Customs, Excise and Gold Tribunal - Delhi
Primlaks Waffles P. Ltd. vs Commissioner Of Central Excise on 20 August, 1999
Equivalent citations: 2000ECR411(TRI.-DELHI), 2000(118)ELT221(TRI-DEL)
ORDER S.S. Kang, Member (J)
1. In the impugned order, the Collector of Central Excise held that M/s. Primlaks Waffles Pvt. Ltd. and M/s. Western India Chocolate Products Ltd. manufactured the goods on behalf of the same manufacturer, therefore, their production and clearances have to be clubbed under the excise law. The Collector of Central Excise also held that both these appellants are related to M/s. Target Marketing Pvt. Ltd. with mutuality of interest, therefore, the extra consideration received by M/s. Target Marketing Pvt. Ltd. would have to be added to the assessable value.
2. Ld. Sr. Counsel, Sh. Joseph Vellapally, appearing on behalf of the appellants, submits that M/s. Primlaks Waffles Pvt. Ltd. and Western India Chocolate Pvt. Ltd. are independent manufacturers having their own independent manufacturing units on separate plots and both have separate financial arrangements, workers and separate income-tax and sales-tax registrations and separate excise licence. He submits that neither Primlaks Waffles Pvt. Ltd. nor Western India Chocolate Pvt. Ltd. have any supervision or control over each other. He, further, submits that both the appellants are manufacturing different products. He submits that the Collector of Central Excise passed the impugned order only on the ground that for both the appellants, the funds are arranged by one single source i.e. Hemani family through 'M/s. Pittwatter Enterprises, Hongkong, which is the holding company. He submits that in the impugned order, the Collector of Central Excise held that both the appellants are manufacturing goods for and on behalf of the same manufacturer. He submits that the manufacturer was not named or no investigation was conducted in respect of the manufacturer on whose behalf the appellants were manufacturing the goods. He submits that the Tribunal in the series of decisions held that main factor for deciding whether the units are one and the same, is the common source of expenses from one common fund or from one firm only and flow back of funds from one to the other. He relied upon the following decisions :
1. Rang Udyog v. C.C.E., Ahmedabad -1996 (83) E.L.T. 648 (Tribunal);
2. C.C.E., Jaipur v. Rock Drill (I) (P) Ltd. -1997 (95) E.L.T. 93 (Tribunal);
3. Binod Kumar Maheshzuari v. C.C.E., Calcutta-I-1997 (90) E.L.T. 83 (Tribunal); and
4. Padma Packages (P) Ltd. v. C.C.E., Coimbatore-1997 (90) E.L.T. 175 (Tribunal).
3. He submits that in the present case, no investigation was conducted in respect of the manufacturer on whose behalf the appellants are manufacturing the goods, as held by the Collector nor there is any evidence to show the financial flow back to that manufacturer.
4. In respect of M/s. Target Marketing Pvt. Ltd., he submits that the Commissioner of Central Excise, in the impugned order without any cogent reasons, held that M/s. Primlaks Waffles Pvt. Ltd., Western India Chocolate Pvt. Ltd. and M/s. Target Marketing Pvt. Ltd. are related persons. He submits that M/s. Target Marketing Pvt. Ltd. is merely a zonal distributor in Maharashtra, Madhya Pradesh and Gujarat and there is no mutuality of interest and no financial flow back from M/s. Target Marketing Pvt. Ltd. to the other appellants or vice versa. He submits that all the appellants are private limited companies. The transaction between the Target Marketing Pvt. Ltd. and the other appellants, is at arms length and are on principal to principal basis and there is no mutuality of interest either direct or indirect. He relies upon the decision of the Tribunal in the case of International Computer India Mfg. Co. Ltd. v. C.C.E. reported in 1989 (41) E.L.T. 287 (Tribunal). He submits that the Tribunal held that when both buyers and sellers are limited companies, they cannot be considered as related persons merely on the ground that they are subsidiaries of same holding company unless shown to have direct or indirect interest in the business of each other. He, therefore, prays that the appeal be allowed.
5. Ld. DR appearing on behalf of the Revenue reiterated the findings of the lower authorities.
6. Heard both sides.
7. In these appeals, the Collector of Central Excise, in the impugned order, held that M/s. Primlaks Waffles Pvt. Ltd. and M/s. Western India Chocolate Pvt. Ltd. are manufacturing the goods on behalf of the same manufacturer, therefore, their clearances have to be clubbed for the purpose of excise duty. The contention of the appellants is that both the appellants are independent units and there is no evidence on record to show that there is financial flow back from one appellant to another. The contention of the appellants is also that in the impugned order, the Collector held that both the appellants are manufacturing the goods on behalf of the same manufacturer. The only evidence relied by the Collector is that one Hemani family, who was controlling M/s. Pittwatter Enterprieses, Hongkong, is funding the appellants. As there is a single source of fund, the appellants are one company. The Tribunal in the case of Rang Udyog v. C.C.E., Ahmedabad reported in 1996 (83) E.L.T. 648 (Tribunal) held that in the case of even common partners, common machines, when there is no evidence of financial flow back from one to another, the clearances of two units cannot be clubbed. The Tribunal in the case of Padma Packages (P) Ltd. v. C.C.E., Coimbatore reported in 1997 (90) E.L.T. 175 (Tribunal) has also taken the same. In another case in Binod Kumar Maheshwari v. C.C.E., Calcutta-I reported in 1997 (90) E.L.T. 83 (Tribunal), the Tribunal held that in the absence of any evidence of financial flow back, the clearances of two units cannot be clubbed. In the case of C.C.E., Jaipur v. Rock Drill (I) Pvt. Ltd. reported in 1997 (95) E.L.T. 93 (Tribunal), the Tribunal held that for clubbing of clearances of the units, the Revenue has to leave sufficient evidence to show that there was a financial flow back between the units and total administrative control of one unit by another.
8. In the present case, in respect of financial flow back, to each appellant or to the "same manufacturer", which was not identified in the impugned order, there is no evidence on record. Therefore, the finding of the adjudicating authority in respect of clubbing of clearances of both the units is not sustainable.
9. In respect of mutuality of interest of the two appellants with M/s. Target Marketing Pvt. Ltd., we find that all the companies are private limited companies and the Revenue is not disputing the fact that M/s. Target Marketing Pvt. Ltd. is only the distributor for some of the States. The adjudicating authority, in the impugned order, held that as M/s. Primlaks Waffles Pvt. Ltd. and M/s. Western India Chocolate Pvt. Ltd. are producing goods on behalf of one manufacturer, the same argument is also applicable to the relationship between these appellants and M/s. Target Marketing Pvt. Ltd. in view of the common finding.
10. The Tribunal in the case of International Computer (supra), held that when the manufacturers and buyers are limited company, they cannot be said to be related persons merely because being subsidiaries of same holding company, unless shown to have direct or indirect interest in the business of each other. In the present case, there is no evidence on record to show that M/s. Primlaks Waffles and M/s. Western India Chocolate Pvt. Ltd. have direct or indirect interest in the business with M/s. Target Marketing Pvt. Ltd. or vice versa.
11. In the foregoing paras, as we held that clearances of M/s. Primlaks Waffles Pvt. Ltd. and M/s. Western India Chocolate Pvt. Ltd. cannot be clubbed and in view of the decision of the Tribunal in the case of International Computer India Mfg. Co. Ltd. reported in 1989 (41) E.L.T. 287 (Tribunal), cannot be said that there is any mutuality of interest between the appellants.
12. In view of the above discussion, the impugned order is set side and the appeals are allowed.