Customs, Excise and Gold Tribunal - Delhi
Rana Rubber Industries vs Collector Of Central Excise on 26 October, 1987
Equivalent citations: 1987(32)ELT433(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. Brief facts of the case are as follows :-
M/s. Rana Rubber Industries (RR) was a partnership concern of the Brothers and their mother. It was having a Central Excise licence for Rubber Conveyor belting and transmission since 1967 under Licence No. L-4/1/67-SRE. The same partnership was having another factory under the name and style of M/s. Rana Rubber and Plastic Mills (RR&PM) at village Kumhar Khera near Saharanpur. Later on, it is claimed by the appellant that the new Partnership Deed was executed in respect of their factory at Kumhar Khera w.e.f. 1-12-1978. The partners in this new partnership were the wives of the three brothers who were the partners alongwith their mother in respect of the other unit i.e. RRI. However, the new partnership deed effected from 1-12-1978 was not intimated to the Central Excise authorities on dissolution of old partnership deed in respect of the other unit RR± it continued to work under the old L-4/1/SRE/75. The other unit Rana Rubber & Plastic Mills (RR&PM) is also manufacturing the same goods namely Rubber transmission and conveyor beltings w.e.f. 1-4-1978. Notification No. 71/78 was issued by the Central Govt. allowing an exemption inter alia on the aforesaid goods, to a manufacturer upto the value of Rs. 5,00,000/- within the financial year i.e. 1978-79 and 1979-80 and so on. During the scrutiny of R.T. 12 Returns by the Range officers of Central Excise. It was observed by Range officer that the appellant company RRI had another unit RRPM as stated above with identical partners and partnership. Accordingly, it was alleged that the clearances of both the units namely RRI and RR&PM were to be clubbed for the purpose of computing the exemption limit of Rs. 5 lakhs in terms of Notification No. 71/78 dated 1-3-1978. It has also been alleged that from the scrutiny of Invoices submitted by the appellant only on 11-1-1982 after they were first requested for by the Central Excise Department on 4-9-1979 and after several reminders that the appellant company had been charging from its customers, in respect of the goods cleared from both the units, on various accounts such as special packing charges and the duty on the goods even though the duty had never been paid by any of the units to the department and no approval for special packing charges not includible in the value of the goods appeared to have been taken by the appellant from the department. Accordingly, a show cause notice dated 30-1-1982 was issued for demand of duty of Rs. 4,713.20 for the year 1978-79 and of Rs. 35,846.60 for the year 1979-80. The appellant was also asked to show cause as to why penalty should not be imposed on them for removing goods without proper payment of duty and for contravention of Rules 9, 52-A, 53 read with Rules 173C, 173G and 173F.
2. After considering the various pleas of the appellant including that of time bar, the original adjudicating authority namely the Addl. Collector of Central Excise, Meerut has confirmed the demand of the aforesaid amount of duty and has also imposed a penalty of Rs. 25,000/-on the appellant.
3. Learned Consultant for the appellant has taken a number of pleas which are dealt with seriatam below :-
(i) The new partnership deed executed in respect of other unit RR&PM w.e.f. 1-12-1978 cannot be doubted simply because it is not a registered document on the ground that non-registration of partnership deed merely disentitled partnership from certain rights under the Partnership Act. The Central Excise law does not anywhere lay down that partnership must necessarily be registered before it is accepted by the Central Excise authority. The fact that partnership deed is borne out by the Registration Certificate issued by the Sales Tax Officer, Saharanpur. We are unable to accept this plea of the learned Consultant for the appellant. The appellant has not submitted any evidence as to when they made the application for registration of their firm to the Sales Tax Officer for registering it w.e.f. 1-12-1978. Since by-registration of the firm under the sales tax law, the firm merely acquires a sales tax liability, certificate from Sales Tax Officer is not a clear proof that the partnership has been registered with the new partners as claimed in the partnership Deed effective from 1-12-1978. In order to admit a partnership deed with specified partners, it is required to be registered under the Indian Partnership Act. If that is not done, then the appellant company was required to follow the provisions of the Central Excise Law, to rid itself of the Central Excise duty liability. Therefore, we are inclined to agree with the adjudicating authority that the dissolution of the old partnership in respect of the other unit RR&PM and re-constitution of the new partnership without following the procedure laid down by the Central Excise Law cannot be accepted in the facts and circumstances of the case inasmuch as the appellants have not been able to prove that the new partnership deed has come into existence w.e.f. 1-12-1978.
