Custom, Excise & Service Tax Tribunal
Plasto Containers (India) P. Ltd vs Commissioner Of Central Excise, Nagpur on 28 January, 2011
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No. E/483 to 486/2008
(Arising out Order-in-Original No. 3/2008/C dated 25.2.2008 passed by the Commissioner of Central Excise, Nagpur)
For approval and signature:
Honble Mr. Ashok Jindal, Member (Judicial)
Honble Mr. P.R. Chandrasekharan, Member (Technical)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
authorities?
Plasto Containers (India) P. Ltd.
R.C. Agarwal
Vishal Agarwal
Urmila Agarwal
Appellant
Vs.
Commissioner of Central Excise, Nagpur
Respondent
Appearance:
Shri Bharat Raichandani, Advocate for the appellant Shri N.A. Sayeed, JDR for the respondent CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) Date of hearing : 06.01.2011 Date of decision : 28.01.2011 O R D E R No:..
Per: Mr. Ashok Jindal, Member (Judicial) The present appeals have been filed by the appellants against order confirming the duty demand along with interest and imposing penalty under the CEA, 1944. This is the second round of litigation before this Tribunal.
2. The brief facts of the present case are as under.
3. The appellants are a private limited company. The appellants are engaged in the manufacture of water tanks of various sizes ranging from 200 litres to 2000 litres since 1988. The appellants factory is located at Plot J-3, MIDC, Digdoh, Nagpur. The appellants are claiming, being an SSI unit, are exempt from payment of central excise duty in terms of SSI Exemption Notification No.8/2000-CE.
4. However, one of the main raw materials viz. plastic granules was received by the appellants on payment of central excise duty and hence, the appellants started clearing the aforesaid finished products on payment of concessional rate of duty in terms of Notification No. 9/2000-CE. Accordingly, the appellants got registered with the central excise department with effect from 13.10.2003. The appellants also filed periodical ER1 returns.
5. The aforesaid final products viz. water tanks manufactured by the appellants are different in shapes, colours, sizes, technical specifications, etc. Hence, names were given to the storage tanks such as Tata, Neelkamal, Johnson, Plasto, Vishal, Surabhi, Bajaj (India) etc. These names were loosely referred to as brand names by the appellants.
6. M/s Vaibhav Plastimoulds Private Limited (Vaibhav) is another private limited Company. Directors of the said company are Shri R. C. Agrawal and Shri. Vishal Agrawal. Vaibhav also manufactures water tanks at their factory located at Plot J-2, MIDC, Digdoh, Nagpur. However, the water tanks manufactured by Vaibhav are of capacity ranging from 3000 litres to 5000 litres. Vaibhav was set up in the year 2001.
7. In the initial years of setting up of Vaibhav, Vaibhav did not have an extruder machine. Hence, in terms of job work agreement entered into between the appellants and Vaibhav on 07.04.2002, the appellants agreed to manufacture certain goods on job work basis for Vaibhav. Both the units are located adjacent to each other having a boundary of barbed fence wire.
8. Investigations were undertaken by the officers of the Central Excise Department and search was conducted at the factory premises and office premises of the appellants on 11.08.2003. During the course of further investigation, statements of supervisors as well as directors of the appellant company as well as Directors of Vaibhav were recorded under Section 14 of the Central Excise Act. Based on the aforesaid investigation, show cause notice dated 04.07.2005 was issued to the appellants, inter alia, alleging that the appellants are liable to pay central excise duty totalling to Rs.51,48,919/- for the period from 2000-2001 to 2003-2004. The show cause notice also proposed to impose penalty on appellants and directors of both the companies. The case of the Department in the show cause notice was, broadly, that Vaibhav is a dummy unit and fagade floated by Mr. Vishal Agrawal in order to avail exemption benefit under small scale exemption Notifications. It was also alleged that the affairs of both the companies were being managed by Mr. Vishal Agrawal and there was common storage of raw materials and finished goods, common premises, common stocks and financial flow back between the two companies. The denial of the SSI exemption was that the appellants have manufactured branded goods and hence, are not entitled to benefit of exemption Notification No. 8/2000 and No. 9/2000. It was alleged that the appellants are manufacturing the goods under certain brand names and the said brand names are well known in the market belonging to others. Hence, demand was raised on all clearances made by the appellants as well as Vaibhav.
