Customs, Excise and Gold Tribunal - Delhi
Summerking Electricals (P) Ltd. vs Cce on 3 June, 2004
Equivalent citations: 2004(117)ECR894(TRI.-DELHI), 2004(176)ELT302(TRI-DEL)
ORDER 2. Demand - Clandestine clearances and use of brand name--In view of the above decision of the Tribunal holding that all units are having separate and independent existence, the matter is remitted back to the jurisdictional adjudicating authority for readjudication to decide whether there was any clandestin manufacture and/or clearances, and use of brand name, by any of the units, and/or whether the exemption limit provided in the notification was exceeded. Revenue appeals dismissed. Other appeals party allowed by remand. V.K. Agrawal, Member (T)
1. These are sixteen appeals -eight appeals filed by M/s. Summerking Electricals (Pvt). Ltd. and seven others and eighth appeals filed by Revenue against a common Order-in-Original No. 37/Comm/Meerut-I/2001 dated 1.8.2001 passed by the Commissioner Central Excise, by which the Commissioner has clubbed the clearances, confirmed demand of duty, imposed penalties and confiscated machinery etc. 2.1 Shri Naveen Mullick, learned Advocate, mentioned that the following six companies/firms which are independent of each others, manufacture electrical appliances and parts thereof:
1. Summerking Electricals (P) Ltd.,
2. Hindon Electricals Pvt. Ltd.,
3. Domestic Aids,
4. Summerking Enterprises,
5. Servottam Appliansces,
6. Weather Makers 2.2 He, further, mentioned that a show cause notice dated 20.3.1997 was issued to them along with others for demanding Central Excise duty for the period from 1.4.1992 to 30.11.1996 and imposition of Penalties; that either more show cause notices were issued for the period from 1.2.1996 to March, 2000 containing the following main allegations:
(i) Shri D.R. Goel is the key person in functioning of these units. He is in absolute control of the working of the units and under his supervision day to day affairs of these units are carried out.
(ii) The testimony of suppliers of raw materials and purchasers of finished goods leave no room for doubt as to who was the person who had actual control over business of all these units. These units were constituted on paper in a way so as to create an impression that they were separate and independent legal entities whereas their actual ownership always remained in the hands of Shri D.R. Goel.
(iii) Shri D.R. Goel has been instrumental in creating various firms and companies in different names and style with his close relatives and friends as partners, directors or proprietors. The supervisory, administrative and managerial control was exercised by D.R. Goesl in all units.
(iv) Loan was arranged by D.R. Goel for M/s. Summerking Electricals Pvt. Ltd. and M/s. Hindon Electricals P. Ltd.
(v) Premises at 61, Maliwara, Ghaziabad was utilized by a number of manufacturing and trading units either simultaneously or one after the other.
(vi) Brand Name 'SUMERKING' or 'SUMERKING GOLD' are the same and have collection with Shri D.R. Goel.
2.3 He mentioned that the Commissioner, based on these allegations, has held that (i) D.R. Goel has engineered creation of all the units in different name and styles and these units have been brought into existence as per the well planned strategy of D.R. Goel; (ii) Summerking Electricals Pvt. Ltd. has resorted to artificial fragmentation by constituting firms in different names to evade payment of duty and avail benefit of SSI exemption; (iii) the other Noticees to the show cause notice have wilfully cooperated with D.R. Goel in lending their identity for the various units and provided active assistance in misusing the SSI benefit and thus rendered themselves liable for penal action under Rule 209A of the Central Excise Rules, 1944 and (iv) the real ownership and operation of all units was actually vested solely with Shri D.R. Goel; that the Adjudicating Authority has concluded that the duty liability is to be fixed on M/s. Summerking Electricals Pvt. Ltd. in which Shri D.R. Goel was the initial Director and M/s. Summerking Electricals was the original entity.
