Custom, Excise & Service Tax Tribunal
Cce, Chennai Iv Commissionerate vs M/S. B.K. Office Needs (P) Ltd on 2 December, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
E/512-513/2004
(Arising out of Order-in-Appeal No. 52&53/2003 (M-IV) dated 31.03.2003, passed by the Commissioner of Central Excise (Appeals), Chennai).
For approval and signature
Honble Shri P.K. DAS, Judicial Member
Honble Shri R. PERIASAMI, Technical Member
_________________________________________________________
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CCE, Chennai IV Commissionerate : Appellant
Vs.
1. M/s. B.K. Office Needs (P) Ltd. : Respondents
2. Shri S. Ramanathan, Managing Director Appearance Shri P. Aurl, Supdt. (AR), for the appellant Shri J. Shankararaman, Adv., for the respondent CORAM Honble Shri P.K. DAS, Judicial Member Honble Shri R. PERIASAMI, Technical Member Date of Hearing : 19.09.2014 Date of Pronouncement:
FINAL ORDER No. 40874-40875 / 2014 Per. P.K. Das These appeals are arising out of a common order and therefore, both are taken up together for disposal.
2. Revenue filed these appeals against the order of the Commissioner (Appeals), where the adjudication orders were set aside and the appeals filed by the respondents were allowed.
3. The respondents are suppliers of Modular Office partitions, work stations and furniture by processing components from various suppliers and install them at the customers premises. They also supply furniture such as tables, chairs, computer tables etc., which are bought out items. According to the Revenue, the respondents manufactured Modular Office Furniture Systems, Work Stations and general furniture. Central Excise officers during the visit of their business premises found that the other units M/s. Tab Top Steel Industries and M/s. Fab Craft Industries are also situated in the same premises. M/s. Tab Top Steel Industries is a partnership firm and M/s. Fab Craft Industries is a proprietorship firm. A show cause notice dated 23.04.2002 was issued proposing demand of duty to the tune of Rs. 16,12,400/- on the respondents along with interest and penalty by clubbing the clearance value of the other two units. The other units and the M.D of the respondents were directed to show cause as to why the penalty would not be imposed under Rule 209A of the Central Excise Rules, 1944. The adjudicating authority clubbed the clearance value of the three units namely BK Office needs, Tab top Steel Industries and Fab Craft Industries and hold that the goods are classifiable as Systems Furniture and Work Stations under chapter heading 9403.00 and confirmed the demand of duty of Rs. 16,12,400/- along with interest and penalty. A penalty of Rs. 1,61,000/- was imposed on Shri Ramanathan, Managing Director of the respondent Company under Rule 209A. By the impugned order, the Commissioner (Appeals) set aside the adjudication order. Hence, the Revenue filed appeals against the impugned order.
4. The Ld. Authorized Representative on behalf of the Revenue reiterates the grounds of appeal and submits that the Commissioner (Appeals), erroneously proceeded on the basis that the three units were individual entities as they have a separate sales tax registration and no flow back of money from one unit to another unit. He submits that it is evident from the statement of various persons that the respondent No.2 Shri. S. Ramanathan, Managing Director of the respondent Company No.1, is controlling the other two units. It is also submitted that Tab Top is a partnership concern with Shri C. Adiseshan, Mrs. Savithri Ramanathan, Mrs. Prema Karthikeyan as parners. Mr. Savithri Ramanathan, is the wife of Shri S. Ramanathan, MD of the respondent Company, Mrs. Prema Karthikeyan is wife of Mr. S. Karthikeyan, another Director of the respondent Company. Fab Craft is a proprietorship concern with Shri S. Srinivasan, B/o. Shri S. Ramanathan, proprietor of Fab Craft. It is submitted that all the persons in their statements admitted that Shri. S. Ramanathan is looking after the activities of the Companies. It is stated that Shri S. Ramanathan cleared all current liabilities of Tab Top and it would done under his supervision. It is clear from the material evidence that the other two units are part of the respondent company. It is submitted that the Commissioner (Appeals) had not examined the material evidence on records. He relied upon the following decisions in support of his argument.
