Custom, Excise & Service Tax Tribunal
M/S. Anurag Dyes & Chemicals Pvt. ... vs Commissioner Of Central Excise & St, ... on 16 October, 2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SCO 147-148, SECTOR 17-C, CHANDIGARH 160 017
COURT NO. I
Appeal No. E/792-793/2007-DB
Date of Hearing : 17.05.2017
Date of Decision : 16.10.2017
[Arising out of Order-in-Original No. OIO-18-KKJ-ADJN-2006 dated 27.12.2006 passed by the Commissioner (Appeals) Central Excise & ST, Delhi-IV (Faridabad)]
For approval and signature:
Honble Mr. Ashok Jindal, Member (Judicial)
Honble Mr. Devender Singh, Member (Technical)
M/s. Anurag Dyes & Chemicals Pvt. Limited : Appellant
Shri Atul Gulati, MD
vs.
Commissioner of Central Excise & ST, Delhi IV (Faridabad) : Respondent
Appearance:
Shri Vikrant Kackria, Advocate for the Appellant(s) Shri G.M. Sharma, A.R. for the Respondent(s) CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. Devender Singh, Member (Technical) Final Order No. 61985-61986 / 2017 Per : Ashok Jindal Appellants have filed these appeals against the impugned order dated 27.12.2006 for clubbing of clearances of three units namely, M/s. Sterlite Chemicals Pvt. Limited, M/s. Emulsion Products and M/s. Anurag Dyes and Chemicals Pvt. Limited.
2. The facts of the case are that, M/s. Anurag Dyes & Chemicals Pvt. Limited (M/s. ADCL for short) was established in the year 1975 and got registered with the Central Excise department in the year 1995 and surrendered their registration in the year 2002. M/s. Anurag Dyes and Chemicals Pvt. Limited having Shri Atul Gulati, Shri B.R. Duggal and Shri Arjun Bisht as Directors. M/s. Sterlite Chemicals Pvt. Limited (M/s. SCPL for short) having two Directors Shri Atul Gulati and Shri Arjun Bisht were was established in the year 1978 and got registered with Central Excise department in the year 1993 and surrendered their Central Excise registration in the year 2002. M/s. Emulsion Products is a partnership firm having two partners namely, Shri Atul Gulati and Shri Arjun Bisht, it was established in the year 1977 and got registered in the year 1997 and it has also surrendered Central Excise registration in the year 2002.
3. M/s. ADCL is located at Plot No. 40, at Shed No. C, DLF Industrial Estate, Faridabad, M/s. SCPL is located at Plot No. 40, at Shed No. D,E and F, Industrial Estate, Faridabad and M/s. Emulsion Product is located at t Plot No. 40, at Shed No. A, B and I, Industrial Estate, Faridabad. The allegation of the Revenue is that M/s. SCPL and M/s. Emulsion Products are dummy units and manufacturing activities being undertaken by M/s. ADCL as the appellant did not have entire machinery for manufacturing of their final products. M/s. ADCL is engaged in the manufacture of Poly Vinyl Acetate Emulsion and M/s. SCPL and Emulsion Products were engaged in the manufacture Synthetic Adhesives. Ploy Vinyl Actate Emulsion was semi-finished raw material for manufacture of Synthetic Adhesives which were being manufactured by M/s. SCPL and M/s. Emulsion Products. It is submitted that all the units were having independent machinery and the machinery owned by the units have been mentioned in the show cause notice. The common machinery for all the three units is boiler and electric generator sets. The Boiler is owned by M/s. SCPL and Electricity Generator set is owned by M/s. Emulsion Product. All the units were contributing expenses for running of boiler and generator sets proportionately in their books of accounts and all the units were registered independently with Central/ State government departments. The allegation of the Revenue is that as all the three units are having mutual interest as the Directors / partners are common or same and have been controlled by Shri Atul Gulati. Moreover, the units are not having independent machinery to manufacture the final product. Therefore, in the guise of dummy units, clearances have been shown to avail SSI exemption. Accordingly, the allegation was made that other unit, M/s. SCPL and Emulsion Product are dummy units. Therefore the clearances made by these units are to be added to the clearances of the appellant Company.
