Customs, Excise and Gold Tribunal - Delhi
Prima Controls (P) Ltd. vs Collector Of Central Excise on 30 August, 1993
Equivalent citations: 1993(44)ECC169, 1994(72)ELT62(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. Both these appeals arise from a common order in original No. 34/90 dated 10-7-1990 passed by Collector of Central Excise and Customs, Pune.
2. The question that arises for our consideration in these appeals is as to whether the clearances of both the companies could be clubbed together and benefit of concession granted to Small Scale Units vide Notification No. 77/83 Central Excise dated 1-3-1983, 77/85 Central Excise dated 17-3-1985 and 175/86 dated 1-3-1986 can be denied to them.
3. The facts of the case leading to the issue of show cause notice dated 12-6-1989 are as follows :--
3.i Both the companies are independent one and incorporated separately under the Indian Companies Act, 1956.
3.ii However, the department by their show cause notice dated 12-6-1989 has alleged that M/s. Avcon Controls (P) Ltd. Bombay (hereinafter referred to as M/s. Avcon) holders of Central Excise licence and M/s. Prima Controls (P) Ltd. (hereinafter referred to as M/s. Prima) by their common directors namely Sh. A.N. Kawale, and Mrs. Pramila A. Kawale (both are directors in both the companies) and the Rajan A. Kawale (Director of Prima only) had contravened various provisions of the Central Excise Act and Rules (as mentioned in the show cause notice). Inasmuch as M/s. Avcon and M/s. Prima and their Directors have misused the concessions granted to the Small Scale Units vide the above noticed notifications during the progressive periods, when these notifications were in force, by suppressing the fact that M/s. Prima is split up unit of M/s. Avcon. The same having been floated by them with a view to avail the benefits of SSI exemptions and M/s. Prima is a related company of M/s. Avcon within the meaning of Section 4(4)(c) of the Central Excises and Salt Act, 1944. They thus availed the value based exemptions provided to SSI units under the referred notification, to which they were not entitled to, taking into account the aggregate clearances of excisable goods from M/s. Prima and M/s. Avcon during the financial years 1984-85 to 1988-89. Thus they had evaded differential excise duty of Rs. 4846361.51 under Rule 9(2) read with Section 11A of the Act by contravening various rules of Central Excise Rules, 1944 as noted in the show cause notice. It is further alleged that they failed to file price lists in respect of the excisable goods manufactured and cleared by them as option to clear goods on invoice value is not available to them. It is further noted in the show cause notice that in the case of sales from M/s. Prima and M/s. Avcon, the correct value of the said goods in the prescribed and correct form should have been declared as the relation between them fell within the mischief of Section 4(4)(c) and they have thus cleared the excisable goods manufactured at M/s. Prima without properly determining CED payable thereon, during the period 1984 to March 1989. It is stated that these goods had been completely consumed by M/s. Avcon and hence the price is required to be determined in Part VI(a) on the basis of comparable prices, and no discount is admissible.
3.iii Besides the demand for the differential duty they were also charged and asked to explain as to why :--
(i) The clearance from M/s. Prima and M/s. Avcon should not be clubbed to determine the admissibility of value based exemptions vide notification noted alone and also they were asked to explain as to why M/s. Prima should not be treated as subsidiary of M/s. Avcon.
(ii) The shortage of goods valued at Rs. 5500/- noticed in the BSR on 23-12-1988, should not be treated as cleared from factory and accordingly CED @ 15% + 5% to Rs. 866.25 should not be recovered under Rule 9(2) ibid.
(iii) That an unaccounted goods valued at Rs. 1,40,750/- seized under panchnama be not confiscated under Rule 173Q(2) and penalty imposed upon them under Rule 9(2) read with Rule 173Q(i) ibid.
3.iv The Show Cause Notice relied in the statement of Sh. A.N. Kawale, Managing Director of M/s. Avcon Controls (P) Ltd. project report of M/s. Prima seized letter addressed by M/s. Prima to various customers.
3.v On the basis of the examination of the Memorandum of Association and Articles of Association of M/s. Avcon, it is inferred that:
(i) The main objects of the company were to manufacture different types of valves and control equipments and to deal in them,
(ii) It was promoted by Mr. and Mrs. Kawale.