3.1 The learned Advocate stibmitted at the outset that the Commissioner, in the impugned Order, while giving his finding in respect of fixing the duty liability on M/s. Summerking Electricals Pvt. Ltd., has held that "M/s. Summerking Electricals Pvt. Ltd. was the original entity, the other units/entities were created subsequently to misuse the benefits of SSI notifications. I am of the opinion that the duty liability is recoverable from the principal manufacturer, viz M/s. Summerking Electricals Pvt. Ltd. and the clearances are to be clubbed." The learned advocate contended that the clearances of units namely (i) M/s. Surnmerkking Enterprises which started from 16.8.1980, (ii) M/s. Domestic Aids which started on 31.7.1987, and (iii) M/s Hindon Electricals Pvt. Ltd. which started on 13.10.1998 cannot be clubbed with the clearances of M/s. Summerking Electricals Pvt. Ltd. which was started subsequent to these units on 14.12.1989; that further these units were having separate factories at different place; that as these unit came into existence prior to coming into existence of M/s. Summerking Electricals Pvt. Ltd. their clearances are to be excluded as per the finding of the Adjudicating Authority itself; that this fact is even apparent from the show cause notice dated 20.3.1997 itself (Internal Page Nos. 5 to 8 of the notice). He mentioned that the clearance of only remaining two units namely M/s. Sarvottam Appliances and M/s. Weather Makers, which came into existence on 22.10.1992 and 11.9.1995 at the most can be clubbed with the clearances of M/s. Summerking Electricals P. Ltd.; that the valve of these clearances does not exceed the exemption limit provided in the small scale exemption Notification. He also emphasized that the Revenue has not challenged the said finding contained in the impugned Order.
3.2 The learned Advocate mentioned that the finding in the impugned Order is that all the units were the creating of a single manufacturers, D.R. Goel, who being the manufacturer misused small scale exemption Notification Nos. 175/86 and 1/93 and contended that now show cause notice has been issued to Shri D.R. Goel as a manufacturer under Section 11A of the Central Excise Act; that the notice has only been issued to him for imposition of penalty under Rule 209A of the Central Excise Rules, 1944; that accordingly demand of duty confirmed against M/s. Summerking Electricals P. Ltd. cannot be sustained; that it has been held by the Supreme Court in the case of Metal Forgings v. UOI that "issuance of a show cause notice in a particular format is a mandatory requirement of law" and "in the absence of a show cause notice it is not open to the Revenue to make a demand on the appellants...." He also mentioned that all the manufacturing units had separate constitution, separate factories, separately registered with various authorities and under the law were separate legal entities; that even then the finding in the impugned Order is to the effect that it was Shri D.R. Goel who was looking after all the units and had the supervisory, Administrative and managerial control; that as against this finding, the Adjudicating Authority has imposed the penalty on S.K. Gupta, Rakesh K. Gupta, D.R. Goel, Ashok K. Gupta, Smt. Savitri Goel and Ms. Gunjan Goel, Ashok K. Gupta, Smt. Savitri Goel and Ms. Gujan Goel under Rule 209A of the Central Excise Rules, 1944 on the ground that they had engaged themselves in acquiring, processing, transporting, removing, depositing, keeping, selling and purchasing of excisable goods from 1.4.1992 to March, 2000; that the imposition of penalty on these persons who are either the partner or director in manufacturing firms, go to confirm that each one of them is associated with manufacturing activity; that in view of this it cannot be claimed by the Revenue that it is only Shri D.R. Goel who had the supervisory, administrative and managerial control.