4. In these set of facts, proceedings were initiated and by way of adjudication, demand of duty was confirmed against the appellant Company along with interest and penalties on both the appellant companies have been imposed. Aggrieved from the said order, appellants are before us.
5. Shri Vikrant Kackria, ld. Counsel for the appellant submits that, allegation by the department that all the units have a common electricity connection is not correct and he produced copies of the electricity bills of each unit showing that each unit is having separate electric connection. It is his submission that there is no allegation in the show cause notice that there is any financial flow back or having mutual interest between the said units. All the three units have separate gates for entry and exit and were manufacturing goods separately. He further submits that department has placed reliance on the statements of the employees, wherein it has been stated that some common employees were used in all the three units. To verify the said fact, the appellant sought cross-examination of those employees but the cross-examination was denied to them, on the ground that the statements were given by the employees voluntarily. Therefore, the finding of the adjudicating authority is baseless as the statement of employees cannot be relied upon until-unless opportunity of cross-examination is granted to the appellant. He further submits that, without admitting, even if some employees are common, then also it cannot be a ground to club the clearances of three units by holding that the units are dummy units. He further submits that Boiler and Generator Set is only common for all the units and the same cannot be a ground for clubbing the clearances as the units were having independent machineries to manufacture the goods manufactured by them independently. He also relied upon the CBEC Circular No. 6/1992 dated 26.05.1992 wherein it has been held Limited company whether public or private are separate entities entitled to separate exemption limit and clubbing of the clearances in such case cannot be done. He relied upon various case laws to say that clearances made by them cannot be clubbed:-
(a) CCE, Ludhiana vs. Jagjit Agro Industries 2014 (309) ELT 301 (Tri.)
(b) Ghaziabad Organics Limited 2016 (344) ELT 965 (Tri.)
(c) CCE, Chandigarh vs. Suchita Steels (India) Limited 2015 (327) ELT 103 (Tri.)
(d) Nova Industries Pvt. Limited vs. CCE, Chandigarh 2015 (327) ELT 103 (Tri.)
(e) Plasto Container (India) Pvt. Limited vs. CCE, Nagpur 2011 (268) ELT 509 (Tri.)
(f) Poly Printers vs. CCE, Delhi 2002 (139) ELT 295 (Tri.)
(g) Bentex Industries vs. CCE. New Delhi 2003 (151) ELT 695 (Tri.)
(h) Renu Tandon vs. UOI 1993 (66) ELT 375 (Raj.)
6. Ld. Counsel submits that on limitation also they have a goods case. It is an admitted fact that all the three units were having registration with the Central Excise department and surrendered their registration in December, 2002 and till then they were paying duty on their clearances after exhausting SSI limit. The appellants were also filing classification declarations, RT-12 returns with the departmental authorities claiming exemption from registration. Therefore, there is no suppression on the part of appellant. The period of dispute is August 2002 to August 2005, whereas the show cause notice has been issued on 16.09.2005 by invoking extended period of limitation. He further submits that all the three units were under the jurisdiction of same Range Superintendent in Commissionerate Range, Faridabad. Therefore, allegation of suppression of facts cannot be sustained in the light of the following decisions:-
(a) Arihant Arts vs. CCE 2004 (173) ELT 194
(b) H.T. Bhavnani Chemicals (P) Limited vs. CCE 1997 &92) ELT 502
(c) Nikhildeep Cables Pvt. Limited vs. CCE 1994 (70) ELT 273 He further submits that periodical audits were conducted by the departmental authorities and therefore, all the relevant facts were well in the knowledge of the department. Therefore, question of invocation of extended period of limitation is not sustainable in the light of following decisions:-
(a) CCE vs. Dabur India Limited - 2002 (182) ELT 308 (SC)
(b) Ok Play (India) Limited vs. CCE - 2005 (180) ELT 300 (SC)
(c) Anand Nishikawa vs. CCE - 2005 (188) ELT 149 (SC)
(d) Pahwa Chemicals Limited vs. CCE 2005 (189) ELT 257 (SC) In these circumstances, ld. Counsel prays that impugned order be set-aside.