(iii) Mr. and Mrs. Kawale were to be permanent Directors of the company.
This has been compared with the Memorandom of Association and Articles of Association of M/s. Prima, incorporated on 29-1-1980, it is inferred that they are totally identical inasmuch as :--
(i) The main objects use the same i.e. to manufacture different types of valves and control equipments and to deal in them.
(ii) It is also promoted by Mr. and Mrs. Kawale only,
(iii) Mr. and Mrs. Kawale are the permanent Directors.
3.vi On the examination of the project report of M/s. Prima submitted to Bank, it is alleged it is inferred that:
(1) (11.1, para 2 of the report). This manufacturing unit is established as Small Scale Unit to avail with all the facilities which are given by various government authorities such as excise etc. (2) At 11.2, para 2, regarding technical competence it is stated that the "Directors are with experienced in the manufacturing of the valves as they are running Control Valve Manufacturing Co., M/s. Avcon in Bombay" which imply that the same projects are to be manufactured at M/s. Prima...shortage of place, heavy labour cost involved and Government policy to discourage expansion of industries in Greater Bombay Unit, have become major reasons for launching this unit at Pune (implying that M/s. Prima was started by them as M/s. Avcon could not expand in Bombay)...
...As the Directors have full confidence and ideas about the demand pattern, required manufacturing technology and in their other company the Sales is well established demand is rising (implying that the Product of M/s. Prima is a similar one and that M/s. Prima would benefit from established market of M/s. Avcon).
...for other items technical know how has been already collected, and tried and established, all models are field tested for at least 6 months, vendors and sub-vendors have already been developed (implying that this technical know how has been developed, tried and field tested and established by M/s. Avcon for M/s. Prima free of charge even prior to M/s. Prima's coming into existence). This is further corroborated by other evidences subsequently in this Annexure.
(3) At 11.2, para 4, it is stated that the "key" Personnel are ready at Bombay factory who shall conduct training for the new recruits in the shortest possible time to put the Company in full scale manufacturing. . . . Some experienced persons can also be transferred to Pune which will give a boost to production and ultimately increase the turnover and profitability.
3.vii It is also alleged in the show cause notice that Shri Kawale in his statement had admitted on 20-2-1989 that Mr. Mohendale who was with M/s. Avcon's Consultant was transferred as a Director to M/s. Prima.
3.viii The statement of Mr. Kawale is also relied by department that "when the new company will start functioning fully, same of the portion which is presently being manufactured in Bombay and present sale will be diverted to this Unit".
3.ix Therefore, it is inferred in the show cause notice that, the fact that articles of manufacturing and sale of this Unit have actually been transferred is apparent from :--
(i) balance sheet of M/s. Avcon for the year 1982-83 in the notes (13,14) under item 2 against capacities and production, it is seen that from April 1982, the production of modulating rotors was completely stopped and the production is nil against 361 Show Cause Notice during the previous year. It is exactly during this period that M/s. Prima started full scale production and those items was diverted to it.
(ii) and also from M/s. Prima's letter No. PCPL/PNA 8303/A.N./Bby/119/87 dated 12-7-1987 to M/s. Apptach Engineering Pvt. Ltd. (14.1) stating that our parent company has been manufacturing actuators for past 17 years (now we are manufacturing), and also from
(iii) M/s. Prima's letter No. PCPL/A.N./Bby/83/86 dated 25-7-1986 to M/s. M.B.M. Associates (15.1) stating that "we are manufacturing electric actuators (modulating motors earlier supplied by M/s. Avcon).
It is alleged that Mr. Kawale could not give proper clarification in this behalf in his statement.
3.x The department have also referred to several letters viz letter No. 83/JI/MB/478, dated 12-6-1984 to M/s. Jocomatic International, France (16.2) and from it is alleged that it appears that M/s. Avcon are their agents in India. Further M/s. Prima have submitted their collaboration as seen from the invoice No. 6360 dated 30-4-1981 (and also from the project report). In this invoice the address of M/s. Prima is that of M/s. Avcon it is always a practice that the agency and collaboration would be with the same entity. It therefore, appears that M/s. Prima has got this collaboration in the capacity of subsidiary division of M/s. Avcon.