4. The learned Advocate further mentioned that it has been alleged that most of the units are located in the same premises at 61, Maliwara, Ghaziabad; that first of all there were only three units located at 61, Maliwara - Summerking Enterprises, Weather Makers and Sarvottam Appliances; that there were two floors at 61 Maliwara; that again Ground Floor of 61 Maliwara has two portions - Portions 'A' & 'B'; that Portion 'A' was trading shop where the following units were working as under:
(1) Sales India From 22.10.1992 to 31.3.1995 (2) Sarvottam Appliances From 7.4.1995 to 8.9.1995 (3) Summer Sales From 9.9.1995 to
He mentioned that Portion 'B' was the manufacturing portion wherein the following units worked:
(i) Sumerking Enterprises upto 21.10.1992 (ii) Sarvottam Appliances 22.10.1992 to 31.3.1995 (iii) Weather Maker 11.9.1995 to 18.3.1998
He contended that it is evident that the units did not work simultaneously; that first floor was also manufacturing premises where the following units worked one after the other and not simultaneously:
(1) Summerking Enterprise up to 21.10.1992 (2) Sarvottam Appliances 22.10.1992 to 31.3.1995 (3) Weather Maker 11.9.1995 to 18.3.1998
He also mentioned that even though the address was same, there wire different distinct portions with no commonness; that proper rent was paid to the owner of the premises which reflected in income tax returns.
5.1 The learned advocate contended that these units were never inter-connected with each other; that simply some relations/friende have started their own units with their own finds, labour, machinery, etc. and even if it is presumed that D.R. Goel, because of his experience, guided them from time to time, this would not make him the real manufacturer of all the units; that partnership firm, proprietary firm and limited companies are legal entities; that they are maintaining separate accounts,, filing income tax return, sales tax return, purchasing their own raw materials and selling their own final products; that no doubt corporate, veil can be lifted if units are engaged in evading Central Excise duties; that but simply manufacturing the same products and belonging to relations/friends, would not make them all the units one. He relied upon relations/friends, would not make them all the units one. He relied upon the Board's Order dated 29.5.1992 under Section 37B of the Central Excise Act (Circular No. 6/92 dated 29.5.1992) according to which it has been ordered that if there are two firms with only sdme of the partners in common, each firm is entitled to separate exemption limit. He mentioned that the Tribunal in the case of Malik & Co. v. CCE, Mumbai 2003 (56) RLT 217 has referred to Circular No. 6/92 and held that the Commissioner is required to consider the Circular "on the issue that a limited company should be treated as separate entity for the purpose of the exemption limit as held by the Supreme Court in the case of Supreme Washers (P) Ltd. v. Commissioner of Central Excise, Pune 2002 (53) RLT 753 (SC).
5.2 Regarding the finding that loans were arranged by D.R. Goel for Summerking Electricals P. Ltd., Hindon Electricals P. Ltd. from his family members and close relatives, the learned Counsel submitted that arranging of loan does not amount to financial control as it only means financial management; that for the purpose of clubbing what is required is the mutuality of interest and financial control and flow of funds and common funding; that it has been held by the Tribunal in Alpha Toya Ltd. v. CCE, New Delhi that managerial control is different from money flow back; that the Tribunal has held as under:
The mere fact of management control and a few directors being common and also by the fact that interest free loans are being given to the other units by the first unit, these factors, by itself, is no ground for holding them as dummy units and for ordering clubbing of all their clearances.... There is no dispute in all these cases that all the four units are independent in existence, with independent transactions, without any profit sharing, management control or money flow back to the main unit. Each unit is having independent bank transaction, loans, sales, purchase & tax registrations.
5.3 Regarding the list of the firms and persons (at Pages 130 to 132 of the Appeal Paper Book) who had given loans, the learned Advocate mentioned that it is not merely the family of D.R. Goel but even various financial agencies who had given the loans to the respective units; that all such loans had been paid back by the respective units along with the interest; that it is not the case of the Department that the loan advanced had not been paid back; that thus it cannot be alleged that there has been any financial flow back or financial control of D.R. Goel on the units. He relied upon the decision in DM. Gears Pvt. Ltd. v. CCE, Delhi-I 2002 (141) ELT : 2002 (101) ECR 555 (T) wherein the Tribunal, relying upon the judgment of the High Court of Rajasthan in Renu Tandon v. UOI 1993 (6) ELT 375 (RAJ), has held that "commonality in respect of factory office, electric connection, management, labour, etc. or similarity of products is no evidence of mutuality of business interest" and that "mutuality of business interest has to be inferred from common funding and financial flow back." Reliance has also been placed on the decision in Superior Products v. CCE, Delhi .