9. The appellants filed the reply to the show cause notice. Order-in-original dated 06.03.2006 passed by Commissioner of Central Excise, Nagpur confirming the demand on both the companies jointly and severally. The Commissioner also imposed penalties on the appellants. On appeal (Appeal Nos.E/1821 to 1826/06), this Tribunal vide order dated 20.07.2006 set aside the order passed by the Commissioner and remanded the matter back to the Commissioner to decide as to which is the real unit from whom duty is demandable. On de novo adjudication, impugned order passed by the Commissioner confirming demand to duty totalling to Rs.20,49,079/- after allowing cum-duty and cenvat credit to the appellants. The Commissioner has also imposed penalties on the appellants. Hence, this appeal.
10. The ld. advocate submitted that the impugned order is bad in the eyes of law on the following ground namely
(a) It is not a case of clubbing of clearances made by two separate companies.
(b) The extended period of limitation is not invocable in the facts and circumstances of the case.
(c) As the units are located in the rural area, the appellants are entitled for benefit of SSI Notification no. 8/2002 and 9/2002.
(d) The appellants are not clearing the goods under the brand name of others.
He further argued in details and submitted as under:-
11. The appellants are a private limited Company registered with the Registrar of companies in terms of the provisions of the Companies Act. Vaibhav is also a private limited Company registered with the registrar of companies. The memorandum of articles of association of both the companies are different. The directors of both the companies are different. There are no common directors as well. Both the Companies are independently registered with the sales tax department and filing independent sales tax returns thereof. Similarly, both the companies are registered with the income tax department separately and filed separate income tax returns thereof. Both companies have separate and independent balance sheets along with profit and loss account. Both the companies have separate professional tax registration. Both companies have separate registration under the Factories Act. Both companies have separate factory premises. Both the companies have separate lease agreement with MIDC. Both companies have separate water connections from MIDC. Both companies are paying local taxes to the local gram panchayat separately. Both the companies have separate and independent electricity meters issued by MSEB. Both the companies have independent machinery for manufacture of the final products. Both the companies have independent purchases of inputs/raw materials. Both the companies have independent sales. Both the companies are manufacturing water tanks of different sizes. Both the companies have independent bank accounts. These facts are not in dispute. Above apart, both the companies are separately registered with the central excise department itself. In light of this admitted factual position, it is incorrect to suggest that Vaibhav is a dummy unit floated by the appellants herein and hence, there clearances of both the companies cannot be clubbed.
12. There are no common premises for both the companies. Both the companies have independent premises, although adjacent to each other. Both the premises are having a boundary of barbed wire fence. However, non-existence of a concrete wall between the two companies cannot be a ground to hold that both the companies are one and same unit. Further, it is incorrect to suggest that Mr. Vishal Agarwal was managing the affairs of both the companies. Assuming this finding was to be true, even then the fact that both companies are being managed by one person cannot lead to a conclusion that both the companies are one and the same. Admittedly, the management of both the companies is separate. There is no common director. Hence, this cannot be a ground for clubbing the clearances of two companies.
13. Moreover, merely because both units have common storage tank cannot be ground to hold that the both the companies are one and same. Separate records were being maintained for withdrawal of kerosene and LDO by common storage tank by both the companies. This is the admitted factual position. The common storage tank was installed in order to save cost as both the companies are small scale units.
14. The fact that Vaibhav have no extruder machine cannot, yet again, be a ground to arrive at a different conclusion. It is undisputed that Vaibhav has independent machinery including one clamp shell machine and 1 three arm roll moulding machine for production of storage tank of capacity of 3000 litres to 5000 litres. Extruder machine was not purchased by Vaibhav due to large investment involved therein. Therefore, in terms of job work agreement dated April, 2002, certain goods were manufactured by the appellants herein for Vaibhav on job work basis. However, Ld. Commissioner, surprisingly, is silent on the said job work agreement in the impugned order. Therefore, it must be held that the impugned order is not correct and needs to be set aside.