1. Parle Bisleri Pvt. Ltd. Vs. CCE, Ahmedabad 2011 (263) ELT 15 (S.C.)
2. CCE, Jamshedpur Vs. Xenon 2013 (296) ELT 26 (Jhar.)
3. Harnik Nutrients Pvt. Ltd. Vs. CCE, Pune 2009 (238) ELT 235 (Bom.)
4. Harnik Food Industries Vs. CCE, Pune 2009 (243) ELT 322 (Bom.) Upheld by the Honble Supreme Court as reported in 2012 (283) ELT A81 (S.C.)
5. Regarding the classification of modular office furniture systems, the Ld. AR submits that it is evident from the dossiers/Adv. Pamphlets that the systems furniture installed by them is a special design and series of fabric upholstered panels with different types of tops made of melamine used partition to choose from that the system panels are connected by designed aluminium extrusions, which is fixed and installation done with minimum tools. Shri S.Kumar, Territorial Manager of the respondent Company in his statement stated that the systems installed by them is 100% modular in nature and the system can be taken to any place and re-installed there. Shri S.N. Barnabas, Manager Purchase and production control of M/s. Matasushita Air Conditioning Ltd., customer of the respondent company has stated in the same manner. On the basis of the said statements, the Ld. AR submits that in this case, modular systems are mobile and therefore excisable. He relied upon the decisions of the Tribunal in the case of Cognizant Technology Solutions India Pvt. Ltd., Vs. CC (AP & ADMN), Kolkata-I 2012 (286) ELT 77 (Tri.-Kol.) and Featherlite Products Pvt. Ltd. Vs. CCE, Bangalore-III 2007 (208) ELT 143 (Tri.-Bang.). He also submits that the adjudicating authority while calculating the demand, has taken into consideration of the bought out items. Regarding classification of the goods, the Ld. AR refers para 1.3 of the show cause notice.
6. On the other hand the Ld. Advocate on behalf of the respondent submits that the respondents supplied the work stations initially to Bangalore and Hyderabad. He submits that they are not handling any activities in their premises. They carry out assembling and systematic integration of partition panels, power coating aluminium structures, glass panels and accessories and installed at site. The goods were purchased from the market as well as from the other two units at Cochin, Bangalore, Hyderabad and Chennai. There are several proceedings were initiated at Bangalore and Hyderabad and no proceeding was initiated at Cochin. He further submits that the proceedings initiated at Hyderabad was dropped by the Commissioner (Appeals) by Order in Appeal No. 38 & 39/2007 (H-III) dated 30.10.2007. On appeal by the department, by Final Order No. 1327-1328/2008 dated 27.11.2008, the Tribunal dismissed the appeal filed by the Revenue. In the proceedings initiated at Bangalore, the Commissioner (Appeals), Bangalore, by O-in-A No. 493/2013-CE dated 24.09.2013, allowed the appeal filed by the respondent and set aside the adjudication order. No proceeding was initiated at Cochin.
7. Regarding clubbing of the other two units, he submits that there is no reason for clubbing of private limited company with proprietorship and Partnership Company. He relied upon the decision of N.D Industries Vs. CCE, Pune -2003 (157) ELT 459 (Tri.-Del.) and also Boards Circular dated 29.05.1992, which was referred in the case of N.D. Industries (supra). Both the proprietorship and partnership firms are two independent income tax assessees and there is no material available on record of flow-back of money.
8. Regarding classification of the goods under chapter heading 94 of the Central Excise Tariff Rules, 1985, the Ld. Advocate submits that the adjudicating authority had over looked that these furniture are immovable. Even in any case, if the furniture are removed from that place, it will be damaged partly and therefore it cannot be treated as excisable goods. He strongly relied upon the decision of the Honble Supreme Court in the case of Craft Interiors Pvt. Ltd. Vs. Commissioner - 2006 (203) ELT 529 (S.C.), which was followed by the Tribunal in the following cases:
1. Trident Interwood Pvt. Ltd. Vs. CCE, Bangalore 2010 (250) ELT 269 (Tri.- Bang.)
2. Teekays Interior Solutions Pvt. Ltd. Vs. CCE, Bang.
2009 (235) ELT 122 (Tri.-Bang.) Without prejudice he submits that the demand of duty was not quantified properly in so far as it cannot be demanded on bought out items.
