Customs, Excise and Gold Tribunal - Delhi
Gufic Pharma Pvt. Ltd. vs Collector Of Central Excise on 4 July, 1995
Equivalent citations: 1996(85)ELT67(TRI-DEL)
ORDER Gowri Shankar, Member (T)
1. These appeals arise out of the Order passed by the Collector of Central Excise, Vadodra in which he has held that both the appellants wrongly availed of the benefit of Notifications 85-C.E. and 175/86-C.E. on account of their having interest in the business of each other and being financially involved with each other. He also demanded duty from M/s. Gufic Pharma (P) Ltd and imposed penalty on each of them. He further Ordered confiscation of land, building, plant and machinery of both the companies but permitted them to be redeemed on payment of fine. We have heard the arguments forcefully advanced by the Senior Advocate on behalf of the appellant companies and the rebuttal of the Departmental Representative.
2. The effect of the Collector's Order is to hold that M/s. Gufic Pharma (P) Ltd., Bharuch is the real unit and M/s. Gufic Pvt. Ltd. is an artificial entity created to unlawfully avail the benefit of the Notification.
3. The demand is for a period from 1-4-1985 to 31-3-1989 and was issued in the show cause notice dated 4-1-1990. The extended period provided in Section 11A of the Central Excises and Salt Act, 1944 would, therefore, come into play. Paragraph 26 of the show cause notice alleges fraud, mis-statement and suppression of facts with an intent to evade payment of duty.
4. The Collector has found that the extended period has been correctly invoked, by saying that the appellants have not shown in the declarations furnished by them with regard to availing of the exemptions that they were having mutuality of interest, financial and managerial among the five units referred to in the show cause notice. The circumstances which led the Collector to conclude mutuality of interest and briefly common share-holding among five firms including the two appellants by members of Chokshi family, the fact that some unsecured loans were taken from some of the share holders and other firms in which the Chokshi family were share holders such as M/s. Gufic Finance and Leasing etc. by M/s. Gufic Pharma (P) Ltd and M/s. Gufic Pvt. Ltd., the fact that Sh. J. P. Chokshi is the Managing Director both the companies and direct their affairs, both the firms have common distributors M/s. Jal Enterprises in which also is they have share holding by Chokshi brothers.
5. The show cause notice alleged (in para 25) that M/s. Gufic Pharma had declared in its classification lists that" We do not have any such factory in India" while claiming exemption under Notification No. 175/86 with intend to evade payment of duty. The Collector has said in his order that the appellants have suppressed facts "to the extent that they have shown in the declaration that they were having mutuality of interest/financial and managerial to the five units referred to in the show cause notice".
6. It will be seen that there is a difference in the show cause notice and the Collector's order as to the nature of suppression. Going by the show cause notice, M/s. Gufic Pharma has invited invocation of the extended period by saying that they did not have any "such factory in India". We fail to see how this amounts to mis-declaration or wilful suppression. The Collector in fact has not specifically found that appellants are a dummy or shell existing only in name and that the real manufacturer is M/s. Gufic Pharma. After detailed discussion, he has concluded that M/s. Gufic Pharma Pvt. Ltd. have mutuality of interest in each other and also in five other units. A distinction has to be clearly made between alleged ownership of a factory and alleging mutuality of interest. On this basis alone, it is doubtful whether the extended period can be invoked.
7. In any event, even if we assume that the show cause notice had in mind only the mutuality of interest, there is still no case for invoking the extended period. The Gujarat High Court has held in Apex Electornics Pvt. Ltd. [1992 (61) E.L.T. 413] that the extended period cannot be invoked by alleging suppression of fact which was not required by law to be disclosed. Applying the ratio of this decision to a case of clubbing, this Tribunal has held in Unique Resin Industries v. Collector of Central Excise, Baroda [1995 (75) E.L.T. 861] that failure to disclose details about the financing of the units would not attract the extended period, there being no provision under which the source of finance was required to be declared. That would be the position here too. There is no provision requiring the assessee to declare its share holders or the other factors on the basis of which the Collector has come to this finding of facts. The extended period therefore, would not be applicable. The demand for duty therefore, cannot be sustained and is set aside and consequently the penalty imposed is also set aside and both the appeals are allowed.