15. The decision of the Supreme Court in the case of Supreme Washers (P) Ltd. V/s CCE 2003 (151) ELT 14 (SC) relied upon by the Ld. Commissioner to club the clearances of both the companies is not applicable in the facts of the present case.
16. In the said case the apex court has remanded the matter in the light of the Board circular 6/92 dated 29.5.1992 which clarifies that limited company should be treated as a separate entity for the purpose of examine the limit and production cannot be clubbed with other units. The said circular was followed by this Tribunal in the case of Jifcon Tools P. Ltd. vs. CCE 2007 (208) ELT 345. He also relied on the decision of CCE vs. Sotex 2007 (209) ELT 9 (SC), Superior Products V/s CCE 2002 (144) ELT 187. [The said decision was confirmed by the apex court in 2008 (230) ELT 3 (SC)], Shakti Tubes Limited V/s CCE 2002 (150) ELT 359. [The decision of Shakti Tubes Limited was confirmed by the apex court reported in 2008 (231) ELT 193 (SC)], Studioline Interior Systems Private limited V/s CCE 2006 (201) ELT 250, Shree Krishna Minerals V/s CCE 2005 (190) ELT 250, CCE V/s Electro Mechanical Corporation 2008-TIOL-177-SC-CX and Renu Tandon V/s Union of India 1993 (66) ELT 375. After relying on the above decisions, he submitted that the clearance made by the appellants and Vaibhav cannot be clubbed together.
17. The ld. advocate further submitted that it is also alleged that the appellants are manufacturing branded goods as the ld. advocate submitted that as their unit is located in rural area, the allegation of manufacturing of branded goods will not survive. He submitted that the appellants are entitled to benefit of exclusion under Clause (c) of para 4 of SSI Notification no. 8/2000 and 9/2000. The said Notifications defines rural area as area comprising in a village as defined in the land revenue records excluding (i) the area under any municipal committee, municipal corporation, town area committee, cantonment board or notified area committee or (ii) any area that may be notified as urban area by the Central Government or State Government.
18. To support this contention he placed on record the certificate issued by MIDC, wherein the original officer has certified that the area where the factory of the appellants is located as outside the limits of Nagpur Municipal Corporation and within the village limit of Digdoh. Taluka Hingna, District Nagpur. Similar certificate was also issued by the Sarpanch, Digdoh Gram Panchayat certifying that the factory is beyond Nagpur Municipal area and falls under Digdoh village area. He also placed on record certificate issued by the Zilla Parishad, Nagpur. The appellants also produced certificate issued by Tehsildar, Hingna that the factory of the appellants is located in Digdoh village which is a rural area. He further submitted that the adjudicating authority has failed to define notified area committee. In fact he has taken notified area in stead of notified area committee and held that the factory is located in notified area of MIDC which is not correct interpretation. The Commissioner also has not disputed the certificate issued by various authorities. He also relied on Article 243(c) of the Constitution of India under part 9 which defines the term village has the village specified by the government or public notification to the village and article 243P (C) of the of the Constitution of India under part 9 defines municipality as an institution of the government under 243Q. Article 243PD defines municipal area as a territorial area of the municipality as notified by the governor. He also relied on the case law of Mahila Gram Udyog Lijjat Papad V/s CCE 2002 (149) ELT 502 which was confirmed by the apex court reported in 2003 (151) ELT A84. He also relied on the following decisions:-
a) CCE V/s Progressive Organics Private Limited 2005 (184) ELT 241
b) Katyani Foods & Beverages Private Limited V/s CCE 2004 (170) ELT 82
c) Macfield Beverages India Private Limited V/s CCE 2008 (223) ELT 231
d) CCE V/s Srijee Foods 2006 (198) ELT 219.