5.4 Regarding undisclosed bank account of M/s. Sales India Ltd. with Oriental Bank of Commerce, the learned Advocate submitted that Sales India is a trading house dealing in purchase and sale of goods of not only of units involved but also of others and the Adjudicating Authority has not treated the sales to a related person; that there is no charge that the cash which was withdrawn pertained to manufacturing units or utilized in these units; that withdrawing the case does not in any way reflect that any duty was evaded or one was dummy of another. He also mentioned that the bank account of Sarvottam Appliances was opened and operated upon by only its proprietor, Shri R.K. Gupta; that if Sarvottam Appliances failed to disclose the bank account, no analogy can be drawn that D.R. Goel operated the account.
6. Regarding brand name, he mentioned that Summerking and Sumerking Gold are two different brand names; that the Tribunal has held in CCE v. Samrat Steel Industries that brand name "New Ship" and "Ship" have more dissimilarities than the similarities; that as logo and brand name are different, it is of no consequence; that brand name "Summerking" was used by Summerking Enterprises which has been dissolved on 21.10.1992 and after dissolution the brand name can be used by other parties. Reliance has been placed on the decision in Bentex Motor Control Industries and Ors. v. CCE, New Delhi 2001 (47) RLT 770 (T) : 2001 (94) ECR 290 (T). He also denied the charge that there was any clandestine removal of goods; that it stands admitted by the Adjudicating Authority that relied upon documents were testing records; that Shri D.S. Bhatnagar was only a Quality Control person nothing to do with the production and marketing; that when goods are tested, the same will be entered in RGI Register only after completion of the process of testing; that the Department has not brought on record any evidence that the goods had reached the market; that figures mentioned against B-9 in the show cause notice is from sale account and cannot be treated as clandestine removal. He, further, mentioned that in show cause notice for the purpose of imposing penalties under Rule 209A it was alleged that the specified persons were engaged in acquiring, possessing, removing ^etc. the goods and they knew that the goods were liable for confiscation; that, however, in the impugned Order penalties have been imposed on entirely different reason that is these persons have wilfully cooperated with D.R. Goel in leading their identities for the various units and providing active assistance in misusing the SSI benefits; that the said finding is thus beyond the scope of show cause notice as such was not an allegation in the show cause notice; that Rule 209A is also not applicable in these situations. Reliance has been placed on the decision in International Talkie Equipment Co. P. Ltd. v. CCE 2000 (39) RLT 767 (T). He also mentioned that no statement/enquiry whatsoever was made from Smt. Savitri Goel, Ms. Gunjan Goel and Shri Ashok Kumar Gupta and as such no penalty can be imposed on them. He mentioned that the provisions relating to the extended period of limitation have been invoked up to 30.11.96 in the show cause notice dated 20.3.1997 whereas the Central Excise Officers had visited their premises on 1.6.1995 after which the duty cannot be demanded by invoking charge of suppression of facts, etc.; that Whether Maker came into existence only after 11.6.1995.