(ii) A plea was taken up by the learned Consultant for the appellant that a partnership is distinct from the partners. Therefore, the two units namely RRI and RR&PM cannot be. said to belong to the same person or the manufacturer. For this proposition, the learned Consultant relies upon the Tribunal's decision in the case of M/s. G.D. Industrial Engineers, Faridabad v. CCE, Chandigarh [1983 (14) ELT 1994 (Cegat)]. This decision relying on Supreme Court decision reported in 1978 (2) ELT (J) 317 in the case of ACCE v. J.C. Shaha & Others has held that while it is true that "under the law of partnership each partner is an agent of all others, the partnership itself is a person distinct from the partners in terms of Section 3(42) of the General Clauses Act, 1897. Accordingly, partner of the firm is not the same person as the firm itself ...." It has been further held that "it makes for no difference for the applicability of the ratio of the aforesaid decisions if, instead of one or two persons happening to be the partners in a plurality of firms, all the partners in one firm are identical with those in the other firms, as in this case. A partner in any of the three firms is distinct from each of the three firms" which is separate and distinct from the other two and also distinct from the individual partners composing them, [ibid para 7(c)].
Prime facie, there appears to be some force in this plea of the learned Consultant for the appellant. However, on a closer reading, we observe that this plea too is not of any avail to the appellant because the facts in this case are different from the facts in the case of G.D. Industrial Engineers. It is observed from para 7(d) at page 1844 of the aforesaid report in the said case that the three firms though having common partners were having shares of each partner differently in different firms. 'Person' has been defined in Section 3(42) of the General-Clauses Act as including "any company or association or body of individuals, whether incorporated or not". Therefore an "association" of the same individuals with identical partnership (shares) will mean the same 'person' in terms of the General Clauses Act or for the purpose of the Central Excise law in the absence of any definition of "person" in such law. It can, therefore, be said in the instant case, as it has not been proved to the contrary, that the same person namely the partnership of three brothers and their mother was having two units namely RRI and RRPM and these two units cannot be said to be run by the different persons i.e. different manufacturers.
(iii) Next plea of the learned Consultant is that the demand is time barred inasmuch as show cause notice has been issued beyond a period of 6 months of the period for which the demand has been confirmed. According to the learned Consultant, both the units namely RRI and RRPM had been submitting regular RT-12 returns in respect of goods manufactured and removed from both the units. These have also been assessed by the officers concerned. Both the units fall under the same Central Excise range within the jurisdiction of the same Superintendent and of the same Inspector. Similarity of the name of the two units should have alerted the Central Excise officers to enquire further into the constitution of the partnership of both the units. Failure to do so would raise a presumption in favour of the appellant that the officers know about the common partnership of the two units. Accordingly, no presumption of suppression of facts or misstatement of facts can be attributed against the appellant. The show cause notice, therefore, is time barred. We are unable to accept this plea of the appellants' learned Consultant. In the absence of any declaration by the appellant while submitting the classification list for clearance of the goods in terms of Notification No. 71/78, the presumption of bonafides on the part of the appellant company cannot be accepted. They ought to have declared, before availing of the said exemption, about the same partnership of another unit RR&PM. We also observe that the additional liability of duty does not arise merely on account of clubbing of the production of the two units RRI & RR&PM but also on account of several other factors such as charging of duty separately without paying it to the department and charging higher prices of goods in the garb of special packing charges without getting any prior approval of the department to that effect. These charges were made by the appellant separately in the Invoices raised by it on its various customers. The invoices were not given by the appellant although asked for by the department since 4-9-1979 mentioned supra,' despite several reminders. The relevant Invoices were given by the appellant only on 11-1-1982 as stated in the show cause notice and not rebutted by the appellant. Accordingly, the charge of wilful suppression of facts is borne out from the records of the case and the larger time limit of 5 years has been rightly invoked by the lower authorities in demanding duty under Section HA of the Central Excises and Salt Act. Accordingly, the various case law relied upon by the learned Consultant is not applicable in the instant case. This is clearly a case of inappropriate payment of duty by the suppression of facts of charging higher prices or by not disclosing the fact of another unit under the identical partnership. Accordingly, Rule 9 has been rightly invoked and penalty has been rightly imposed.
