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Wandrobes and ors. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Judge
Reported in(1992)(42)LC86Tri(Delhi)
AppellantWandrobes and ors.
RespondentCollector of Central Excise
Excerpt:
1. all the three appeals arise from a common order passed by the collector of central excise, bangalore. hence, they are taken up together for the disposal as per law. by this impugned order, the learned collector has held that the clearances of all the three units are required to be clubbed together for the purpose of examining the benefit of notification no. 83/83 dt. 1.3.1983 as amended on the ground that they are not eligible for the exemption separately, although they are independent entities on paper; as they have manufactured their goods in the same factory using the same machinery held that since the units namely, raineo industries and wardrobes had manufactured steel furniture with the help of some machinery, the clearance of both the parties should be clubbed for the purpose of.....
Judgment:
1. All the three appeals arise from a common order passed by the Collector of Central Excise, Bangalore. Hence, they are taken up together for the disposal as per law. By this impugned order, the learned Collector has held that the clearances of all the three units are required to be clubbed together for the purpose of examining the benefit of notification No. 83/83 dt. 1.3.1983 as amended on the ground that they are not eligible for the exemption separately, although they are independent entities on paper; as they have manufactured their goods in the same factory using the same machinery held that since the units namely, Raineo Industries and Wardrobes had manufactured steel furniture with the help of some machinery, the clearance of both the parties should be clubbed for the purpose of exemption under notification No. 83/83 as amended and that they are liable to pay Central Excise duty on the goods cleared in excess of exemption limit of Rs. 7.5 lacs.. The learned Collector has considered the defence put forth by the party unable to show cause by which they have stated that the clearances made by them during the period 1980-81, 1981-82, 1982-83, and 1983-84 includes the clearances of goods falling under TI 68 during the above said periods and such clearances has to be excluded as the same were well within the limit of exemption limit of Rs. 30 lacs. The learned Collector has also examined the invoices produced by the parties along with their replies and has held that most of the invoices had been taken into account while calculating the aggregate clearances made by the parties during the period in question. On this account he has given some relief yearwise and in few cases he has rejected the benefit on the ground that there is no documentary proof with regard to these goods being actually used for interior declaration (sic). He has upheld the department's allegation of suppression and has held that the Raineo had suppressed the facts of using the machinery released to M/s. Wardrobes Bangalore to utilise the said machinery in the manufacture of steel furniture. He has held that the parties had failed to inform the department regarding the leasing out their machinery to M/s. Wardrobes Bangalore. He has also held that while filing the declaration the department had failed to reveal the utilisation of the machinery of M/s. Raineo Industries. He has also held that the facts of the case reveal that M/s. Wardrobes Bangalore have no separate office no separate godown for storing raw material or finished goods. He has also held that mahazar dt. 11.1.1984 confirmed that there is no clear cut demarcation between the two units. He has also noted their existence of inter-communicable doors between the two units. Therefore, from these facts he has inferred that M/s. Wardrobes had been floated by Raineo Industries with intention to evade payment of duty by claiming exemption for the other unit also. He has also held that the goods cleared under invoice of Raineo Industries and M/s.

Wardrobe, Bangalore are actually manufactured in the factory of Raineo Industries, Bangalore. He has also held that the machinery leased out by Raineo Industries to Wardrobes Bangalore are not being used exclusively by Wardrobes, and that it is being used by Raineo Industries also. Therefore, he has held that the goods had been manufactured in the factory premises of Raineo Industries and therefore, they are the persons who are liable to pay Central Excise duty on the goods manufactured and cleared from their factory in excess of exemption limit as specified in the relevant notification during the period in question. The learned Collector has justified the invoking of larger period in the proviso of Section 11A of the Act. Finally, he has ordered for confiscation of the goods seized from Raineo Industries valued at Rs. 21,600/- under Rule 173Q of the one of the Central Excise Rules, 1944, who has given option to redeem the same on payment of redemption fine of Rs. 5000/-. The duty of Rs. 2,80,217.13 has been confirmed upon M/s. Raineo Industries under Rule 9(2) of Central Excise Rules read with proviso to Section 11A of Central Excises and Salt Act, 1944 on the steel furniture and parts thereof cleared without payment of duty during the period 1980-81 to 1983-84. He has also imposed a personal penalty of Rs. 25,000/- on M/s. Raineo Industries, Bangalore under Rule 173Q(1) of Central Excise Rules. He has imposed personal penalty of Rs. 1000/- on Ms. Wardrobes under Rule 52A of Central Excise Rules 1944 for having transported the non-duty paid excisable goods from M/s. Raineo Industries. He has ordered for confiscation of steel furniture valued at Rs. 95,585/- from M/s. MM Agencies Pvt. Ltd. under Rule 173Q(1), 210 of Central Excise Rules 1944 and has given an option of redemption on payment of Rs. 25,000/- under Section 34 of the Central Excises and Salt Act, 1944.

2. The case had arisen as a result of the visit of Supdt. of Central Excise, Penaya, Bangalore to the unit of M/s. MM Agency on 11.1.1984.