7. Countering the arguments, Shri Vikas Kumar, learned SDR, submitted that three units were working from the same premises, that is 61, Maliwara, Ghaziabad; that in all the units, either Shri D.R. Goel himself was the partner/director or his close relatives; that Shri D.R. Goel was the sole owner of 61, Maliwara, Ghaziabad; that no so called tenant was paying the electricity bill, etc' that all work relating to procurement of raw material/production/marketing of all manufacturing units was managed and looked after by Shri D.R. Goel; that all dealers has stated that they negotiated rates of goods with him and used to place Orders with Shri D.R. Goel; that the directors/partners/ proprietors freely shifted amongst group companies/factories/firms; that for example Shri R.K. Gupta, nephew, was one of the directors of Summerking Electrical (P) Ltd. during the period from 1.10.1990 to 22.10.1992 and thereafter he was proprietor of M/s. Sarvottam Appliances; that all the units were engaged in manufacturing/trading of electrical appliances; that thus it is clear that Shri D.R. Goel in association with his close relatives floated a number of manufacturing and trading units and D.R. Goel was the key person, in absolute control of the working of the units; that Shri D.S. Bhatnagar, Manager of M/s. Summering Electricals (P) Ltd., in his statement dated 13.6.1996 had deposed that all sales were effected from Maliwara show room by D.R. Goel and the goods were despatched from the factory against slips sent by him; that these slips were sent back in the evening to Shri D.R. Goel; that Shri Budh Prakash Agarwal had stated in his statement that he was made director of M/s. Hindon Electrical (P) Ltd. by D.R. Goel who himself was not a director of the said company; that all the major suppliers of raw materials and purchasers of the finished goods have admitted that their business dealings were only with D.R. Goel or his authorized representative irrespective of the unit and they considered the brand name Summerking, Summerking Gold as one and the same; that this clearly goes to prove that D.R. Goel was having the actual control over the business of all the units and these units were constituted in a way so as to create an impression that they were separate and independent legal entities whereas their actual ownership always remained in the hands of D.R. Goel; that this was done with a view to evade payment of Central Excise duty by fragmentation of the value of clearances in the name of different concerns. He also mentioned that there is no force in the submissions of the learned Advocate that the premises at 61 Maliwara was given on rent; that the rent receipts produced by Shri S.K. Gupta did not reflect electricity charges; that no written agreement in respect of the said charges had been produced; that these receipts are not bona fide receipts; these are fabricated ones with an attempt to establish that these units were separate units; that two units were shown to have functioned from the same premises at one point of time.
8. Regarding financial management and inter-flow of funds, the learned SDR submitted that the funds in all units were provided by the members of the family of Shri D.R. Goel and friends; that the units had obtained unsecured loans from the family members; that for example M/s. Sarvottam Appliances had an unsecured loan of Rs. 1,16,085/-from minor daughter of D.R. Goel; that the unsecured loan was Rs. 1,04,280.70; that Shri Sanjeev Kumar Gupta, Proprietor of M/s. Sales India who had unsecured loans from a number of persons/ firm, had admitted in his statement dated 4.12.1996 that out of the nine persons /firm he was known only to Shri Vikas Goel and he was not knowing any other persons/firm who had given him unsecured loans; that all loans were arranged by Shri D.R. Goel who was looking after all major affairs of the firm; that Shri Rakesh Kumar Gupta, Proprietor of M/s. Sarvottam Appliances had also deposed in his statement dated 4.12.1996 that all the loans were arranged by his material uncle, Shri D.R. Goel. He also mentioned that the main debtor at the end of financial year 1991-1992 of Domestic Aids were M/s. Sales India and Vikas Enterprises; that, however, by the end of 1993-1994, Domestic Aids had become debtor of Sales India; that thus there was exchange of funds at convenience from one firm to another. He further submitted that scrutiny of records had revealed that major portion of sales of inputs, raw materials, semifinished goods and finished goods was among the Group units only; that enquiry also revealed that M/s. Sales India had an account No. 1447 with Oriental Bank of Commerce, Ghaziabad which was opened by D.R. Goel; that Shri A.K. Sharma, Bank Manager, had deposed in his statement dated 7.12.1995 that only D.R. Goel was authorized to operate the said account; that Shri D.R. Goel had withdrawn amounts from the said account though he had claimed not to be the proprietor of Sales India and Shri Sanjeev Kumar Gupta was the proprietor; that on the other hand Shri Sanjeev Kumar Gupta had denied in his statement dated 28.12.1995 to have opened or operated any such account and that he did not have any information or knowledge about the deposits and withdrawals from the account; that Shri S.K. Gupta had also mentioned in his statement dated 4.12.1996 that even in respect of Bank account No. 43337 with State Bank of India he had withdrawn the money once or twice because after signing the cheque book he used to give it to Shri D.R. Goel who either himself or through any other person withdrew the amount.