(iv) Another plea of the learned Consultant is about computation of value under Section 4 in terms of Notification No. 71/78. The duty charged separately by the appellant from its customers should not be included in such computation on the basis of Orissa High Court judgment in the case of Bizy Industries 1982 (10) ELT 109 (Ori)). We are unable to accept this plea as well. An amendment of Section 4 by the Finance Act, 1982 inserted an explanation to the effect that the duty actually payable by an assessee to the department alone would be deductible from the price of the goods charged by it from its customers. This explanation has been given retrospective effect from 1-10-1975. Amendment made by the Finance Act, 1982 giving retrospective effect from 1-10-1975 would prevail and the judgment of Orissa High Court mentioned supra would have no applicability here in the instant case.
(v) Next plea of the learned Consultant is that in any case the penalty is unwarranted in the facts and circumstances of the case and Section 47(2) of the Finance Act, 1982 lays down that the said amendment under Section 4 could not make an offence retrospective. We are afraid that there is no substance in the plea of the learned Consultant. The show cause notice had been issued on 30-1-1982 i.e. before the insertion of amendment by Finance Act, 1982. Therefore, there is no question of retrospectivity of offence in the instant case and the offence of the appellant here does not merely relate to the amendment to Section 4 of the Central Excises and Salt Act; but also to other factors such as suppression of facts about correct valuation of goods and the two units being under the identical partnership.
(vi) Last plea of the learned advocate for the appellant is that the demand of duty has been wrongly calculated inasmuch as the total values for the 2 years i.e. 1978-79 and 1979-80 are values or total realisation made by the appellant including the element of duty therein. Therefore, before arriving at an assessable value, after giving allowance of exemption limit of Rs. 5 lakhs, duty element should be deducted from the values (total realisation). On such value so arrived at, appropriate rate of duty should be applied for the purpose of demand of duty. We agree with this plea of the learned Consultant.
4. Subject to a small modification in determining the amount of demand, as referred to in Serial No. (vi) above, we do not find any merits in the various pleas of the appellant and accordingly, the appeal is rejected.
V.T. Raghavachari
5. I have perused the order prepared by brother Shri P.C. Jain and agree with him regarding the nature of disposal of this appeal as indicated in paragraph 4 of his order. I am adding a few lines with reference to the issues dealt with by him under paragraph 3(i) & (ii).
6. According to the appellants it was only from 1-12-1978 that RR&PM consisted of partners different from those in RRI. In the proceedings before the Additional Collector, no objection had been taken that till 1-12-1978 also the clearances of RRI and RR&PM should not be clubbed together or aggregated. That was evidently for the reason that there was no dispute in the proceedings before the Additional Collector that though at the two different places the factories were named differently, they were but one since the partners were the same in both the places. In the circumstances, the claim now made that the clearance of RR&PM from 1-4-1978 to 30-11-1978 should also be excluded in calculating the clearances of the appellants cannot be accepted.
7. That would lead us to the question whether at any rate on 1-12-1978 RR&PM became a separate and distinct identity. In this connection, it should be noted (i) the partners of the new firm were but the wives of the three of the partners of the old firm (ii) the manager said to have been authorised under the partnership deed to operate on the bank account also was one of the old partners (iii) the partnership deed was not registered and, therefore, the question whether it was actually executed on the date it bears is open to doubt which it would not have been if the registration had been done (iv) it does not appear to have been produced before other public authorities also shortly after its alleged date of execution. The certificate produced before us as issued by the Sales Tax authorities is admittedly dated 29-8-1987 & (v) though both units were licenced no application for amendment of the licence in the name of the new partners had been made. These circumstances taken cumulatively throw a good deal of suspicion that the alleged partnership deed dated 1-12-1978 may not have come into existence that day but was evidently brought into existence subsequently. In the circumstances, the conclusion of the Additional Collector that there is no proper proof of dissolution of the earlier partnership and constitution of a new partnership, is correct.
8. As earlier mentioned I agree with the conclusions in paragraphs 3(iii) to 3(vi) of Shri Jain's order as also with his conclusions to the nature of the disposal of the appeal.