One Shri S.R. Shetty, one of the Directors of the Company was present at the time of visit who has produced the book of accounts maintained by them. The Supdt. seized the same and thereafter visited the residential premises of one Shri A. Sudhakar Rai, Managing Director of M/s. MM Agencies on the same day and seized incriminating records under a Mahazar dated 11.1.1984. Thereafter, a visit was made on the same day to the factory premises of M/s. Raineo Industries, Shri A. Sudhakar Rai, proprietor of the said unit was present at the time of said visit.

He informed the officers that totally there are three units viz. M/s.

Raineo Industries; a proprietory concern and manufacturers of steel furnitures.

(ii) MM Industries, a Private Limited Company and manufacturers of wooden furniture; and (iii) M/s. Wardrobes, a proprietory concern, manufacturer of steel furniture constituted in the same premises.

3.The officers went round the factory along with the said Shri Sudhakar Rai. In the ground floor of the building the front portion of the hall was equipped with the following machinery: It was reported that the front portion of the hall and the machinery installed in the said portion belonged to M/s. MM Agencies. The remaining portion of the hall was divided into three portions with concrete bricks and iron grills work about 8 ft height. It was reported that one portion belonged to M/s. Wardrobes and the other two portions belong to M/s. Raineo Industries. The officers found the following machineries installed in the portion of M/s. Raineo Industries: 4. In the portion of M/s. Wardrobes, following machineries were found to be installed: 5. Shri Sudhakar Rai informed the officers that there is only one electric meter for lighting and one for power and they arc in the name of M/s. Raineo Industries. It was also ascertained by the officers that M/s. Raineo Industries had made an agreement with the other two units for hiring building machinery and electricity. M/s. MM Agencies and M/s. Wardrobes were paying Rs. 4000/- and Rs 3700/- per month respectively to M/s. Raineo Industries towards hire charges. It was also ascertained that M/s. Wardrobes had no separate painting facility and the spray painting machine of M/s. Raineo Industries is being utilised for painting purposes. The officers also noticed three godowns behind the main building. Godown No. 1 was stored with wood and was reported to belong to M/s. MM Agencies, Godown No. 2 was stored with finished steel furniture, slotted angles and filing cabinets. It was ascertained that the Godown No. 2 belonged to M/s. Raineo Industries and the goods stored in the said godown belong to M/s. MM Agencies. The Godown No. 3 said to be stored with steel furniture belong to M/s.

Raineo Industries and the goods stored were reported to be hypothecated to M/s. Vijaya Bank. The officers visited the first floor of the portion of the said building and seized incriminating records pertaining to M/s. Raineo Industries, M/s. Wardrobes and M/s. MM Agencies under a mahazar. They also visited second and 3rd floor of the front building and found different varieties of steel furniture. It was also seized under a mahazar.

6. The officers on 12.1.1984 visited M/s. Raineo Industries. They checked the godowns and found some finished steel furniture valued at Rs. 27,075/-. The officers therefore seized the said furniture and incriminating documents.

7. The officers on scrutiny of records found M/s. Raineo Industries having crossed the exemption limit and have cleared the goods without payment of duty. The Raineo Industries had floated the unit of M/s.

Wardrobes with intention to avail exemption for both the units with a view to evade Central Excise duty. Therefore, the goods were also seized which were valued at Rs. 1,17,185/- belonging to M/s. Raineo Industries.

8. The statement of Shri Sudhakar Rai was also recorded. He had stated that M/s. Wardrobes is situated in a small portion of the premises of Raineo Industries and Shri A.G. Vijayakumar, his nephew is the proprietor of the said firm and that portion of the factory premises of Raineo Industries had been leased out to M/s. Wardrobes and that Wardrobes were paying Rs. 3700/- per month being rent for utilisation of a portion of the building, electric power and required machinery and that MA. Wardrobes were purchasing raw materials independently from the market and manufacturing steel furniture and that M/s. MM Agencies were purchasing steel furniture from M/s. Wardrobes also. It was stated that Shri Vijayakurhar is an independent assessee and was filing separate returns to Central Excise, Sales Tax and Income tax separately. The statement of Shri Vijayakumar, proprietor of M/s. Wardrobes on 31.1.1984 also stated that he has been working as supervisor in MM Agencies. He confirmed the statement of the said Sri Sudhakar Rai,.

proprietor of M/s. Raineo Industries. The officers scrutinised the entire clearance for the years 1979-80, 1980-81, 1981-82, 1982-83 and 1983-84. On the basis of the said clearances the department issued the show cause notice dt. 20.6.1984 under the various provisions of Excise Law.

9. When the case was called Shri N. Singh, consultant appeared for the appellants and submitted that the appellant had already filed written statements and he would reiterate the same. He relied on two rulings as given in the case of Silver Chem Industries v. CCE as reported in 1991 (32) ECR 210, and in the case of International Dyestuff Mfg. Co. v.CCE, Baroda, as reported in 1991 (33) ECR 31.

10. In the written submissions, the appellants contended that the learned Collector had accepted and admitted a few facts viz.: iii) Filing separate monthly and yearly declaration with excise departments; vi) Submitting intimation to Inspector of Factories as required under releasing of premises; 11. It has been contended by the appellants that M/s. Wardrobes and M/s. MM Agencies Ltd. were quite distinct and having separate entity.