9. After hearing both the sides and on perusal of the records, we find that two issues are involved in these appeals. One is clubbing of the clearance value of all the three units viz., M/s. B.K. Office Needs Pvt. Ltd., M/s. Tab Top Steel Industries and M/s. Fab Craft Industries and denial of SSI exemption. The other issue is classification of the goods. According to the Revenue, Shri S. Ramanathan, Managing Director of M/s. B.K. Office Needs is controlling all the units. The constitution of the three units is as under:-
M/s. B.K. Office Needs Pvt. Ltd., - Shri S. Ramanathan.
Managing Director Shri S. Karthikeyan B/o. Sh. S. Ramanathan, Shri C. Balaraman, Brother-in-law of Sh. S. Ramanathan M/s. Tab Top Steel Industries Partnership Firm Shri C. Adiseshan, B/o. Shri C. Balaraman Smt. Savithri Ramanathan W/o. Sh. S. Ramanathan Smt. Prema Karthikeyan W/o. Sh. S. Karhikeyan M/s. Fab Craft Industries Shri. S. Srinivasan, B/o. Sh. S. Ramanathan, Manager of M/s. B.K. Office Needs Pvt. Ltd.
10. The Revenue in the grounds of appeal stated that the minutes of the meeting ie., a common document for all the three entities and it is mentioned that the decision taken by Shri S. Ramanathan, MD of M/s. B.K. Office to clear all the current liabilities of Ms/s Tab Top and till date it should run under his supervision. It was found that the entire sale of M/s.Tab Top is with B. K. Office only. It is contended that the actual participation and performance of the dejure partner of M/s. Tab Top have officiate contact of routine business. It is a family business of Shri S. Ramanathan. On perusal of the adjudication order, we find that M/s. Tab Top and Fab Craft, manufactured general furniture such as tables, chairs, computer tables, cupboards, filing cabinets and parts of modular work stations and sold to M/s. B.K. Office. Shri S. Ramanathan, procured the orders from buyers and placed to the other two firms for manufacturing of goods. M/s. B.K. Office, in their brochure claimed the goods were manufactured by them. We find from the adjudication order, that M/s. Tab Top and Fab Craft, are separate entities and all the ingredients such as constitution of partnership/proprietorship, sales tax registration etc. are existence, should serve as an independent business entity. The investigation had not proved any non-receipt of raw materials and manufacture of components thereon from these two units. It is contended that M/s. S. Ramanathan, MD of M/s. BK. Office has wide rapport in the market and therefore, he collected the orders and supplied it to the other two units for manufacture of the items. He has also had the knowledge of raw materials and therefore, handled the supply and payment of it. It is categorically contended that all the three units have separate Sales tax registration, Income tax Registration etc. It is contended that, Common managerial control exercised by Mr. S. Ramanathan, of M/s. BK Office, based on the minutes of the meeting held on 07.02.1998, such exercise of common managerial control was not sufficient to make out the others as dummy units, as held in the case of Alpha Toyo Ltd. Vs. CCE, New Delhi 1994 (71) ELT 689 (Tri.). On perusal of the records, there is no material available of flow-back of funds. It is well settled by a series of decisions that mere common partners and proprietor of other concern, and use of staff etc., would not sufficient to hold that units are one and the same. After going through the order of the Commissioner (Appeals), we do not find any reason for clubbing of the three units.
11. Regarding the classification of the goods, the Commissioner (Appeals) observed as under:-
From the case records, I find that the appellant is supplying modular office partitions, partitioned workstations and furniture by procuring components from various suppliers and integrate and install them at their customers premises. They also supply furniture such as tables, tale tops chairs, computer tables, cupboards and filing cabinets which are bought out items. It is not disputed that the appellant make modular partitions as per the customers requirements at the customers premises depending on various ground situations. Partitions are erected by fixing aluminium connecting post. To this connection, aluminium extrusion, laminated or melamine boards or glass panels are raised for the specific purpose of separating the floor area and the place where such a working cubicle is placed. The mere activity of fixing the aluminium bordered laminated sheets or glass panels to the aluminium poles and grounded to the earth does not become manufacture of furniture or parts of furniture. The Aluminium poles, extrusion, glass panels and the laminated particle are all bought out items. By fabrication and assembly no new commodity as such arises which is either marketable or movable. It only leads t an emergence of a modular cubicle, which is not movable as such. If dismantled, it loses the very shape and structure it had retained earlier. The activity of placing a chair, a trolley and storage systems in the above said partitioned cubicle or modular cubicle would not amount to manufacture of modular furniture. The complete pieces of furniture like trolley, storage system, file holders, overhead storage unit, wall hanging storage shelf and chairs are known by their own identity and they do not loose their identity if place inside the cubicle to be called as part of modular furniture.