It 'is further alleged that M/s. Avcon's letter No. PCPL/A.N./MS 2997/84 stating that M/s. Avcon are representing M/s. Jocomatic International in India and M/s. Prima are manufacturing Solemned Valves in collaboration of M/s. Jocomatic International.
Admission of a fact by Mr. Kawale to effect that the initial correspon-dence of collaboration was posted to M/s. Avcon who already had their agen-cy, is also relied in show cause notice.
3.xi Further it is alleged in the show cause notice that from the letter No. PCPL/AK/Bby/29/86-87 dated 28-11-1986 addressed to the Manager, Bank of India, it appeared that an amount of Rs. 13 lakhs had been perfectly due to M/s. Prima from M/s. Avcon. This is also confirmed from ledgers. This amount represents almost 9 year's sale to M/s. Avcon from M/s. Prima. This amount is interest free. Moreover, in spite of such heavy outstanding amount further supplies were being made to M/s. Avcon. From these facts it is alleged that the finances of one are freely used by the other for its needs i.e. there is a flow of finances from one to the other and by not charging any interest additional benefits are derived. Sh. Kawale cannot clarify on this front in his statement.
3.xii It is further alleged that from the shareholding chart as produced by the assessee under summons, it is inferred that the sharedholding is as follows :--
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Name of the share- Percentage holding Percentage holding
holder & other in M/s Avcon as on in M/s Prima as on
31-3-1988 30-3-1988
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(1) Shri A.N. Kawale 51.45% 50%
(2) Smt. P.A. Kawale 27.72% 30%
(3) M/s. New Burn Thermal 0.14% --
Plants Pvt. Ltd.
(4) Shri A.N. Kawale and 20.69% 19%
Smt. P.A. Kawale jointly
(5) Shri R.A. Kawale - 0.05%
(6) Miss Margaret Fernandes 0.05%
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Therefore, it is alleged that both M/s. Avcon and M/s. Prima are financed entierly by Mr. and Mrs. Kawale and their son Mr. R.A. Kawale. This fact is alleged to have been admitted by Sh. Kawale, in his statement. It is also stated that even M/s. New Burn Thermal Plants (P) Ltd. is firm held entirely by the other Kawale's only.
3.xiii It is infered from the statement of Mr. Kawale that the entire finance of both the Units are controlled by him only, as he is signing all the cheques. It is, therefore, alleged that both M/s. Avcon and M/s. Prima are under the exclusively control of Mr. and Mrs. Kawale and under the exclusive management of Shri Kawale as can be seen from their statements.
3.xiv It is also inferred from the sales chart that M/s. Prima was flouted in 1950 and when M/s. Avcon had exceeded the exemption limit of 0.5 lakhs.
It is further alleged that the major sales of M/s. Prima are to M/s. Avcon as can be seen from a letter to Bank of India which shows that the sales of Avcon are about 1 to 2 lakhs per Unit.
3.xv Further it is alleged that they are giving discounts to the tune of 30% to M/s. Avcon whereas in normal taxes, the same is between 10% to 15%. Extra discount is granted to M/s. Avcon above the normal discount and hence the sales transaction do not appear to be at an arm's length. Sh. Kawale in his statement is alleged to have admitted that M/s. Prima are giving higher discount but when asked whether this was to compensate for various services that are being rendered by M/s. Avcon like marketing, technical and development work, he refuted the same, stating that this was only bulk quantity discounts.
3.xvi Therefore, it is alleged that M/s. Avcon has misused the various concessions given to small scale industries and contravened the various provisions of the Central Excises and Salt Act, 1944 and rules and thus had made liable to pay differential duty as well as penalty.
3.xvii It is also alleged that M/s. Prima had failed to properly maintain the prescribed RG-1 daily stock amount of the goods manufactured by them and in the stock taking conducted. Shortage of certain goods valued at Rs. 45,500/- and excess valued at Rs. 1,40,750/- was also formed. Besides unaccounted finished goods seized under panchnama dated 23-12-1988.