They were carrying on independent business with their own funds, employing labour out of their own funds and conducting manufacturing activity of its own account. It was also contended that M/s. MM Agencies was also doing trading business in the capacity of trader that buying and selling furniture. It was contended that M/s. Wardrobes was not manufacturing and clearing and hence there was no need to settle in store room approved under Rule 47 of Central Excise Rules, 1944. It was stated that M/s. Wardrobes was submitting declaration in terms of notification No. 111/78 and thereafter under notification 2/81 to the jurisdictional Supdt. for the year 1978-79, 1980-81,1981-82,1982-83 and 1983-84 giving all the particulars required in the proforma set out in the said two notifications. It was contended that the Supdt. was satisfied with the said declarations and had accepted the same, and they contended that M/s. Wardrobes and MM Agencies were entitled for exemption from the operation of Rule 174 of Central Excise Rules from maintaining detailed stock account of the excisable goods manufactured and making clearance under the cover of challan and submitting monthly returns in a simplified form. M/s. Wardrobes had contended that it was not correct that clearances of goods made by them was manufactured and cleared by M/s. Raineo Industries and they also denied the allegations that they had floated M/s. Raineo Industries. It was contended that they were independent entity and was entitled to the exemption under the aforesaid notifications. M/s. MM Agencies also contended that the steel furniture found in their premises was not manufactured by them but had been purchased under proper invoices from M/s. Raineo Industries and M/s. Wardrobes and that they were obtained from units which were availing exemption from Central Excise duty. The Bills of purchase had been produced for verification. They have heavily relied on the lease agreement entered into between them to claim benefit of the notification. It is their contention that merely because there was a common use of machinery and equipment it did not result in dummy concern. In this connection, they have relied on the ruling rendered by the Tribunal in the case of Shri Jagjivan Das v. CCE and also on the Board's Circular letter No. 350/57/77-TRU dt.

21.1.1978. They have also relied on the ruling as rendered in the case of Aroma Apparels v. CCE as . They have also relied on the ruling rendered in the case of Shakti Udyog v. CCE as and in the case of Auto food (sic)Aruna Industries v. CCE and Modem Paper Industries 12. They also contended that the department is not entitled to involve larger period under proviso of Section 11A of the Act in view of declarations filed by M/s. Wardrobes since 1978. In this connection they have relied on the following rulings: 13. They contended that the clearance of each unit is less than the stipulated exemption limit in terms of notification No. 71/78-CE dt.

1.3.1978, 80/80-CE dt. 19.6.1980 and 83/83-CE dt. 1.3.1983. On the basis of these submissions they have sought for setting aside the impugned order.

14. Smt. J.M.S. Sundaram, learned SDR while defending the order of the learned Collector submitted that all the three units were working in one premises and that the final product, namely, steel furniture were being sold through MM Agencies. She contended that M/s. Raineo Industries were owning the machines, while M/s. Wardrobes were also working in the same premises on a lease document which is nothing just to evade excise duty. She contended that MM Agencies was an outlet for their product. She contended that the common use of machinery, building, power and light would all indicate that they are part of single unit and that this alleged suppression of ownership done with a view to evade payment of duty. The fact that all the three units were having their offices also situated in the same building would also lend credence to the plea that three units are nothing but a single unit.

15. On a query from the Bench as to whether the allegation that they are dummy units, she replied that the Collector has not given any findings about this but an inference can be drawn to that extent. She contended that they are separate entities only on paper and therefore, they are not entitled to the benefit as the clearances of goods have emerged from the same factory. She contended that declaration filed by M/s. Wardrobes did not disclose the fact of lease deed of other two units functioning from the same building and therefore, the declaration not being complete, it can be presumed that the party has deliberately suppressed information to evade duty.

16. We have carefully considered the submissions made by both the sides and have also perused the records and the written submissions filed by the appellants in this case. The question arises for our consideration is as to whether all the three appellants are separate units or the Raineo Industries has suppressed the facts of actual production of steel furniture by using their machineries in their factory premises, by floating one more unit in the name of M/s. Wardrobes deliberately to avail exemption under notification No: 71/78, 80/80 and 83/83 as amended, during the said period as noted and alleged in para 11 of the show cause notice. Does the clearances of Wardrobes are required to be clubbed with the clearances of M/s. Raineo Industries for the purpose of examining the exemption under the said notification or the appellants made in the show cause notice barred by time.

17. We have to examine the above questions from the facts which are drawn from the investigation and the allegations made in the show cause notice. The departmental authorities and the learned Collector have not alleged in the show cause notice that the two units, namely, Wardrobes and MM Agencies Pvt. Ltd. are dummy units set up by Raineo Industries with a view to avail the exemption under the said notifications. The department has not challenged the existence of three units working independently. The learned Collector in his order has admitted that they are independent entities on paper but however, he is unable to accept that these units could be considered for the benefit of grant of exemption under the relevant notifications. The relevant portion of his order as noted in para 19.2 is reproduced below: The parties in their replies to show cause notice and the consultant during the course of personal hearing contended that both M/s Raineo Industries, Bangalore and M/s Wardrobes Bangalore are separate legal entities and are entitled for separate exemption under Notification No. 80/80 as amended. The fact that both M/s Raineo Industries and M/s Wardrobes, Bangalore in the manufacture of steel.furniture. The goods manufactured by them have been emerged out from the same factory. The Notification No. 83/83 dated 1.3.1983 as amended exempts the specified goods cleared for home consumption on or after 1st April of any financial year, by or on behalf of a manufacturer from one or more factories: in the case of first clearances of specified goods upto an aggregate value not exceeding Rs. 7,5 lakhs, from the whole of the duty of excise leviable thereon under Section 3 of the said Act.