19. Finally he submitted that from the above submissions, it is clear that the factory of the appellants is located in a rural area and even if assuming that appellants are manufacturing branded goods the benefit under SSI exemption Notification no. 8/2000 cannot be denied.
20. Finally he submitted that the demand is barred by limitation as the period involved in this case is 2000-2001 to 2003-2004. A show-cause notice has been issued on 4.7.2005 by invoking the extended period of limitation holding that the appellants have suppressed the facts that they are using the brand name of the other manufacturer on the product which is contrary to the material on record as the appellant from time to time has clearly disclosed the fact of using the brand name vide their letter dated 30.12.1999, 4.5.2002 and 1.3.2001 (which are on record). In that way suppression cannot be alleged. Moreover the appellants are registered with Central Excise department and are discharging their duty in terms of Notification 9/2000 and filing their periodical returns extended period cannot be invoked.
21. In view of the above submissions, he prayed that the impugned order is liable to be set aside confirming the duty and interest on the main appellants and penalty on all the appellants.
22. On the other hand, the DR submitted that the contentions of the ld. advocate are not sustainable that Vaibhav was holding the Central Excise registration, in fact Vaibhav has obtained Central Excise registration later on. Hence the ld. advocate has not placed the correct facts before this Tribunal. He also submitted that all the activities relating to right from purchase of raw material storage account having sales of finished goods were managed and controlled by Shri Ramesh Agarwal, the director of Vaibhav. The investigating team has established that both the units are separate on paper but in fact both the units are a family concern and same are managed by a single person. Hence, the impugned order has correctly clubbed the clearance of both the units as one. The clearance made by both units are to be clubbed, he also relied on the decision of Modi Alkalies reported in 2004 (171) ELT 155 (SC) and Navrang Art Printers 2000 (251) ELT 267. He further drew our attention to the fact that the appellants have suppressed the fact that both the units namely Plasto and vaibhav are managed by a single person and a family concern and this fact has not disclosed and the same has only came to know at the time of investigation. These facts have been suppressed. The adjudicating authority has rightly invoked the extended period of limitation.
23. With regard to the rural area exemption, the ld. DR submitted that the factory of the appellants are located is an area notified by the MIDC and the Clause (c) of para 4 of SSI Notification 8/2000 defines rural area excluded the municipal corporation. As MIDC is a corporation, hence the factory of the appellants are outside the rural area. Accordingly, the appellants are not entitled to the SSI exemption under Notification 8/2000. He also relied on the decision of Supreme Washers (supra) which was relied by the adjudicating authority. In view of the above submissions, he prayed that the impugned order be upheld.
24. We have heard both sides at length on 6.1.2011 and the bench asked the ld. advocate for the appellants to file the copy of the documents on which he has relied that both the units are separate. The arguments were heard and order was reserved to be pronounced on 28.01.2011.
25. Ld. advocate filed certain documents. Same is taken on record. In the meantime, ld. DR also filed his written submissions along with copy of two judgements in the case of Navrang Art Printers (supra) and Modi Alkalies (supra) which were not relied on by the DR during the course of arguments, but in the interest of justice, both the decisions are taken on record.
26. On careful consideration of the submissions made by both sides, we find that the appellant has challenged the impugned order on four grounds:-
a) extended period of limitation is not invocable.
b) Clearance of the appellants firm and Vaibhav cannot be clubbed.
c) The factory of the appellants are situated in the rural area and they are entitled for an exemption under Notification no. 8/2000 and 9/2000; and
d) the appellants are not manufacturing the branded goods and not using the brand name of others.
27. In the show-cause notice there is an allegation against the appellants that they have suppressed the fact from the department that the appellants are using the brand names of others for their product and both the units namely the appellants and Vaibhav are family concerned and are managed by one Shri Vishal Agarwal.