4. The appellants filed a detailed reply to the Show Cause Notice. They have denied any contravention of any provisions of any of the Central Excise Rules, 1944. It is stated by them that M/s. Avcon is a company incorporated under the Companies Act, 1956 and requested with the Registrar of Companies Bombay aid that it is also holding a SSI registration certificate dated 22-7-1971 and licenced under Factories Act, Sales Tax, Professional Tax and Income Tax Act.
4.ii They state that as an effect of incorporation, the company behaves an artificial person erected by law which is equal to a natural person and has its own separate legal entity of its own, with its own seal, assets and separate and distinct from those of its members. It can sue but be sued exclusively for its own purpose.
4.iii Therefore, they state that department seeking to clube the clearances of their company with that of another independent company M/s. Prima is patently invalid and erroneous and with any basis of law and therefore the proceedings were required to be dropped.
4.iv They have denied that basis of clubbing of the company by invoking Section 4 of the Central Excises and Salt Act as totally erroneous and illegal. Referring to Section 4 of the companies show cause notice, they have stated that the central idea in the concept of holding company and a subsidiary company is that the holding company should hold more than half of the normal value of equity share computed of the subsidiary company or shared have the right to appoint or remove a majority of the number of Directors of the subsidiary company. They contend that in their case none of the above situations exist since they are not holding a single share in M/s. Prima Controls nor do they have any right to remove any of the Directors of M/s. Prima. In support of this plea they filed the Certificate of their chartered accountant.
4.v They further pleaded that the concept of 'relative' has no application to impersonal bodies like limited companies (relied on Hind Lamps Ltd. v. Union of India 1977 (1) E.L.T. (J 1). They further pleaded that even if one company hold 50% or more shares of another company then that company can be at the most said to be having an interest in the another company as a shareholder, but for this reason it cannot be said that the first company has any interest, direct or indirect in the business carried on by one of its shareholder even though the shareholding of such shareholders may be 50% or more [Union of India v. Atic Industries Ltd. 1984 (17) E.L.T. 323]. Dawn Apparels Ltd. v. Union of India 1989 (43) E.L.T. 401. They stated that in their case they were not holding any share in M/s. Prima hence the question of their interest in M/s. Prima directly or indirectly did not arise at all. Hence they contend that the provisions of Section 4 of Central Excises and Salt Act, 1944 cannot be applied to the facts of this case. [They relied on the following ratios : Kerala Electric Lamp Works Ltd. and Anr. v. Collector - 1988 (33) E.L.T. 771, Brakes India Ltd. v. Assistant Collector -1988 (33) E.L.T. 654 Madras High Court, Union of India v. Bombay Tyres International Ltd. -1983 (14) E.L.T. 1896 Supreme Court, Prabhat Zarda Factory Ltd. v. Collector of Central Excise -1988 (34) E.L.T. 239].
4.vii(a) They further pleaded that M/s. Avcon was incorporated in the year 1976 and started commercial production in the year 1977, whereas M/s. Prima was incorporated in the year 1980 and started production in the year 1982 i.e. almost after five years after they entered the market.
(b) Both the companies are independent legal entities and the concept of relatives does not apply to them as they are impersonal bodies and not natural ones (Jay Engineering Works Ltd. v. Union of India 1981 (8) E.L.T. 284).
(c) Both the companies are holding separate SSI registration one issued by the Development Commissioner (Industries) Bombay and another issued by the General Manager District Industries Centre and separate registration in all other statutes.
(d) They are holding separate Central Excise licence for their Bombay factory as well as for their Pune factory distinct from that of M/s. Prima.
(e) Both the factories are separately situated.
(f) Separate Central Excise...were filed for Pune factory which was approved separately by the same Assistant Collector having control over M/s. Prima also.
(g) RT-12 returns of Pune factory had been filed separately and had been approved also separately by the Range Superintendent who was having jurisdiction over the factory of M/s. Prima also.
(h) M/s. Avcon manufacture and sell variety of control and solevoid valves while M/s. Prima's main product is actuators which are separate and separate product from the valves.