Provided that the aggregate value of clearances of the specified goods from any factory by or on behalf of one or more manufacturers in any financial year shall not exceed Rs. 7.5 lakhs.

I find from the records that both M/s. Raineo Industries, Bangalore and M/s. Wardrobes, Bangalore though they arc independent entities on paper have manufactured goods in the same factory and have availed exemption under Notification No. 83/83 as amended separately. The inception of the words "any factory" in the above-mentioned proviso of the Notification No. 83/83 as amended is more significant, in that, by the inception of the said words in the proviso, it is clear that the exemption is restricted not on the basis of manufacture but on the basis of production from a factory during a financial year. In other words, the benefit is limited to the value of the goods manufactured and cleared from a factory during the financial year. Hence, M/s.

Raineo Industries, Bangalore and M/s. Wardrobes, Bangalore though they are separate entities on paper, they are not eligible for exemption under Notification No. 83/83 as amended, separately as they had manufactured their goods in the same factory using the same machineries. On the whole, a factory is entitled for exemption up to Rs. 7.5 lakhs during a financial year whether the manufacturer is one or more. Since both the parties have manufactured steel furniture with the help of same machineries, the clearances of both the parties should be clubbed for the purpose of exemption under Notification No. 83/83 as amended, and M/s. Raineo Industries and M/s. Wardrobes, Bangalore are liable to pay Central Excise duty on the goods cleared in excess of exemption limit of Rs. 7.5 lakhs, without payment of duty.

The court's Judgment and decisions of Board quoted by the parties is related with 'manufacture', partnership etc. and none of the cases quoted by them is relevant to the instant case which speaks of the usage of the same machineries/factory by both the parties in the manufacture of steel furniture.

17. The entire case has to be examined in the light of the above findings. The question is as to whether use of some machinery, power, light, office facility by two independent units with different owners registration separately under the Factories Act as well as Sales Tax Act and Income Tax Act would disentitle from the grant of exemption under notification and such common use would require the clubbing of clearances for the purpose of the notification.

18. In order to appreciate the findings, it is necessary for us to examine some of the citations on this issue. In the case of International Dyestuff Mgs. Co. v. CCE as reported in 1991 (33) ECR 31.

In para 5 and 6, the Tribunal has observed as follows: 5. From the records, we find that the Department had knowledge of the fact of M.R. Shah, Proprietor of P.J. Texdyes, being the son of Rajnikant Shah, one of the partners of the appellant firm. There is no prohibition against a blood relative of a partner of a firm commencing his own business of manufacture of the same goods. The proximity of the 2 premises and sharing of staff is also not prohibited under the CESA or Rules. Both units were purchasing their own raw material and manufacture was carried on with separate machinery, equipment, power and workers. Separate statutory records were being maintained. There is no evidence to establish manufacture of unaccounted dyes. No show cause notice was issued to P.J. Texdyes, though clearance value of both units has been clubbed for the purpose of eligibility to exemption under Notification No.71/78-the value of both taken together exceeds the limit of Rs. 15 lakhs and therefore the appellant has been held to be not entitled to exemption for clearance value of 1st Rs. 5 lakhs during 1979-80, and hence liable to pay duty on the entire clearance value of goods cleared from both units in 1979-80 and duty on value of goods cleared from both units in excess of Rs. 5 lakhs in 1978-79.

6. Several decisions of the Tribunal have taken the view that close relation between partners of one firm and proprietor of another concern, use of staff etc. are not sufficient to hold that both units are one and the same, justifying clubbing of value of clearances. It has been held by the Tribunal in the case of Shree Packaging Corporation, Hyderabad v. CCE Hyderabad 1987 (27) ELT 94 : 1988 (16) ECR 227, that "there is nothing in law to prevent close relations of partners of one firm forming themselves into a separate and distinct partnership even for the purpose of carrying on the same type of business. Unless there is some proof that the finances of the 2nd firm flowed out of the 1st firm and that the profits, or, at least part thereof, flowed back to the 1st firm, it would not be open merely on the basis of surmises and conjectures, to conclude that the 2 firms are not dlninct". Applying this test in this case, there is no proof of either common funding or financial flow-back.

In these circumstances, we set aside the impugned order and hold that the appellants arc entitled to exemption in terms of Notification No. 71/78.

19. A similar question arose in the case of CCE v. Auro Food Pvt. Ltd. (supra). The Bench examined the question of the definition of manufacturers as given in Section 2(f) of Central Excises and Salt Act, 1944 and in this connection has held that Indian Metal Industries and Aurofood said to have engaged in the production of manufacture of tin cans. This finding has been given on the basis of two firms who are completely independent and that one is not a front for the other and also that Indian Metal Industries is not a subsidiary of/or subservient to or under the control of Aurofood. It was held that Indian Metal Industries produce the tin cans as part of their own perfessional work for which they were paid price by M/s. Aurofood. It was held that M/s.