12. Another aspect of this matter is that, on the identical issue, the appellants operated their business situated at Hyderabad. A show cause notice was issued by the Hyderabad Commissionerate for clubbing of the three units as well as on classification of the goods. The Commissioner (A), by Order in appeal no. 38 & 39/2007 (H-III) dated 30.10.2007, set aside the adjudication order and allowed the appeal filed by the appellants. The relevant portion of the said order is reproduced below:
7. I have carefully gone through the record of this appeal and the submissions made by the appellants. The adjudicating authoritys findings recorded in the impugned order have also been duly considered.
8. In the instant case, there are two issues to be decided. 1) Whether the impugned goods can be classified as Other furniture and parts thereof, under Chapter 9403.00 of the CETA, 1985? and 2) Whether the value of clearances of the three units namely M/s. BK Office Needs, M/s. Tab Top and M/s. Fab Craft can be clubbed for determining the SSI exemption limit?
9. In their grounds of appeal, the appellants have not made any specific submissions on the issue of classification of impugned goods, though reliance has been placed on the decisions passed by the Commissioner (Appeals), Chennai vide Order-in-Appeal No. 52 & 53/2003 (M-IV) dated 29.12.2003 and Commissioner (Appeals-I) Bangalore vide Order-in-Appeal No. 73/2006-CE dated 30.05.2006 in this regard. As seen from the case records, it is evident that the appellants are engaged in the supply of modular office partitions, workstations and furniture by procuring components from various sources and integrate and install them at their customers premises. Their activity of fabrication and assembly of components does not result in the emergence of any new commodity, which is movable or marketable as such. The individual components remain as such and there is no transformation into a distinct commodity. In the same issue, the Commissioner (A), Chennai-IV vide the order referred supra has taken a similar view and I do not find any reason to take a divergent view. Hence, I hold that the impugned goods called as modular system furniture or workstations cannot be classified as a collective item as other furniture or parts, under CH 9403 of CETA, 1985.
11. Next, coming to the aspect of clubbing of value of clearances of three units namely M/s. BK Office Needs, M/s. Tab Top and M/s. Fab Craft, the lower adjudicating authority has not put forth any convincing argument to establish the mutuality of interest among the constituent units. In his findings, he has held that the exclusivity of transactions with the appellant unit by Fab Craft and Tab Top clearly establishes that the goods manufactured and cleared by Fab Craft and Tab Top on behalf of the appellant unit is a fagade. Exclusivity of transactions can never be a deciding factor for attributing mutuality f interest and this view is supported by a plethora of case laws. For instance, in the case of Commissioner Vs. Kanchan Industries 2006 (195) ELT A91 (S.C.), the Honble Supreme Court upheld that decision of Appellate Tribunal which held that sale of entire production of goods by the manufacturing units to one buyer at a mutually agreed price who also bears responsibility of advertisement and publicity, is only a business transaction not establishing mutuality of interest in the business of each other to hold the buyer a related person within the meaning of Section 4(4)(c)(i) of Central Excise Act, 1944.
13. Revenue filed the appeals before the Bangalore Bench against this order. By Final Order No. 1327 & 1328/2008 dated 27.11.2008, the Tribunal rejected the appeals filed by the Revenue.
14. The purpose of narration of the above facts is that, on the identical issue the Revenue initiated the proceedings in other Commissionerates. The proceedings initiated in the Hyderabad Commissionerate and Bangalore Commissionerate were dropped by the respective Commissioner (A). There is no material that the order of the Tribunal was challenged before the higher Appellate Authority. In the present appeals also, Revenue took the same grounds as in other cases. We have already stated that there is no evidence of financial flow back with the other units. So, we agree with the findings of the Commissioner (Appeals) on both the issues.
15. In view of the above discussion, we do not find any reason to interfere with the order of the Commissioner (Appeals). Accordingly, both the appeals filed by the Revenue are rejected.
(Order pronounced in the open Court on )
(R. PERIASAMI) (P.K. DAS)
TECHNICAL MEMBER JUDICIAL MEMBER
BB
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