(i) They have separate labour, machinery, finances separate from that of M/s. Prima.
(j) They purchase their own raw material from the market for which they have developed their own supplies are of which is M/s. Prima. They buy the actuators from M/s. Prima, under the purpose orders just like other suppliers and these purchases are on the basis principle to principle and get the quantity discount from M/s. Prima. The purchase from M/s. Prima is on the same terms of as of other customers if they have their own marketing setup to market their goods throughout India.
4.viii Referring to the statements made in the project report, they deny the imputation made by department. They state it is normal practice in the trade to minimise the cost of a product by availing maximum legitimate benefits available to the industry. This does not imply that every statement made in the routine correspondence of an industry will be with an intention to evade taxes. They state that effective utilisation of resources i.e. experience of directors by itself does not prove that two companies are one and the same. They relied on the ruling of M/s. Jagjivandas and Co., Thane v. Collector -1985 (19) E.L.T. 441.
4.ix It is stated that M/s. Prima are manufacturing their products into the technical know how from M/s. Jocomatic International for which they were paying fees to them, therefore, the system of developing their product free of cost did not arise.
(a) They state that A.N. Kawale having full knowledge of the market as a director of their company cannot be considered as an evidence to club the clearances with M/s. Prima with their's. They rely on the ruling rendered by Tribunal in the case of Meteor Satellite Ltd. and Telstar Electronics v. Collector -1985 (22) E.L.T. 271.
(b) They denied having manufactured modulating motors and relied on Collector of Central Excise and that they were buying actuators from outside. There is no careful of 'parent company' and 'sister company' and that both the companies were different and independent.
(c) They denied being collaborators of M/s. Jocomatic International but were representing only their agents for the products manufactured by M/s. Prima in their own right as per the know how of M/s. Jocomatic and that by itself is not a case for clubbing both the companies.
4.x They deny the free use of money of M/s. Prima without interest. They state that it only an outstanding in a trade transactions between them, which is also not a ground for clubbing the units.
4.xi They denied getting free marketing support from M/s. Prima as they were having their own marketing net work. A times sale personnel worked only follow each others enquiries and orders as a help to each other as a matter of convenience to over come long distance problems. This did not mean that M/s. Prima were getting free marketing support from them. In this context, they relied on the ruling of Bhagwandas Kanodia and Ors. v. Collector of Central Excise 1987 (32) E.L.T. 204.
4.xii As regards the shareholding by Mr. and Mrs. Kawale, they stated that the business of a company is not financed by the share capital but by such finance for long term as well as working capital facilities as also by purchasing the goods on credit. Financing of a business is entirely different concept where share equited forms a negligible portion. Both the units were enjoying independent bank and credit facilities. They stated that the share capital contribution was in their individual capacity and therefore that this by itself does not weight against the company.
4.xiii As regard discounts they explained that they were making purchases in bulk penalty, which had been arrived at only after negotiations and thus by itself cannot be a ground for clubbing the clearances of the companies.
(a) They denied the charge of suppression and contended that the department was aware of the facts and hence the demands were all time barred.