Aurofood did not engage in the production of tin containers more than a man who places an order for a pair of shoes to be made by a professional shoemaker engaged himself in shoe making even if he should supply the leather or other wherewithals; or a man who places an order for a coat out of a material he delivers engage himself in the work of tailoring. It was also held that there is no law for deeming a man to be a manufacturer unless he is really a manufacturer. This ruling relied by the appellants is not directly on the issue in question.

19 (sic). The ruling relied in the case of CCE v. Pharmasia Pvt.

Ltd. pertains to provisional assessment and not on the issue in question and therefore is not directly helpful to answer the point in controversy.

20. In the case of Aroma Apparels v. CCE Bombay (supra), the Bench examined the question of clubbing of clearances and also a question as to whether a firm could be treated as dummy for another on mere suspicion or surmise and when clearcut evidence was lacking. Answer to this point has been given in para 6,7 and 14 which is reproduced below: 6. We have carefully considered the contentions of both the parties.

The Department contends that M/s. Intima Wear is a dummy company and the appellants are the manufacturers for the purpose of excise levy.

It is well settled that unless there is adequate proof that the other firm is a dummy concern or a camouflage for the real manufacturer, one cannot act on mere suspicion or surmise. It is in evidence that the appellants' firm has been in existence from 1966.

M/s. Intima Wear was started on 2.1.1970 and we have a certificate of the bank to the effect that the accounts were opened on 2.1.1970.

The proprietorix of M/s. intima Wear and the owner of the appellants' firm are not shown to be related in any way. The appellants have separate bank account. The trade mark certificate has been issued in the name of the appellants even in 1968. The appellants have entered into an agreement of lease on 1.4.1967. In respect of Intima Wear the Municipal Licence fee had been collected from Smt. Advani from 1969. The registration under the Shop and Establishment Act is dated 5.10.1968 in the name of Intima Wear. The sales-tax assessment for the appellants is distinct from the assessment for M/s. intima Wear. The Income-tax assessment in the name of Smt. Advani has also been filed. These, factors unimpeachably point out that the two firms are two distinct legal entities with nothing in common.

7. The Department's contention is that the appellants somehow desired to get the benefit of notification 150 of 71. But we find that these two firms have been started long before the notification.

The income-tax assessment relating to Smt. Advani shows that even during 1970, she was carrying on business in ready-made garments.

The possibility of creating a dummy concern in order to secure the exemption limit does not stand scrutiny.

14. A close reading of the orders of the authorities below show that they have acted on broad inferences rather than proved facts. There is no clear cut evidence by way of records, unimpeachable continuous conduct or irrefutable statements of suppliers of raw materials and such other clinching circumstances to conclude that these two firms are not distinct entities as such, but merely creations or camouflage to get over the provisions of law.

21. This question again came up for consideration in the case of Shakti Udyog v. CCE (supra). The finding given in para 9 and 12 are given below: 9. But notification No. 176/77-CE is not similarly worded: It gave exemption to goods falling in item 68: cleared for home consumption on or after the first day of April in any financial year by or on behalf of a manufacturer from one or more factories....

It is not manufacture "by or on behalf that is the exemption determinant, but clearance "by or on behalf of". Manufacture is one thing, clearance another. Goods can be manufactured on behalf of another; they can never be cleared on behalf of another. A man who produces goods must clear them; they can never be cleared on his behalf or on behalf of some other man. Clearance is itself an end, it is self-sufficient and does not need to be done on behalf of anybody. It is enough to clear-it is not important on whose behalf goods are cleared. The producer/manufacturer clears goods and there is an end of the matter as far as clearance goes.

12. To be sure, a man may camouflage his operations and conceal that he owns more than one factory. When it is discovered that the other 2 or 3 factories are his, we will be tempted to say that their goods were cleared on his behalf. It is nothing of the kind. The goods were cleared by the owner, though he may have remained known before, and though to all appearances, somebody also cleared and removed.

the goods, it was the true owner who in reality cleared them. The goods were not cleared on his behalf: they were cleared by him or, to cut it short, they were cleared and the clearances go to the owner's account.

22. The ratio in the case of Jagjivan Dass and Co. v. CC relied on by the appellants also deals with the same question and the finding given by the Bench in para 6. The Bench after examining the entire question has held that innocuous circumstances, such as use of common premises, telephone, telegraphic address and commonness needs of partners etc. do not conclusively establish manufacture for/or on behalf of one another.

The Bench has also held that occasional use of machinery of one firm by another does not establish manufacture for/or on behalf of one another.

The Bench has further held that since mutual financial transactions between the three firms were duly accounted for, the mere fact that they did not charge interest, are not conclusive circumstance to show that the clearances of the appellants were for and on behalf of others.

The Bench has further held that commonness of partners could not invariably show that the clearances of firm were for and on behalf of others.

23. A similar circumstance arose in the case of M/s. Fusion Polymers Ltd., in order No. 307/91-C dated 3.4.1991 as . In this case, there were several units which were in existence and carrying on the work of manufacture of LDPE granules powder and most batches falling under chapter 31 and 32 of CET Act, 1985. The department had alleged that the various units had been floated by the appellants and that the clearances from all the units were to be clubbed. The question that came up for determination with regard to the applicability of notification No. 170/75. The department had taken a view that the various units were having hired labourers and not job workers. The said contention was negatived by a decision of majority. The Bench has examined in great length, the relevant notification in question and has ultimately held that the appellant did not hire the four job workers as camouflage and as a dummy concern to get their intermediate products manufactured/ processed on behalf of the appellants. It was shown to the Bench that all the four units were independent and had separate units.