28. From the perusal of the records, we find that the appellants have disclosed to the department about the use of name/brand name vide their letter dated 30.12.1999, 4.5.2000 and 1.3.2001 which is on record and in action by the department on the above letters cannot amount to suppression of facts. Whether the appellants has disclosed the fact that both the units namely appellants units and Vaibhav family concern and are managed by Shri Vishal Agarwal and they can be clubbed together is suppressed is to be decided later on after deciding the issue of clubbing. Hence, the issue of clubbing of units is taken now.
29. The ld. advocate has submitted that the appellants are a private company and registered with Registrar of Company under Companies Act having two directors namely Ms. Rajni Agarwal and Ms. Urmila Agarwal and Vaibhav is also a private company registered under the Companies Act having two directors namely Shri Ramesh Agarwal and Shri Vishal Agarwal. The documents relating to registration of their companies and the certificate of registration issued by the Registrar of Companies are on record. It is also on record that there are no common directors. Both the companies are independently registered with sales tax department and filing independent sales tax returns. They are also registered with income tax department and filing income tax returns separately. Both the companies are maintaining their book of accounts accordingly independently having balance sheet and Profit and Loss A/c. Both the companies are having separate registration under the Factory Act and Provisional Tax registration. It is also on record that both the companies having separate factory premises such as appellants are situated at Plot no. J-3, MIDC, Village Digdoh, Hingna, Nagpur and M/s Vaibhav is on Plot J-2, MIDC, Digdoh, Nagpur. They are having separate water connection and separate electricity connections. Both the units are having separate lease deeds executed between them and MIDC. Both the companies are paying local taxes to local gram panchayat separately. Both the companies are having separate machinery and are manufacturing separate goods such as the appellants firm is manufacturing water tanks of various sizes ranging from the capacity of 200 litre to 2000 litre and Vaibhav is manufacturing the water tank of various sizes ranging from the capacity of 3000 to 5000 litres. Both the companies are having their independent bank accounts. These facts are not in dispute as same are on record. The only allegation that Shri Vishal Agarwal is managing the affairs of both the companies which cannot be concluded that both the companies are one and the management of both companies is same. There is no common director in the company. As both the units are having common storage tank cannot be the ground to club their clearances as a separate account is being maintained for withdrawal of kerosene and LDO by common storage tank of both the companies. The common storage tank was installed to minimise the costs. As Vaibhav does not have extruder machine but they have entered into an agreement of job work with the appellants to carry out some process of manufacturing on job work basis. This agreement is also part of the record. The adjudicating authority has not given any finding on the same. Now, we come to the case law relied upon by the ld. advocate.
30. In the case of Supreme Washers (supra) both the parties relying on the said decision. In fact in that case, there was only one legal entity having three different units. The three units, in that case, procured raw materials together from common suppliers and had common stock accounting and planning, had inter-dependent manufacturing operations, had common stock of raw materials and semi finished goods, had common use of the machinery between the three units, had common marketing arrangements and free flow of finance between themselves. On these set of facts, the Honble Supreme Court upheld the view taken by this Tribunal that there was mutuality of interest and inter-dependence between the three units. However, in the facts of the present case, no such factors exist to hold that there was mutuality of interest between appellants and Vaibhav. Both are private limited companies. There is not even an allegation in the show cause notice to the effect that they have common credit facility, common clearance, common vendors, common market arrangements and common machineries used between the two companies so as to prove inter-dependence. Hence, the said decision cannot be held to be applicable in the present case. In fact in that case Apex Court relied upon Circular No. 6/92 dated 29.5.1992 which clarifies that each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. The adjudicating authority has lost sight to give any finding on these.