5. The learned Collector has rejected all their contentions and confirmed the order. The learned Collector as the out set has clarified that once the department is able to show that M/s. Prima and M/s. Avcon are one and the same or the manufacture by M/s. Prima was for and on behalf of M/s. Avcon then allowing any discount from the price under Section 4 of the Act for any sales to M/s. Avcon does not arise, since the transaction between tin company ceases to be a sale and purchase. He has held that it is for this limited purpose that Section 4(4) (c) of the Act had been mentioned in the Show Cause Notice. Further the discount of 25% given to just one another customer of M/s. Prima cannot be considered since such a single transaction cannot labelled as "in the ordinary course of business". Quoting Section 4 the learned Collector has observed that the case against the assessee is not on the allegation that they had suppressed the assessable value under Section 4 of the Act and there by evade duty and hence has held that the 15 ruling referred were out of control. The learned Collector has referred to the details formed in the project report submitted by the M/s. Prima to bank and relying on the ruling rendered by the Hon'ble Supreme Court in the case of common of Income Tax v. Shri Meenakshi Mills Ltd. (AIR 1767 SC 519) and that of M/s. Juggilal Kamlapat v. Commissioner of Income Tax U.P. (AIR 1969 SC of 32) has held that the creation of M/s. Prima Controls (P) Ltd. was merely with the intention of circumventing tax obligation. The exception notification system are intended for Small Scale Industrial Sector and relying on the observation in Golden Press v. Deputy Collector of Central Excise -1987 (27) E.L.T. 273, has held that the notifications are required to be strictly construed and not liberally. The learned Collector has rejected the plea of the appellant about separate registrations for Sales Tax and Income Tax etc. on the ground that mere registration is not a proof of their not being 'related persons' if in substance relationship exists. He has based his findings on the shareholding pattern in the two companies and as such held that the clearances of excisable goods of the two companies are to be clubbed together to ascertain the eligibility to exemption under the said notification and hence confirmed the demand for differential duty. He has also held that the discount allowed by M/s. Prima to M/s. Avcon is not admissible and duty is required to be paid on the assessable value inclusive of this discount.
6. We have heard Shri Arshad Hidayatullah senior Advocate for the appellants and Shri S.K. Sharma learned JDR for the revenue. The learned senior advocate pointed out that the learned Collector had been seriously mislead and had totally confused himself with regard to the concept of valuation for related persons as underlined in Section 4 of the Act with that of the principle of clubbing the clearances for the purpose of grant of exemption for the notification. He pointed out that the learned Collector had not taken any care even to read the bare notification No. 176/86 to see its applicability but instead has solely proceeded to decide the case on the basis of alleged statement in project report, which was nothing but some loose sheets and not even a project report in any sense. The learned Collector had totally misunderstood the concept of clubbing of units and also totally misapplied the ruling besides rejecting the catena of case law relied by the appellants. The learned senior advocate pointed out that although the Collector initially stated that Section 4 is being referred for limited purpose, but ultimately has gone on to decide the case on that basis only. Further, the confusion of learned Collector had been on the basis of Shareholdings of the Mr. and Mrs. Kawale in both the companies. This, the learned senior advocate argued cannot be the basis for clubbing the two companies. The directors of a company are mere servants and each company is a separate corporate body and juristic person, who can sue and be sued. The holding in a company by individuals in forms of share would not make the company as their personal assets. Each corporate company, being a separate juristic person and therefore is independent of the other. The department has not placed any evidence to show that one company is totally a dummy unit of the other, inasmuch as the entire operations are controlled by M/s. Avcon in the case. The discount granted was also not abnormal but given as per normal business practice. There was also nothing unusual in outstanding amounts retained with M/s. Avcon, as these are normal business practices and does not support total control of one unit with the other. In this context he relied on the test laid down for clubbing of two units as laid down in the case of Vivomed Labs. (P) Ltd. v. Collector of Central Excise - 1991 (53) E.L.T. 152, which has been confirmed by Hon'ble Supreme Court, and that of the ruling rendered in the case of Meteor Satellite Ltd. and Telstar Electronics v. Collector of Central Excise, 1985 (22) E.L.T. 271. (Paras 11 to 20).
Shri Sharma arguing for the revenue reiterating the finding given by learned Collector on the project report, argued that the object of creating another company was to expand the present unit and as they could not utilise the benefit of SSI, they had floated a separate unit. The technical know how and training had been provided by the M/s. Avcon to the personnel of M/s. Prima. Thus the object in creating a separate unit was surely to defraud to revenue.
