separately settled by the three management of the firms and Union of Employees. No employee is common in three firms. He also stated that there is no allegation that the firms were on papers, only and the partners were name lenders; the firms were living firms and actively were firms. Shri Sahni, learned Advocate for the appellants, relied on the following decisions in support of his arguments that the clearances of the three firms could not be clubbed for determining eligibility of concession under Notification No. 176/77-C.E., dated 18-6-1977: (i) Chanderasekar Bharathi Weaving Mills and Ors. v. A.C.C.E., Sivakasi andAnr. 1981 E.L.T. 62; (ii) Jaswant Sugar Mills Ltd., Meerut v. Union of India and Anr.

1981 E.L.T. 177 ;Jay Engineering Works Ltd. and Anr. v. Union of India and Ors.

(v) Smt. Shyam Kumari, Baraut and Ors. Order-in-Appeal No. 103-105 of 1982 dated 24-4-1982, 1982 E.L.T. 329 ; (vi) Jai Glasskow Jaipur Order-in-Appeal No. 61-B dated 20-3-1982, 1984 E.T.R. 359 ; (vii) Mis. Meteor Satellite Ltd., Ahmedabad and M/s. Telstar Electronics, Ahmedabad Order No. 295-96/1984-B, dated 3-4-1984.

5. On behalf of the respondent, Shri V. Lakshmi Kumaran, S.D.R., besides the objection as to nonjoinder of M/s. Babu Lal Bhoti Lal and M/s. Hind, to the memo, of appeal, which has already been dealt above, frankly admitted that if the various circumstances and pieces of evidences against the appellants were considered individually and in isolation, the law was against the respondent and of such individual consideration and in isolation no case would be made out against the appellants. He however submitted that if the circumstances were considered cumulatively, irresistible conclusion would be that the clearances made by the two firms M/s. Babu Lal Bhoti Lal and M/s. Hind were for and on behalf of M/s. Jagjivan Dass and therefore the appellants could not claim the benefit of the exemption notification.

In this connection, he also read out the statements made by Shri Bhogi Lal Keshav Lal Shah, common partner in the three firms. He also submitted that there were frequent financial transactions between three firms without charging any interest. He further submitted that whereas the appellants M/s. Jagjivan Dass had Central Excise Licence, the other two firms M/s. Babu Lal Bhoti Lal and M/s. Hind had no Central Excise Licences and were working on the strength of licences of M/s. Jagjivan Dass. He, therefore, submitted that the clearances of the three firms had rightly been clubbed together. He justified the demand of Central Excise duty and imposition of penalty. He relied on the Supreme Court decision in Shree Agency v. S.K. Bhatacharya, 1977 E.L.T. 168.

6. We may first deal with the Supreme Court decision in Shree Agency v.S.K. Bhatacharya strongly relied on by Shri V. Lakshmi Kumaran. A perusal of that judgment shows that the Supreme Court held that the Departmental authorities having been invested with jurisdiction to decide the questions, the conclusions are not open to review by this Court (S.C.) by way of revaluation of matter on record. The Tribunal is to evaluate the facts itself and therefore the decision in which the Supreme Court declined to interfere with order or conclusion, amply supported by evidence on record, on the ground that it was vitiated by any legal error or cause injustice to the party concerned, may not be strictly helpful. For decision in this case if on facts and law it be found that the three firms were distinct and separate, their clearances should not be clubbed together. Para 21 of the findings of the Collector shows that the Collector based his decision on the following 9 pieces of evidence or circumstances : (i) All the three factories are situated in one compound ; (ii) they have a common telephone ; (iii) some of the partners of the three concerns are common ; (iv) that the goods are stored in a common storage place ; (v) the trade mark 'Jiven' belonging to Jagjivandas & Company is used by Babu Lal Bhoti Lal & Company ; (vii) that some of the machinery belonging to Jagjivandas & Company is used by other two concerns ; viii) that a letter was written to the Government of Maharashtra by Jagjivandass & Co. requesting the Government to combine the units of energy consumed by the five units (belonging to the same management) for calculating their quota of electric energy; (iv) that the telegraphic address 'Gaushala' was common for all the three concerns.

We may first discuss Items 2, 6, 8 and 9 of the circumstances relied on by the learned Collector. It is well known that in bigger cities telephones are difficult to obtain and, therefore, if the three firms which consist of relations gave out common telephone as their address, it cannot be considered a strong circumstance for concluding that their manufacture or clearances were on behalf of one. About Item 6, Shri Sahni has contended that this is absolutely incorrect. According to him, M/s. Babu Lal Bhoti Lal are tenants of shop No. 7 and M/s.