24. In the case of Jayant Dyes arid.Chemicals and Meera Agency v. CCE Pune as rendered in order No. 298 & 299/1991-C dt. 27,3.1991, the Bench examined the allegation of the department regarding the Meera Agency being owned by the wife of proprietor of Jayant Dyes and Chemicals could be considered as dummy unit. The Bench upheld the department's contention as mentioned in para 12 as follows: 12. The learned Collector has gone in great details on every aspect of the matter and has considered every piece of evidence placed before him. The conclusion arrived at by Collector on the basis of the evidence with regard to Meera Agencies being a dummy concern is not assailable. The admission of Shri J.V. Kulkarni and also Mr.

Chauhan with regard to common use of assessce's production, control of workers, sales, clearly point out that Mrs. Kulkarni, die proprietor of Metira Agency has no part to play in the manufacture and sale of goods in Meera Agency. There is only a paper arrangement. The contention of the learned Counsel that separate registration under SSI, Sales-tax, Income-tax could go to show a separate entity is not a fact, in view of very clear admission made by the appellants. Furthermore Mr. J.V. Kulkarni has given the statement on behalf of his wife being proprietor of Meera Agency has not come forward with any evidence or has come forward to give statement before the authorities. In such circumstances, the inference drawn on the basis of the materials collected cannot be stated to be perverse. We have\gone through the statement of Shri J.V. Kulkarni and also statement given by Shri S.S. Chauhan. These statements clearly indicate Meera Agency is a dummy concern.

Further, it has to be seen whether by clubbing both the clearances the units will get its entitlement for the exemption. The reliance is placed only on the statement of the Inspector to come to the conclusion that the entries in the note book suggest the sales being made at a higher value. Admittedly, the Department has not given the details as to how these inferences have been drawn from the private note books. We have perused the zerox copy which has been produced before us. We are not in a position to come to the same conclusion.

Therefore, it requires that this matter pertaining to the value of clearances has got to be re-determined. The Department shall supply all the details which they have drawn from the private note books to the appellants. The appellants shall be given full opportunity to explain these details with regard to clearances. It has to be observed that the total clearances for 1982-83 as per the calculations shown in the order-in-original will alone be crossing the limit of exemption. Further, they will be entitled for exemption up to first 2.5 lakhs of rupees. This will be only after correctly assessing the details of sales and other details which require to be examined in great detail with opportunity for the appellants to defend themselves on the entries in the private note books.Lotus Chemicals Industries and Aurobindo Chemical Industries v. CCE as rendered in order No. 458-459/91-C, the Bench examined the similar question of husband owning Aurobindo Chemical Industry and wife owning Lotus Chemical Industries was considered. Even in this case, die department had found that the husband was managing the affairs, namely, procuring raw materials, sale of finished goods, quality control, etc. of both the firms. A question arose as to whether benefit of exemption under notification No. 43/82-C dt. 28.1.1982 could be granted. The Bench examined several rulings and held that the uriit Lotus Chemicals owned by the wife was a dummy concern and therefore, the clearances required to be clubbed. The ruling given in para 4 is reproduced below: 4. The submissions made by both the sides have been carefully considered. It is found that the conclusion arrived by the Collector on the basis of the evidence on the record is well founded. For one thing there is in the records a copy of the General Power of Attorney dated 11th January, 1984 given by Smt. Kamal Bhattacharya as the proprietor of the M/s. Lotus Chemicals Industries in which Shri Bhattacharya's occupation is indicated as a Consultant and he is given the power as the Lawful Attorney, manager or representative of Smt. Bhattacharya and her business in the firm of M/s. Lotus Chemical Industries. This is in accordance with the statement given by Smt. Bhattacharya. On 4.2.1986 in-her statement she has said that by her consent her husband used to do practically all the work for example correspondence with the parties, quality control, rates, terms of payment, purchase etc. of M/s. Lotus Chemical Industries and this was reflected in the statement of Shri Bhattacharya himself in which he said that practically he did all the work of his wife because his wife is not technically qualified and facing a lot of trouble after the dissolution of the partnership. The Collector in his order had also found from the correspondence made between M/s.

Lotus Chemical Industries and other parties that Shri Bhattacharya has signed for "For Lotus Chemicals Industries'. Therefore, in such circumstances when the relationship is that of husband and wife living under the same roof and the husband is acting on behalf of his wife and controlling and managing the operations of both the firms as clearly brought out by the evidence above, the mere fact that they are separately registered as SSI Unit or that they were separately assessed for the Income Tax or Sales Tax purposes will not make any difference for clubbing of clearances of the two firms.