31. In the case of Jifcon Tools Private Limited V/s CCE 2007 (208) ELT 345 (supra) wherein it was held that the clearances of private limited companies cannot be clubbed. Further in the case of CCE V/s Sotex (supra) the apex court held the view taken by the Tribunal by holding that clearances of two units cannot be clubbed in the following circumstances. Both units have their funding and financial arrangement; held separate central excise registration, SSI registration, income tax and sales tax registration separately, purchasing raw material independently and also selling their goods to various purchasers independently, maintaining books of accounts separately for purchase and sale of finished goods; obtaining separate loans and credits from various banks; subjected to tax audit under Section 44 of the Income Tax Act; holding separate licences under the Factories Act and have their own separate supervisors and own separate labour. Further, in the case of Superior Products (supra), this Tribunal held that when two assessees are legally understood juridical persons, one was a registered Partnership firm and another limited company, the clearances could not be clubbed. It was further held that directors of a company or partners of the partnership firm should not necessarily actively involve themselves in managing the manufacture is not correct in law. Not all directors or partners have to be engaged in managing companies or partnerships. Hence, if one director is managing both the entities cannot be a reason when both have separate capital, premises, machinery and labour. Both were carrying out separate operations. It was further observed that commonality of share holders and Partners and a common manager do not destroy the separateness of the two units. Further, the facts that they are manufacturing the same product or that one unit purchases a material from the other on commercial terms also do not go against their separate identity as manufacturers. In that case, the contention of the DR that both units were manufacturing same product, both units are also getting their goods partially manufactured from each other and both units were managed by the same person were rejected by this Tribunal. On appeal filed by the Revenue, the Honble Supreme Court vide detailed judgment reported at 2008 (230) ELT 3 (SC) rejected the appeal filed by the Revenue on the ground that account of the both the units were having separate managements, both units have separate capital, premises, machineries and labour. In Shakti Tubes Limited V/s CCE 2002 (150) ELT 359, this Tribunal held that Shakti Steel Pipes cannot be called a camouflaged unit on the ground that there existed a common boundary wall and common management and the wall separating the two Units is only three to four feet ahead and there existed common Memorandum of Articles and a common Balance Sheet. The assessee in that case did not deny these facts. However, the Tribunal held that Shakti Steel Tubes is a sister concern of M/s. Shakti Tubes Limited, was independent factory having its own complete machinery required for galvanization and engaging its own independent staff. The transactions between the two companies were at arms length and on principal to principal basis and thus, the tribunal concluded that Shakti Steel Pipes Limited was not a dummy Unit. The appeal in that case are rejected by the apex court.
32. In the case of Studioline Interior Systems Pvt. Ltd. Vs. CCE 2006 (201) ELT 250, this Tribunal held out of the three units, two were Private Limited Companies and one is a Partnership firm. Each unit had its own premises and was registered with Central Excise and Sales Tax Authorities. In these circumstances, the Tribunal held that the clearances of the three units could not be clubbed solely on the ground that there were common Directors/partners. Similar view have been taken in the case of Shree Krishna Minerals V/s CCE 2005 (190) ELT 250.
33. In the show-cause notice it is also alleged that there is a financial flow of funds from the appellants to Vaibhav and vice versa and there is mutuality of interest, from the records it is clear that both the companies are having separate bank accounts and Vaibhav have taken some money as a loan from the appellants and same was repaid by Vaibhav to appellants along with interest and it is not a case of interest free loan. All the transactions were done by cheques only. In that case the mutuality of interest is not present.