9. The learned SDR, further, mentioned that the various dealers have stated that they treated the brand name "Summerking" and "Summerking Gold" as one aad the same and belonging to Summerking group; that for example, Shri Chandra Prakash, Proprietor of Chandra Cooler Industries, Ahmedabad. in his statement mentioned that he purchased electrical appliances from M/s. Domestic Aids and M/s. Summerking Enterprises; that the payment in respect of purchase made from Domestic Aids was made in cash to Shri D.R. Goel and payment in respect of purchase from Summerking Enterprises was also made to Shri Goel through demand draft; that similarly Shri Arun Kumar Kakkar, Manager of M/s. Talwar Appliances, Lucknow, has deposed in his statement that the goods were purchased from M/s. Hindon Electncals (P) Ltd., M/s. Summerking Electricals (P) Ltd, Sarvottam Appliances, Domestic Aids and M/s. Sales India; that order for these firms was placec on D.R. Goel on phone at Maliwara; that payments were sent through bank drafts to D.R. Goel. He contended that this leaves no doubt regarding the ownership of all the units and the use of common brand name by all the units; that this also proves that in trade and business circle there was no doubt as to who was the owner of all the units and firms; that thus the value of clearances of all the units are liable to be clubbed for the purpose of levying duty on the goods manufactured and cleared by all the units. Reliance has been placed on the decision in Double Bee Enterprises v. CCE wherein the clearances of both units, having one roof and one common gate, with no separate demarcation of the premises, having common machinery, electric meters, workers and purchasing raw materials at a single point, were held to be clubbable as the units were one through they had separate registration with Sales Tax Department. He also relied upon the decision in the case of J.N. Marshall P. Ltd. v. CCE, Pune wherein the Tribunal has held that the value of clearances of all units to be clubbed for the purpose of working out the benefits available under SSI Notification as the units function in the same premises and no documents have been shown for payment of rent; that aspect of common control of production and sales or management is also present; there is near total administrative control of all the units by J.N. Marshall Pvt. Ltd; payment towards PF, EPF, ESI, Property tax, security and audit fees for statutory audit in respect of all units are made by J.N. Marshall. The learned SDR has relied upon the other decisions also including Supreme Engineering Works v. CCE, Pune wherein the Tribunal has held that value of clearances of units established at different point of time is clubbable as only two brothers and their wives owned them and controlled the production and were having financial relationship and sales between the units were not on principal to principal basis.
10. The learned SDR, further, submitted that the private records seized from Kavi Nagar premises belonging to M/s Summerking Electricals (P) Ltd. reveal the unaccounted production and clearance of excisable goods for which no corresponding bill/invoice had been issued; that Shri D.S. Bhatnagar, Manager-cum-Supervisor has admitted in his statement dated 13.6.1995 that he was maintaining the records of production and despatches in writing pads and that no challans/bills had been issued; that as per these private records, the value of clearance was Rs. 55.21 lakhs in 1994-1995 and Rs. 44.28 lakhs in 1995-1996 (in 50 days only from 1.4.1995 to 12.6.1995). Regarding contention of the learned advocate the entries in RGI for the relevant period are more than what figured in the testing record, the learned SDR contended that figures in RGI cannot be more than the figures shown in testing report; that the sale proceeds of goods cleared in clandestine manner was being deposited in the undisclosed Bank Account No. 1447 with Oriental Bank of Commerce. He also mentioned that a parallel b'ill No. 49 dated 19.2.1993 had been issued by Domestic Aids to M/s. Jaggi Electricals for sale of coolers; that on checking it was found that bill No 49 dated 12.2.1993 had been issued to M/s. Arihant Steel for sale of Iron Sheet; that thus it is apparent that Domestic Aids had indulged in issuing parallel bills not disclosed to the Department. Finally the learned SDR mentioned that Shri D.R. Goel had hired goonda elements who attacked and beat the officers, snatched away most of the incriminating documents/records collected during the search; that two of the officers had to be rushed to the hospital and were admitted in ICU; that F.I.Rs. had been lodged with Police and the matter is being examined by CID Meerut.