The conclusion that in the facts of this case that two proprietory firms managed by husband and wife are in effect one and the same is also supported by the previous decision of this Tribunal dealing with the similar case of two firms producing Synthetic Organic Dye Stuff. This was the case of M/s. Jayant Dyes and Chemicals and Meera Agency v. Collector of Central Excise, Pune disposed of by the Order No. 298 and 299/1991-C dated 27.3.1991 passed by this Tribunal in appeal Nos. E/777/87-C and 778/87-C. These factors make the present case distinguishable from that of Aroma Apparels, Bombay v. CCE, Bombay because the clubbing of the clearances is not merely based on suspicion or surmise nor will the ratio of the case Diamond Engineering and Trading Corporation (supra) will apply because this is not a case of clubbing of clearances of a partnership and of a proprietory concern but of two proprietorship firms in the name of the husband and wife where the husband by consent controlled the operation and conducted the business of both the proprietory firms. So also the ratio of the Supreme Court decision is not applicable as cited in the case of Assistant Collector, Sural v. Shri J.C. Shah, Jayantilal Balubhar and Ors. The appellants have also assailed the validity of the show cause notice issued by the Asslt. Collector dated 17.4.1986.

However, it is found on perusal of the show cause notice that it is a notice for contravention of Rules 9(1), 52A, 173B, 173C and 173G read with Rules 9(2), 173Q relating to clandestine removal and it is not a notice for recovery of short levy under Section 11A and it is settled position that the period under Section 11A is referred to in Rule 9(2) only to specify the outer limit for demanding duty.

26. In the light of these rulings we have to examine as to whether the clearances of all the two units, namely, M/s. Raineo Industries and M/s. Wardrobes could be clubbed for the purpose of clearances. The relevant portion of Collector's findings has been incorporated above.

The statement of Shri Sita Ram Shetty, Director of M/s. Raineo Industries, statement of Shri A. Sudhakar Rai, Managing Director of MM Agencies and that of Shri Vijay Kumar, Proprietor of M/s. Wardrobes is also considered by us. In his statement Shri Sudhakar Rai; Proprietor of M/s. Raineo Industries has stated that three factories are functioning in the same premises on the ground floor of the building and front portion of the building were being utilised as godown by MM Agencies; that the right wing of the first floor is being utilised as office by M/s. Raineo Industries as well as by MM Agencies. He has stated that M/s. Raineo Industries was manufacturing steel furniture and parts of steel furniture and raw materials are purchased directly from market and they were filing returns separately to Central Excise, Sales Tax and Income-tax separately. However, M/s. Raineo Industries were supplying steel furniture to MM Agencies and occasionally to other customers directly. It is also stated that the portion of the Factory was leased to MM Agencies and some portion leased out to M/s. Wardrobes on a monthly rent of Rs. 4,000/- and Rs. 3,700/- per month respectively which included the rent for utilisation of a portion of the building for use of electric power and also charges for leasing out the machineries for manufacturing steel furniture. It is also stated that M/s. Wardrobes were purchasing raw materials independently from the market and manufacturing steel furniture through MM Agencies. The Proprietor of M/s. Wardrobes Sh. Vijay Kumar is an independent assessee and files returns of Central Excise, Sales-tax and Income-tax separately. This statement was corroborated by Sh Vijay Kumar, Prop, of M/s. Wardrobes as well as by Sh Sudhakar Rai, MD of MM Agencies.

27. As can be seen from the ratio of the rulings quoted above, the Tribunal has consistently held that commonality of partners and use of telephone, same labour and occasional use of machinery would not be a criteria for considering the units to be dummy units nor could it be considered as having been manufactured within the definition of a 'factory', as appearing in Section 2(e) of the Central Excises and Salt Act. However, there are two ratios in the unreported orders of M/s.

Jayant Dyes and Chemicals and Lotus Chemicals Industries (supra). In these two cases, it is held that the unit set up on behalf of wife was a dummy unit on the basis of evidence on record. In the present case, the only criteria is the common use of building, machinery and power by three units. The Collector has held that he has not examined the question of two units being dummy units, as there is no such allegations. The department has accepted each unit having filed separate sales-tax, Income-tax returns as well as the each unit having purchased separate raw materials and also maintaining separate production registers but however, the learned Collector has held that M/s. Raineo Industries and M/s. Wardrobes are separate entities on paper and that they are not eligible for exemption under notification No. 83/83 as amended, as they had manufactured their goods in the same factory using the same machinery. He has held that since both the parties have manufactured steel furniture with the help of same machinery, the clearances of both the parties should be clubbed together for the purpose of exemption under notification No. 83/83 as amended and M/s. Raineo Industries and M/s. Wardrobes, Bangalore are liable to pay Central Excise duty on the goods cleared in excess of exemption limit of Rs. 7.5 lakhs without payment of duty. The learned Collector has accepted the fact that physically they arc separate entities but as the goods have emerged from the same factory, they would not be entitled for exemption under the said notification. Now, the question is whether the manufacturing by two units with the help of the same machinery will dis-entitle them from the benefit of the notification in question.

28. The terms of the so called lease agreement shows that M/s. Raineo Industries had leased out a portion of the premises to M/s. Wardrobes with machineries on a monthly rent of Rs. 3,700/-. The lease agreement also stipulates that M/s. Wardrobes shall utilise the premises only for a period of 8 hours during a day for the purpose of their business.

This is a crucial term of the agreement. The exact eight hours has not been stipulated in this lease agreement. The manner in which both the industries would monitor use of machinery for manufacture of their respective steel furnitures is not stated in the lease agreement.