34. In the case of CCE V/s Electro Mechanical Corporation (supra) the apex court held that if there is no evidence to prove that there was mutuality of business interest or there was flow back of funds from one unit to another, it is not possible to hold that clearances of two units could be clubbed. The Honble Rajasthan High Court in the case of Renu Tandon V/s Union of India 1993 (66) ELT 375. (in the facts, two units were situated in the same premises, manufacturing similar products, having common management, having common office and labour, having common electric connection and one unit was owned by father in law and other by daughter in law and both the units were being looked after by husband.) held that value of clearances could be clubbed unless mutuality of interest in the business of each other is proved by the Revenue. In this case the Revenue has failed to prove through evidence that there is a mutuality of interest. Reliance in the case of Modi Alkalies by the DR is of no help to the facts of this case as in that case the facts are somehow different which are reproduced hereunder:-
M/s. Modi Alkalies & Chemicals Ltd. (in short MACL) is engaged in the manufacture of caustic soda of which Hydrogen gas is a by-product. The Central Excise Authorities noticed that in reality MACL was engaged in the manufacture of Hydrogen gas falling under sub-heading 2804.90 of the schedule of the Central Excise Tariff Act, 1985 (in short Tariff Act). But with a view to evade payment of excise duty it floated three front companies, namely, respondent nos. 2 to 4 i.e. M/s. Mahabaleshwar Gas & Chemicals Pvt. Ltd. (for short MGCPL), Shri Chamundi Gas and Chemicals Pvt. Ltd. (for short SCGCPL) and M/s. Nippon Gas and Chemicals Pvt. Ltd. (for short NGCPL). All the three front companies were in vicinity of the factory of MACL. What in reality happened was that through pipelines Hydrogen gas was sent to the three front companies for compressing and bottling the gas. The sole object was to avail benefit of exemption given to small scale industries under the Central Excise Notification No. 1/93, dated 28-2-1993 and thereby evade payment of central excise duty. With a view to unravel the truth, Director General of Anti-Evasion (for short DGAE) searched the factory and office premises of MACL and the three front companies on 27-9-1996. It was found that all the three bottling units were located in one single shed and were separated from each other by small brick walls of about 4 ft. height. The Directors of the three front companies were employees of either MACL or other Modi Group of companies and they were frequently changed. They had common staff for maintenance of records, and operation of the units. The main plant and machinery i.e. cylinders had been supplied only by MACL and the total finance was provided by MACL as unsecured loans or had been arranged by finance companies whose whereabouts were not even known to the Directors of the three front companies. Marketing of the products was done by one Ritesh Beotra, a so-called Director of SCGCPL who was working as Deputy Manager (Marketing) in M/s. Modi Gas & Chemicals Sales Depot at Delhi. He was marketing various gases manufactured by a Modi group concern and was answerable as an employee of MACL. It was, therefore, concluded that MACL had control over Hydrogen gas even after the stage of bottling till it was sold to the customers. The Balance-sheets and other financial statements of the three units revealed that whatever income they earned had gone to MACL in the form of lease rent of cylinders. One Mr. Sita Ram Goswami, Accountant of MACL and Mr. Ashok Kumar, Chief Operating Officer of MACL admitted that some amount of cash was also collected by MACL over and above the invoice prices of Hydrogen gas supplied by three companies. It was noted that while front companies were being supplied gas by MACL @ 0.50 per unit, till August 1996, the same gas was sold by the three companies @ Rs. 5/- per unit. Keeping in view all these factors the authorities were of the view that MACL had created the three companies with the fraudulent intention to avail benefit of exemption granted under Central Excise Notification No. 1/93, dated 28-2-1993 and has mis-declared the assessable value in the invoices with the intention to evade central excise duty.
The facts in the case of Modi Alkalies are different from the case in hand before us as in the case of Modi Alkalies (supra) the main company and three separate companies were incorporated. All the four company in the same factory premises and they are having common pipeline. Directors of the three companies were the employees of Modi Alkalies and they were frequently changed. There were common staff and common plant and machinery. The finances of those companies were provided by Modi as unsecured loan and all the affairs were handled by Rajesh Boitra. The balance sheet revealed that whatever income have has gone to Modi Alkalies. These facts are distinguishable from the facts of the case in hand before us. Hence reliance by the DR is of no help to the Revenue. Further reliance of Navrang Art Printers has also no help to the Revenue as in that case also facts are somehow different. In that case this Tribunal has found having flow back in the case of 2-3 instances and in that case Navrang Art Printers (NAP) was situated at 108, 230, 231 and 233 Champaklal Indl. Estate and the other two units were not registered with the Central Excise at all. In that case, the two units were partnership firm and the third was a limited company having common directors and directors were having no knowledge of any business . That is not in this case. Moreover, from the records it is observed that both the companies were having Central Excise Registration separately. It is a fact that at the time of investigation Vaibhav was not having Central Excise Registration. The show-cause notice was also issued to club the clearance of Vaibhav with the appellants firm. We do not understand how Vaibhav was given separate Central Excise registration when on the department wants to club Vaibhav with the appellants firm. It clearly shows that the department has also found that appellants and Vaibhav are two separate entities.