7. On the other hand, ld. AR opposed the contention of the ld. Advocate and submits that the units were located in the same Plot No. 40, Industrial Estate, Faridabad, moreover, all the units were having a common gate and employees in all the three units were common. He also submits that machineries installed in the factory were not complete to manufacture the final product. All the three units were managed by Shri Atul Gulati and to that effect, the statement of employees was recorded. In that circumstance, the clearances made by the appellants have been rightly clubbed and benefit of SSI exemption notification is rightly denied to them. To support his contention, ld. AR relied upon the decision in the case of Calcutta Chromotype Limited vs. CCE, Calcutta 1998 (99) ELT 202 (SC) and CCE, Pune vs. Elemec Industries 2000 (12) ELT 198 (Tri.).
8. Heard the parties and considered the submissions.
9. We find that in this case, all the three units were established way back in 1970s and all the units were registered with Central Excise department and having separate registrations. All the units have surrendered their Central Excise registration in the year 2002. As the facts of establishment of these units were in the knowledge of the department and have been granted registration under Central Excise Acts, after due verification and it is fact on record machineries were not disputed while granting registration to them. It is also on record that all the units are located in Plot No. 40 but Plot No. 40 is having different shades and the units were located in different sheds. Therefore, it cannot be said that all the units are located in a same building. Moreover, they are having different entry gates for them. It is fact that in all the units, Shri Atul Gulati is a common person who is managing affairs of all the three units but same cannot be taken a ground for clubbing the clearances of all units, in the light of decision in the case of Renu Tandon vs. UOI 1993 (66) ELT 375 (Raj.) wherein the Hon'ble High Court has observed as under :-
36. The petitioner is a lady entrepreneur and has passed M.Com. She decided to start a unit for manufacture of copper wire and installed wire drawing machines in August, 1989 over a portion of the land taken on rent from M/s. Tandon Brothers; on a monthly rent of Rs. 715/-. The petitioner has filed a copy of the rent deed duly executed with the approval of the RIICO who had given the land on lease to M/s. Tandon Brothers. The petitioner also obtained a provisional certificate of registration from the Directorate of Industries, Jaipur and thereafter applied to the Supdt. Central Excise, for grant of a licence to manufacture copper wire of thickness entered into the Schedule attached with the application, giving the address of the premises as A-14-A, 22 Godowns. The officers of the excise Deptt. inspected the site and after a thorough enquiry, issued a licence under Rules 174 and 178 of the Central Excise Rules, 1944. It may be noted here that M/s. Tandon Brothers is also carrying on a similar business of drawing copper wires on a nearby plot A-14, Industrial Estate, 22 Godown, Jaipur which is also registered with the Excise Department and the Department was fully aware of this fact before issuing licence under the Central Excise Rules to the petitioner. The petitioner also applied for a separate electric connection from the Rajasthan State Electricity Board and since connection was not given, she had made arrangements from M/s. Tandon Brothers situated nearby and installed a sub-meter for calculation of the actual consumption to be paid to M/s. Tandon Brothers. The petitioner also opened a separate bank account in the name of the unit and obtained limits from the bank. She has been operating the bank account herself. After starting manufacture of copper wires she submitted return in Form RT-12 to the Supdt. Customs and Central Excise. The first return was submitted on 7-10-1989. It was only on 29th August, 1990 that a notice was issued to the petitioner to show cause as to why the classification list effective from 1-4-1990 should not be approved taking into consideration the value of clearances of both the units as clubbed together. The only ground to issue such a notice was that the two factories are located adjacent to each other and that the proprietor of M/s. Tandon Brothers happens to be the father-in-law of the petitioner and that the work of both these units is being looked after by Shri Avinash Tandon who is the husband of the petitioner and son of Shri S.K. Tandon and that she has been consuming electric power from M/s. Tandon Brothers. These facts which have been mentioned in the show cause notice, in no way, can give rise to a presumption or even an inference that the two units should be treated as one unit. I have already quoted above the various authorities cited by the learned counsel for the petitioner, of various High Courts and the Tribunal wherein it has been held that the value of clearances of the two units cannot be clubbed together and the two units cannot be treated as one unit merely because of proximity of relationship or the situation of the two factories or because there are some common employees unless there is a clear and specific evidence that there is mutuality of business interest between the two units and that both have interest in the business of each other or they have common funding and financial flow-back. In the present case, the most important aspect about having common funding and financial flow-back is missing and therefore, to withdraw the assessment or club the clearances is wholly unjustified and illegal and without jurisdiction. Reference in this connection may be made to International Dyestuff Mfg. Co. v. Collector of Central Excise, Baroda [1991 (53) E.L.T. 85 (Tribunal) = (1991) 33 ECR 31]. The petitioner has asserted on oath that she had opened a separate bank account, she is hereself operating the same and obtained limits and that the impugned notice is conspicuously silent and there is no allegation worth the name that they have any common funding or financial flow-back. Mere blood relationship or sharing of staff, some temporary common employment, similarity of product is also not sufficient to draw an inference that the two units should be clubbed together. Since I have already quoted extracts of decisions in detail, of various Tribunals and the Courts, in the earlier part of this order, I am not reproducing them here again. Unless there is some basis and material available with the Department, it has no right or jurisdiction to issue a show cause notice and it will be wastage of energy and time if the petitioner is directed to appear before the Department to get this aspect decided as on the face of the notice itself read as a whole, the department has not been able to gather any material to come to that conclusion.