11. We have considered the submissions of both the sides. According to Revenue Shri D.R. Goel is the person who has created all the units in different names and styles and who controls all them in all aspects and his sole intention was to evade many of duty by fragmenting the value of clearances among the different units. Revenue has put forth materials/evidences to prove that D.R. Goel is the person who was incharge of all the affairs of all the units, arranging finances and premises. On the other hand, the learned Advocate has contended that after recording such findings the Commissioner has confirmed the demand of duty against M/s. Summerking Electricals Pvt. Ltd. in which Shri D.R. Goel was the initial Director and the other units/entities were created subsequently. According to the learned Advocate, this finding is not correct as three units were started before M/s. Summerking Electrical Pvt. Ltd. came into existence. His submission that Summerking Enterprises started on 16.8.1980, M/s. Domestic Aids on; 31.7.1987 and M/s. Hindon Electrical (P) Ltd. on 13.10.1989 had not been rebutted by Revenue. It is also apparent from the Summary of Units, Nature, Period, Constitution & Financial Arrangement submitted by Revenue wherein the date of commencement of manufacturing unit by M/s. Summerking Electrical (P) Ltd. has been mentioned to be 14.12.1989. Thus the facts do not corroborate the findings that the duty should be collected from Summerking Electrical (P) Ltd. It has also been emphasized by Revenue that three units were functioning from the same premises at 61, Maliwara, Ghaziabad. The learned Advocate has on the other hand contended that none of the manufacturing units was working there simultaneously as Summerking Enterprises worked only up to 21.10.1992. M/s. Sarvottam Appliances started manufacturing activity from 1.4.1995. Thereafter M/s. Weather Makers started manufacturing activity only with effect from 1.9.1995. The other units operating from the said premises were involved in Trading business only. The Revenue has also not controverted these submissions made by the learned Advocate. Thus the fact of different units/functioning from the same premises does not advance the case of the Revenue. For the purposes of clubbing of clearances of the different units, it is settled law that there should be common funding and financial flow back. It has been held by the Rajasthan High Court in case of Renu Tandon v. UOI that "the value of clearances of two units cannot be clubbed together and the two units cannot be treated as one unit merely because of proximity or relationship or the situation of the two factories or because these are some common employees unless there is a clear and specific evidence that there is a mutuality of business interest between the two units and that both have interest m the business of each other or they have common funding and financial flow back." The Appellate Tribunal has followed the said judgment in the case of D.M. Gears Pvt. Ltd. v. CCE, Delhi-I wherein the Tribunal did not uphold the clubbing of clearances as "it has not been shown that M/s. DMG have entirely financed M/s.. CAE's business and drawn all the profits of the business for themsevles."