35. From the above discussion, we hold that as both the units are having separate directors, separately registered with Registrar of Companies, separate sales tax registration, income tax, bank account, and separate lease deed with MIDC and are having separate premises also. In that event the clearance of both units cannot be clubbed. Accordingly, the impugned order clubbing the clearance made by Vaibhav in the clearance of appellants firm is set aside.
36. When the clearance of Vaibhav cannot be clubbed with the clearance of appellants firm, the allegation of suppression is also not sustainable. Accordingly, extended period of limitation is also not invocable in the facts of the case.
37. Now, we come to the issue whether the unit of the appellants firm is situated in rural area or not.
38. Clause (c) of para 4 of SSI Notification 8/2000 and 9/2000 defines Rural area which is reproduced hereunder:-
Rural area as area comprising in a village as defined in the land revenue records excluding (i) the area under any municipal committee, municipal corporation, town area committee, cantonment board or notified area committee or (ii) any area that may be notified as urban area by the Central Government or State Government.
39. The appellants has been able to produce the certificate issued by MIDC certifying that the factory of the appellants is located outside the limit of Nagpur Municipal Corporation and comes within the village Digdoh. Similar certificate has been issued by Sarpanch of Village Gram Panchayat. A certificate has also been issued from the office of Zila parisad Nagpur. A certificate has also been issued from Tehsildar, Hingna certifying that the factory of appellants is located in rural area of Digdoh village. The Commissioner denied the benefit to the appellants holding that MIDC is a notified area where the factory of the appellants are located is the area notified by MIDC. Hence the factory is located in notified area. In fact, the Commissioner has lost sight while interpreting that in fact the word is notified area committee and not notified area. The notified area and notified area committee are two different terms. As per section 80 B of the Income Tax Act which grants deduction of profit and imposition from certain income under that Section 14(1) defines the term rural area for allowing deduction as per definition. Rural Area means any area other than an area which is comprised within the jurisdiction of a municipality (whether known as municipality, municipal corporation, notified area committee, town area committee or by any other name) or cantonment board and which has population of not less than ten thousand according to the preceding census of which the relevant figures have been published before the first day of previous year.
40. From the above definition, it is clear that notified area committee is used in conjunction with the term municipality. During the course of argument also the ld. DR that the area under municipal corporation is also excluded from rural area, as the factory of the appellants falls within the jurisdiction of MIDC which is a corporation, hence cannot be termed that the factory of the appellant is located in rural area is, totally irrelevant. In fact the ld. DR fails to give the correct interpretation to municipal corporation as the municipalities has been defined in part 9 of the Constitution of India which defines municipal area as territorial area of the municipality as notified by the governor. Article 243(g) of the Constitution of India defines the term village as a village specified by the governor by publishing Notification to be village. The terms municipal corporation/village are having concerns with the Land Revenue Authorities and the same are notified by the Governor from time to time on the basis of census. The MIDC cannot be equated with Municipal Corporation.
41. We have seen the certificate issued by various authorities which certified that the area in which the factory is located is within limit of village Digdoh, Taluka Hingna, district Nagpur. Hence, we do not have any hesitation to hold that the factory of the appellants is located in a rural area. Accordingly, the appellants are entitled for the benefit of SSI Notification 8/2000 and 9/2000.
42. As the appellants are entitled for the benefit of Notification 8/2000 and 9/2000 as SSI Notification, we are not required to go into the issue is using the brand name of others, as the appellants succeeded on this ground only.
43. To conclude, as discussed above, we hold that the clearances of appellants firm and Vaibhav cannot be clubbed together and the factory of the appellants firm is located in a rural area. Hence, we set aside the impugned order and allow the appeals of the appellants with consequential relief, if any.
(Pronounced in Court on ______________________) (P.R. Chandrasekharan) (Ashok Jindal) Member (Technical) Member (Judicial) SR 27