Customs, Excise and Gold Tribunal - Mumbai
Jifcon Tools Pvt. Ltd. vs Commissioner Of C. Ex. on 12 September, 2005
ORDER Archana Wadhwa, Member (J)
1. All the five appeals are being disposed off by a common order as they arise out of the same impugned order passed by the Commissioner (Adjudication), vide which he has confirmed demand of duty of Rs. 3,31,421 /- by clubbing the clearances of M/s. Jifcon Engineering Enterprises (hereinafter referred to as M/s. JEE) with the clearances of M/s. Jifcon Tools Pvt. Ltd., (hereinafter referred to as M/s. JTPL) and by denying the benefit of SSI exemption notification. In addition, personal penalty of Rs. 1 lakh, each has been imposed upon both the manufacturing units along with imposition of personal penalty of Rs. 25,000/- each on the other individual appellants.
2. As per facts on records, M/s. JTPL is a Private Limited Company having three Directors, Shri R.M. Kalaskar, Shri. S.C. Bora and Mrs. A.S. Mehra. The said unit is engaged in the manufacture of cutting tools from 1979 onwards and were availing the benefit of SSI exemption Notification No. 80/80-C.E., dated 19-6-80 as amended from time to time. They were operating from Plot No. D-82, MIDC Industrial Area, Ahmednagar. In the year 1982, they entered into an agreement with MIDC for division of the said plot into two plots No. D-82/1 and D-82/2 and after payment of premium of Rs. 17,000/- to MIDC, the plot was divided and sold to M/s. JEE. The said M/s. JEE started their business of manufacture of tools as a partnership firm with Mr. R.M. Kalaskar, Mrs. A.S. Mehra and Mrs. V.S. Bora as partners. Finance for the enterprises was arranged by the said partners, by taking loan from their spouses as also on their own count. Thereafter, the production unit was set up, Central Excise license obtained, classification list filed and duly approved by their jurisdictional Central Excise authorities extending the benefit of SSI Notification.
3. However, their units were visited by the Preventive Officers on 24-10-86 and various records scrutinized. A view was entertained by the revenue that M/s. JEE was created with the sole purpose of availing SSI exemption benefit and inasmuch as the Directors of the Private Limited Company and partners of the partnership firm were related, and there were financial inter-connections between the two units, their clearances are required to be clubbed for computing the value of the clearances in terms of the SSI Notification. For the said purpose show cause notice dated 24-5-88 was issued to all the appellants proposing clubbing of two manufacturing units and as a consequence confirming the demand of duty and imposing penalties upon various persons.
4. During adjudication, appellants took a definite stand that M/s. JTPL as also M/s. JEE are two independent firms/local entities having their own capital and infrastructure facilities. Reliance was placed upon the following documents:
1. Separate premises
2. Separate SSI registration
3. Sepafate Sales Tax number/assessed separately
4. Independent Electrical connection of MSED.
5. Independently financed by MSFC
6. Special Capital Incentive and SEED capital independently sanctioned
7. Separate water connection from MIDC to the respective plots
8. Working capital loan from bank - CC limit sanctioned independently
9. Holding independent Excise License with separate ground plan approved by Excise department after verification of premises/other compliance's such approval of CL from time to time.
10. Independent PF number
11. Independent Factory license, separate clearance from Maharashtra Pollution Control Board
12. Separate shop Act license.
13. Separate Professional Tax registration
14. Separate Income Tax Number/assessed separately
15. Independent audited balance sheet with IT assessment
16. Independent Capital Machinery supported by respective purchase invoices
17. Independent labor force/staff evidenced by Muster roll/salary sheet
18. Independent purchases/stores as the factories are independent.
19. Partnership Deed/Company's registration/incorporation certificate
20. No common facilities enjoyed between two companies.
5. As such, they contended that M/s. JEE cannot be considered to be a dummy of M/s. JTPL inasmuch as, it was working independently with all the machinery installed in their premises and conducting their business as a separate unit. Merely because the wives of the Company Directors were carrying on the business with partnership with one of the Directors the company cannot be made the ground for holding M/s. JEE as dummy of M/s. JTPL. M/s. JEE consist of the essential and basic machines required for the production and the occasional sale of raw materials by M/s. JTPL to M/s. JEE, for which proper compensation was given to them is not sufficient to hold the two units as one. Similarly, where the orders were placed upon the M/s. JTPL and they were not in a position to honour the same, the same were transferred to M/s. JEE by proper amendment of the purchase orders. M/s. JEE was granted a Central Excise licence after the visit of the officers and after verifying the ground plan and their machineries installed therein. Classification list was approved after making the enquires. As such, extended period could not have been invoked against them and there is no justification for levy of penalty.
6. The Commissioner did not accept the above submissions of the appellants and observed in the impugned order that the permission by MIDC to divide the plot and sell the same to M/s. JEE does not advance the appellant's case that M/s. JTPL has no interest in the business of M/s. JEE. The mere fact that they bifurcated the plot and sold the same to M/s. JEE is itself indicative of their interest in starting the business with M/s. JEE. He also observed that it is not understood as to how Mrs. Mehra and Mrs. Bora demonstrated interest in starting business of manufacture of same goods and quality of tools at the same time and that too in partnership with Shri R.M. Kalaskar, who was a Director of the M/s. JTPL. He has also referred to the occasional supply of raw materials by M/s. JTPL to M/s. JEE without raising the bills, though he has observed that debit note was raised at a later stage, but observed that the same was to make belief arrangements. He has also referred to the fact of non-charging of interest from M/s. JEE to come to a finding that the same are mutually inter-related. Similarly, he relied upon the placing of orders on M/s. JTPL by their customers which were subsequently transferred to M/s. JEE. As such he has concluded that JTPL and JEE are one and the same unit and have fraudulently availed the exemption. He also rejected the appellant's plea that since the classification list was approved, the entire demand was hit by bar of limitation.
7. We have heard Shri S. Narayanan, ld. Advocate appearing for the appellants and Shri R.B. Pardeshi, ld. JDR for the revenue.
8. Reliance has been placed by both sides on catena of judgments pronounced by the Tribunal to show that commonness of Directors and partners, occasional transfer of raw materials, same company staff, transfer of purchase order by one unit to another will not make them one unit for the purpose of clubbing, as long as each unit is having complete set of machine required to manufacture the goods in question. We note that all the incidence referred to by the Commissioner are in the nature of common business relations between the two units and cannot be made the basis for holding M/s. JEE as dummy of M/s. JTPL. We also note that M/s. JTPL is a limited company whereas M/s. JEE is a partnership concern. We may here refer to Board's Circular No. 6/92 dated 29-5-92 clarifying that limited companies are separate entities distant from the share holders composing it and hence each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. The same cannot be clubbed with a partnership firm especially when a partnership firm is created independently and is a complete unit in itself. As such, we hold that M/s. JEE is an independent unit entitled to SSI benefit in its own right and its clearances cannot be clubbed with the clearances of JTPL.
9. We also find force in the appellant's contention that the demand is barred by limitation having been raised beyond the normal period of limitation. Both the units were duly licensed and the classification list filed by them were duly approved by the proper officer and as such, it cannot be said that there was suppression the part of either unit so as to invoke longer period of limitation. In view of our foregoing discussion, all the appeals are allowed on merits as also on limitation, and the impugned order is set aside.
(Pronounced in Court)