7. We have carefully considered the submission made by both the sides, and persued the records. As can be seen from the allegations in the Show Cause Notice, the department has proceeded to deny the benefit of the exemption notification applicable to SSI units of appellants solely on the ground that the M/s. Prima is a "splitting unit of M/s. Avcon" and having been floated by them with a view to avail the benefit of SSI exemptions and that M/s. Prima is a related company of M/s. Avcon within the meaning of Section 4(4)(c) of the Act. The learned Collector has held that Section 4(4)(c) of the Act had been involved for limited purpose but unfortunately has based his entire finding on this concept and has totally misguided himself in coming to this conclusion. We are constrain to observe that the learned Collector has totally miscarried himself both on facts and on law. The concept of lifting the corporate veil would arise only if there is a perpetrating fraud and as held in Para 20 of the Meteor Satellite case (ibid) and it has to be resorted to only in exceptional cases as held in para 20 which is noted below :-
"Para 20"
"As for the rulings relied on by the learned Senior Departmental Representative, it is sufficient to say that while Court or Tribunal is certainly entitled to lift mask of corporate entity if the conception is used for tax evasion or to circumvent tax obligation or perpetrating fraud, this is to be resorted to only in exceptional cases. In absence of evidence that profits made by Telester flowed back to Meteor or evidence of control or supervision of Meteor over Telstar, we are not inclined to do so. The rulings do not help the respondent."
7.1 Now, we have to see, as to whether there existed any such circumstances for lifting the corporate veil. In this case Collector has found two circumstances to hold that the unit M/s. Prima is a subsidiary of M/s. Avcon and the clearances are to be clubbed. One is the holding of shares by the common directors and other is the alleged project report of M/s. Prima, with due respect to the learned Collector, both the grounds cannot be the reason for clubbing the units. As these reasons have long been examined by the Tribunal in a series of judgments and overruled the same. A company is an independent juristic person with its own seal and it can sue and be sued. The directors are mere servants and that the contributors towards the share capital, by their mere contributions do not become proprietors. Mere common holding by individuals does not make both the companies to be one and the same. It is not the case of the revenue that M/s. Prima is a dummy unit floated on paper for the purpose of defrauding the revenue to take advantage of the exemption notifications. It is only on the basis of common directors and common Managing directors, and on the concept of related persons, the clearances are being clubbed together. Both these concepts have been negatived in number of rulings by this Tribunal as cited by the learned Counsel. More recently the Tribunal has also decided in the case of Fusion Polymers Ltd. v. Collector of Central Excise 1991 (56) E.L.T. 665, Cheryl Laboratories v. Collector of Central Excise 1993 (65) E.L.T. 596, A. Rathinam Prop. Micheal Match Works v. Collector of Central Excise 1992 (60) E.L.T. 451.
7.2 The finding giving by the Tribunal in para 11 to 17 of M/s. Meteor Satellite Ltd's case (ibid) may be cited herein, to follow its ratio for the present case.
******* 7.3 The finding given by Tribunal in Vivomed Labs. (P) Ltd. case (ibid) at Page 159 and 160 is also reproduced herein below :
******* The above ratio of the ruling is fully applicable to the facts of this case.
8. An independent reading of exemption notification No. 175/86-C.E., dated 1.3.1986 indicates that the Central Govt. has exempted the excisable goods described specially in the Schedule to the notification from excise duty and cleared for home consumption, in any financial year, by a manufacturer from one or more factories. The notification stipulates a condition by which the value of clearances of one or more manufacturers can be clubbed. The revenue is not invoking any relevant para of the notification to deny the exemption. But they want to treat both the units as a single manufacturer, on the ground noted by us. The learned Collector has observed that the exempting notification has to be strictly construed. There cannot be two opinion on this. Undoubtedly, every exemption notification has to be strictly construed but at the same time, an exempting notification cannot be read in such a manner as to make the notification otiose. This is precisely, what the learned Collector has done. He has held two independent companies, which are geographically apart and without any financial flowback or being dummy of one other, to be one company. Such an interpretation is unique and unknown to law and it is a total misapplication of law. The Learned Collector has applied the ruling of Bhoormul's case 1983 (13) E.L.T. 1546. With due respect to learned Collector, this ratio is totally inapplicable as the case dealt about smuggling activity and Customs evasion, which is not the case here.
9. As observed earlier, there is nothing on record to show that M/s. Prima is a dummy unit of M/s. Avcon. The learned Collector has held that he can lift the mask of corporate entity. But the revenue has not placed sufficient evidence in this regard to uphold the charge.
10. Therefore, applying the ratio of the citations noted by us the impugned order deserves to be quashed and we order accordingly by allowing the appeal with consequential benefits if any.