Jagjivan Dass are tenants of shop No. 4, M/s. Hind have no shop in their name and have been allowed a table space by M/s. Jagjivan Dass in their shopcum office. We agree with his argument that in most of commercial towns and cities this practice is common and this by itself would not prove that firms are one and the same. This circumstance would have to be ignored. About the eighth item of the evidenceabout the letter written to Government of Maharashtra for combining units of energy consumed by 5 units (there were two more units namely, Kamlesh Metal Industries and Jeevan Fabricators; these two have not been proceeded against in these procee dings) -in these days of shortage of power if for making proper use of power, a letter like the one under reference was addressed to Maharashtra Government, the same would not weigh against the appellants for concluding their clearances to be common. About Item 9, the telegraphic address of the three concerns as Gaushala, it has been explained that this address is used for the whole of the complex and all the shops situated within that complex use the same telegraphic address. It was submitted that there were about 50 shops using the same address. Regard being had to this explanation we attach no importance to this circumstance of the telegraphic address of the three concerns being common. Of the remaining circumstances, Item 1 all the three factories being situated in one common compound, from the copy of the approved plan filed before us we find that this was well within the knowledge of the Excise authorities when they approved the plans. This circumstance should therefore be excluded. About Item 3, some of the partners of the three concerns being common, it has to be remembered that the three concerns were registered well before the Tariff Item 68 came on the Statute Book and before the subject notification in question came into force. There are a number of decisions that commonness of partners would not invariably show that the clearances of the firms are no behalf of one another. Considering all the circumstances, we do not attach much importance to this piece of evidence. About Item 4th, goods being stored in common storage place, Shri Sahni challenged this finding, stating that seizures were made from different places. It is wrong to say that they were stored in a common place. Perusal of the orders of the Collector shows that though he referred to this circumstance as a piece of evidence, but he has not expressed any opinion about the same in the discussion part of his order. This circumstance therefore cannot be used for basing the finding. About the 5th circumstance i.e. Trade Mark 'Jivan' belonging to M/s. Jagjivan Dass being used by M/s. Babu Lal Bhoti Lal, Shri Sahni, learned Advocate for the appellants has explained that this trade mark was registered only 4 months before the seizure in favour of M/s. Jagjiveen Dass. He submitted that there is no record showing that name (trade name) was found used on the goods found in the factory premises. Some of the goods found in the shop premises of M/s. Babu Lal Bhoti Lal had shown the trade mark 'Jiven' but the shop premises are different from the factory. Considering however the unchallenged submission that trade mark was registered only 4 months before, and perusal of the seizure records not showing that other two firms at the material time produced the goods bearing this trade mark, we do not find that this circumstance is conclusive against the appellants. Apart from this it was also brought to our notice that the Trade mark was registered only with respect to certain Items (No. 21) in favour of M/s. Jagjivan Dass and not in respect of those items which were produced by the other two firms. Apart from this there are decisions that mere use of brand name could not make one a manufacturer by or on behalf of other. We do not consider this circumstance conclusive against the appellants. About the 7th item in the circumstances, some of the machinery belonging to M/s. Jagjivan Dass and Co. being used by the other two concerns, the nature and extent of their use is not very clear from the order. Shri Sahni in this connection has explained that M/s. Babu Lal Bhoti Lal and M/s. Hind Industries manufacture only small utensils and there is no occasion for them requiring use of bigger cutting circle. From these two concerns only small utensils like Katories, glass and spoons have been recovered and not bigger utensils.

Occasional use of Jagjivan Dass and Co's buffing machine by the remaining two firms by itself would not make the three concerns working for and on behalf of one another on this circumstance alone. The learned Collector in this connection has observed that none of the three units is selfcontained in the matter of plant and machinery and utilisation by one of the facilities available with the other is in a manner as if they are all parts of the same organisation. We have failed to appreciate this observation. The three units are admittedly registered as small scale units. The nature and extent of use of the machinery between one or the other is not quite clear from the record and in absence of the same it is not possible to appreciate this piece of evidence. While frequent use might raise a strong inference against a party but from stray use such conclusion may not be possible to be drawn. In the absence of proper particulars we do not find this circumstance conclusive against the appellants. Shri Lakshmi Kumaran, learned S.D.R. argued that there was free mutual flow of finance between the three concerns without charging any interest and therefore it had to be held that they were under the same management. Shri Sahni, learned Advocate for the appellants in this connection explained that such commercial transactions were common in trade circles. In any case the partners in the three firms were close relatives and these transactions were accounted for in the accounts books. In our opinion these are their duty as common mutual transactions between three firms and the mere fact that they did not charge interest against one another on these transactions when they are doing so against others could not be a conclusive circumstance to find against the appellants that their clearances were for and on behalf of one another.

As to Shri Lakshmi Kumaran's contention that M/s. Babu Lal Bhoti Lal and M/s. Hind had no Central Excise Licence and were working on the strength of licence granted to M/s. Jagjivan Dass, we find considerable force in Shri Sahni's contention that this allegation was not stated in the Show Cause Notice nor was it considered as a circumstance against the party before the lower authorities. He also explained that as latter two were free from excise control under Examption Notification no licence was necessary. We do not consider this circumstance against the party as the same was not the subject- matter of the show cause notice or in the order before the lower authorities. The appellants and the other two firms were registered as firms long before Tariff Item 68 came on the statute book and the Notification No. 176/77-C.E. dated 18-6-1977 was promulgated. The parties have separate income-tax registration, sales-tax registration, registration as small scale units, separate electricity meters. The various circumstances relied on by the Department for fastening the appellants with liability have been discussed above. It would be seen that while some of the circumstances are innocuous, the remaining circumstances are either not proved or are innconclusive. We therefore find that the Department has failed to bring home the allegations against the appellants. We, therefore, set aside the impugned order and allow the appeal.


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