10. Further, we find that all the three units have been registered separately after completing investigation. In that circumstance, the clearances made by three units cannot be clubbed in the light of the decision in the case of Plasto Containers (India) Pvt. Limited vs. CCE, Nagpur 2011 (268 ELT 509 (Tri. Mumbai), wherein this Tribunal has observed as under :-
34.?In the case of CCE v. 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. Union of India - 1993 (66) E.L.T. 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 companies 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.
11. We also take note of the fact that M/s. ADCL is manufacturing Poly Vinyl Acetate Emulsion which is raw material for M/s. SCPL and M/s. Emulsion Products who are manufacturing Synthetic Adhesive and therefore M/s. ADCL and other two units are not manufacturing the same goods and in fact, one is the raw material for the other and the goods manufactured by M/s. ADCL cannot be manufactured by M/s. SCPL and M/s. Emulsion. The case law relied upon by ld. AR in the case Elemec Industries (supra) for deciding the issue in hand, is reproduced:-
6. ?For the purpose of clubbing of clearances to determine the eligibility of small scale exemption the totality of the facts and circumstances had to be analysed. While with reference to isolated facts, the units may appear to be distinct and separate, but when the facts and circumstances are seen in totality seemingly distinct and separate units may turn out to be one common manufacturing entity.
While the financial flow back could be one of the important considerations, it could not be made the sole basis for arriving at the decision, this way or that way.
While the determining factor for clubbing of clearances is the true nature of relationship as between different units, the facts and circumstances of each case had to be appreciated. On the basis of the specific facts in a particular case, after the conclusions have been drawn, the case law could be cited to support the conclusions; but such a matter which largely depends upon the facts and circumstances relevant to the issue, no decision could be arrived at only on the basis of decisions in other cases with facts and circumstances specific to them.
12. Admittedly the issue of clubbing or declaring dummy units should be examined in the light of facts of each case. In the case in hand, the constitution of firms is Private Limited and Partnership Firm, therefore, merely being a one person is common in all the units cannot be a ground for clubbing the clearances of all units. Further, all the units were having separate registration with Central Excise department, different Sales Tax registration, ESIC etc. and having different trademarks and filing their IT Returns separately. In these circumstances, merely surrendering the Central Excise registration in the year 2002, the clearances of all the units cannot be clubbed. Therefore, after examining the facts and circumstances of the case, we hold that clearances made by all the three units cannot be clubbed altogether.
13. We find that the fact that all the three units have separate registration with the Central Excise department was well within the knowledge of department while granting the registration and surrendering the registration in the year 2002. In that circumstance, charge of suppression cannot be alleged against the appellants. Consequently, extended period of limitation is not invokable.
14. With these observation, we set-aside the impugned order and allow the appeals with consequential relief, if any.
(Order pronounced in the court 16.10.2017) Devender Singh Member (Technical) Ashok Jindal Member (Judicial) KL 12 Appeal No. E/792-793/2007