12. In the present matters, the main submissions of Revenue about the common funding and financial flow back is that funds in all units were provided by family members and friends and the unsecured loans were arranged by D.R. Goel. From the Summary of Financial arrangement given by the learned SDR, we observe that there is no mention of arranging unsecured loans for M/s. Summerking Electrical (P) Ltd. nor is their any material to show that there was financial flow-back from other units to M/s. Summerking Electrical (P) Ltd. The main contention of Revenue is that unsecured loans were arranged by D.R. Goel. Arranging of loans from family members and friends cannot lead to a conclusion that all the units do not exist. It is a common practice to arrange loans/finances for near and close relatives venturing into business. The learned Advocate has also contended that loans were also provided by financial agencies and all loans have been back by the respective firms. Again there is no rebuttal from Revenue. In this regard he has relied upon the decision in Alpha Toyo Ltd. wherein the Department had proceeded on the basis of interest free loans given by the Appellants to other four units and had come to the conclusion that they were related persons and that the four units were dummy ones, and as there was a common managerial control, the benefit of SSI notification No. 175/86-CE was denied to them, the Tribunal has held as under:
We arc not satisfied with the said findings as Managerial control is different from money flow back, management control and profit sharing. A dummy unit is a unit, which is not in existence in reality, but it is merely created on paper only. In other words, the physical existence of such a unit is not to be found in terms of investment of capital, machinery and labour. The unit which creates such a dummy unit, utilize the dummy unit for the purpose of tax citation. Therefore, the courts have clearly distinguished on facts each of the case and have now settled the issue by holding that mere evidence of Directors being common or utilization of telephone, labour or machinery by itself is not a ground to consider an unit as a dummy unit of the other. It has been held that even if a unit is in existence, but if it is totally controlled in terms of money flow back, profit sharing, management control, and it had been created with a view to evade taxes by a series of acts of omission and commission, by manipulation of accounts and records then in such an eventuality, the clearance of a dummy unit can be clubbed. As rightly pointed out by the Id. Senior advocate there is no definition of the term "dummy unit," but what how from the judgments cited by him is that a dummy unit is a unit, created by the main unit with a view to evade taxes and that the first main unit totally controls its activity in terms of profit sharing, management control, decision making, and acts of such nature. The dummy unit would be a mere facade one and in reality it is one and the same with the main unit. In this particular case, there is no such evidence at all to show that such an arrangement is in existence. The mere fact of management control and a few directors being common and also by the fact that interest free loans are being given to the other units by the first unit, these factors, by itself, is no ground for holding them as dummy units and for ordering clubbing of all their clearances, and to deny the benefit of the exemption Notification.
13. The Tribunal has thus held that the mere fact of management control or of grant of interest free loans is not sufficient to come the conclusion that the units are dummy. The bank account No. 1447 with Original Bank of Commerce, Ghaziabad which was not disclosed to the Department by Shri D.R. Goel, peuains to M/s. Sales India, a trading concern only. This bank account by itself does not lead to any conclusion that the clearances of the various manufacturing units should be clubbed. Similarly there is no force in the submission of Revenue that major portion of sales of raw material, semi-finished goods and finished goods among the various units goes to show that the separation of units was a facade and in reality all units worked in tandem. The units have to purchase inputs, raw materials from somewhere and if they purchase the same from the units owned by there close relatives, it does not mean that all of them are one unit only. It has been held by the Tribunal in Superior Products v. CCE, New Delhi that "the commonality of share holders and Partners and a common manager do not destroy the separateness of the two units. That they are manufacturing the same product or that one unit purchases material from the other on commercial terms also do not go against their separate identity as manufacturers." This decision also distinguishes the decision in the case of Supreme Engineering Works by observing that "in that case tax evasion was being carried out under the garb of corporate entities." In view of this the different units cannot be treated as dummy units. They will all be eligible to avail of the benefit of SSI exemption. We, therefore set aside demand of duty and all penalties imposed on various firms and persons and confiscation of plant and buildings.
14. As regards use of brand name and clandestine clearance, we are of the view that matter should go back to the jurisdictional Adjudicating Authority for re-adjudication in view of our holding that all units are having separate and independent existence. The Adjudicating Authority has to decide as to whether there was any clandestine clearance of the goods and if so which unit or units indulged in clandestine manufacture and clearance, and if yes, whether they exceeded the exemption limit provided in SSI exemption notification Similarly the question of use of Brand Name has to be decided by the Adjudicating Authority in accordance with law. We, however, make it clear that the Adjudicating Authority will be at liberty to impose any penalty on both these counts, if necessary. We now come to the appeals filed by Revenue. The prayer regarding imposition of penalty on 7 other persons and demand of interest under Section 11AB of the Central Excise Act do not survive in view of our Order holding the manufacturing units as independent of each other. The issue regarding clandestine clearance of goods has been remanded and the Revenue is at liberty to plead before the Adjudicating Authority regarding non-accountal of goods reflected in the testing records in RG-1 and their removal without payment of duty. Similarly the Adjudicating Authority will decide afresh about the demand of duty on cooler pump and its motor.
All the appeals are disposed of in the above terms.