Although the terms of the lease agreement is not challenged by the department but the fact that the lease deed is executed only a Rupee five stamp paper cannot be considered as lease deed. The title of the document is 'lease agreement' but the description is "This deed of lease is made on 21.1.1981 between parties". One of the terms of this document stipulates that the lease is for a period of two years. As per Section 107 of the Transfer of Property Act, transfer of property by a lease exceeding one year can be made only by a registered instrument under the Indian registration on a duty stamped instrument. This document not being executed on a proper stamp paper, becomes an inadmissible document as per Section 35F of the Indian Stamp Act, which is reproduced below: 35 Instruments not duly stamped inadmissible in evidence etc. - No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence or shall be acted upon registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped; (a) any such instrument not being an instrument chargeable with a duty not exceeding ten naye paise only, or a bill of exchange or promissory note, shall, subject to all just exceptions, be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or when ten times of the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion.

29. The other documents on record is the letter dated 21.1.1981 addressed t Inspector of Factories, by Raineo Industry informing about the lease of portion of their premises to Wardrobes. However, they have not filed any other document to show that the Inspector under the Factories Act has granted a separate Factory licence to M/s. Wardrobes.

M/s. Wardrobes has also not filed any document in support of their contention that they are registered under the Factories Act, separately and they are holding a licence under the Factories Act. They have also not produced any evidence under the Factories Act to prove the fact that they were maintaining separate registers under the Factories Act and other labour statutes. The. so called lease agreement produced with regard to sharing of machinery, raises a serious doubt as to its genuineness. The agreement does not stipulate the arrangement of 8 hours between them for manufacture of their goods and it appears to be impracticable in its application also. There is also no explanation as to how the said separate units were functioning independently. It will be safer to draw an inference in the absence of this explanation that the goods were manufactured by only a single unit by and on behalf of other units as held by the learned Collector. There being in existence only one factory registered under the Factories Act and no separate licence having been produced by M/s. Wardrobes or MM Agencies, the finding of the learned Collector that the clearances are to be clubbed, has to be upheld.30. The learned Collector has further held that M/s. Raineo Industries is the manufacturer and having the absolute control over the building and the machinery. As we have held that the lease agreement is not a valid document and in the absence of any other corroborative evidence of factory licence and separation of manufacturing process of each unit, the order of the learned Collector has to be confirmed.

31. The appellants have contended that the appeals are time barred in view of the fact that the declarations have been filed by M/s.

Wardrobes and M/s. Raineo Industries every year. The learned Collector has gone into the details of these declarations and has found that there has been a suppression of facts and that there is a mis-declaration. There is no reason to differ from his findings. The rulings relied upon by the appellants are not applicable to the facts of the present case.

32. In view of our findings, we uphold the learned Collector's orders by dismissing these appeals.

33 I agree with the conclusions arrived at by my learned Brother in the proposed order after a fine analysis of facts and circumstances by him with reference to the clause: by or on behalf of a manufacturer, from one or more factories, from the whole of the duty of excise leviable thereon, 34. Apart from the foregoing, assuming that M/s. Raineo Industries and M/s. Wardrobes are separate entities as manufacturers, one fact emerges from their so called lease agreement between them, that M/s. Wardrobes are manufacturing their goods in the same factory and clearing them availing of the benefit of the said exemption notifications. The two appellants are not separately entitled to said exemption notifications in view of the stipulation made therein: (c) Where a factory producing the specified goods is run at different times of any financial year by different manufacturers, the value of the specified goods so cleared from such factory in any such year at nil rate of duty shall not exceed rupees five lakhs 4. Where a factory producing the specified goods is run at different times during a financial year by different manufacturers, the aggregate value of clearances of the specified goods from such factory in any such year shall not exceed rupees five lakhs and rupees ten lakhs respectively in terms of Clauses (a) and (b) of paragraph 1.

Nothing contained in this notification shall apply if the aggregate value of clearances of all excisable goods for home consumption: (ii) from any factory, by or on behalf of one or more manufacturers.

had exceeded rupees twenty-five lakhs in the preceding financial year.

34 A. It would thus be observed that the ceiling on aggregate clearances of the excisable goods applies not only to a manufacturer, or on his behalf, from one or more factories, but also to clearances from a factory by one or more manufacturers.

35. Now, the word "factory" has been defined in the Central Excises and Salt Act, in Section 2(e) as follows: "factory" means any premises, including the precincts thereof, wherein or any part of which excisable goods other than salt are manufactured, or wherein or any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on; 35A. No other definition of factory has been given for the purposes of notifications 71/78, 80/80 and 83/83. Accordingly above definition of the said Act under which the notifications have been issued would apply for the purposes of those notifications. Factory, as defined above is a geographical entity of a "premises, including the precincts 'hereof.

There is no dispute that the two appellants, M/s. Wardrobes and M/s.

Raineo industries-have been manufacturing in the same premises, maybe at different times, therefore, the ceilings on exemptions stipulated in notifications No. 71178, 80/80 and 0183 would apply after taking into account the total clearances of both the appellants/ manufacturers.

Citations made by the appellants are not relevant because these do not leal with the aforesaid clauses in the notification 71/78, 80/80 and 83/83.

36. Looked at from the above angle, as well, the impugned order is correct. Appeals ire, therefore, dismissed.


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