Madras High Court
Campion Plastic Industries Ltd. vs Cegat on 15 February, 1996
Equivalent citations: 1996(84)ELT189(MAD), (1996)IMLJ406
Author: A.R. Lakshmanan
Bench: A.R. Lakshmanan
ORDER
1. By consent of both parties, both the writ petitions are taken up for final hearing. Heard Mr. P. S. Raman for the petitioners and Mr. M. M. Reddy for the respondents.
2. Both the writ petitions have been filed against the order of the 1st respondent dated 22-9-1995 directing the petitioner M/s. Campion Plastics to pre-deposit a sum of Rs. 3.50 lakhs on or before 29-11-1995 to quash the same and to direct the 1st respondent to hear the appeals on merits without pre-deposit.
3. Against the order of the 2nd respondent confirming the demand made by the officials of the Excise Department and also imposing penalty on the petitioners, they filed appeals before the 1st respondent under Section 35B of the Central Excises and Salt Act seeking for a waiver of the pre-deposit of the duty and the penalty pleading inter alia a strong prima facie case based on admitted facts and judicial pronouncements on the subject apart from raising a justified plea a financial hardship in the light of the companies' status as reflected in their audited accounts.
4. Mr. P. S. Raman placed strong reliance on a recent decision of the Special Bench 'B' of the Tribunal at New Delhi in the case of Alpha Toyo Ltd. reported in 1994 (71) E.L.T. 689 wherein it had been specifically ruled that mere existence of common managerial control, a few common directors and advancing of money to each other would not be sufficient to club clearances of two units unless the second unit is proved to be a dummy unit meaning one which is not physically existent in terms of investment of capital, machinery and labour. Therefore, according to Mr. P. S. Raman, not only is the petitioner in W.P. No. 16342 of 1995 incapable of being classified as a dummy unit since it has its own manufacturing facilities but is also involved in the development and manufacture of several other products for which it is licenced and in respect of which it has entered into collaboration agreements with other leading Corporations in India.
5. I have gone through the order of the 1st respondent. The 1st respondent has not decided the prima facie case pleaded by the petitioners and that the same has been brushed aside by the 1st respondent in one sentence by holding that the issue as to whether the units are to be clubbed are (sic) not will require an indepth analysis with reference to various factors not permissible at this stage. As regards the plea of financial hardship, the 1st respondent has held that taking note of the sales turnover of the two companies, the dues from sundry debtors and the amount of loan and advances amounting to over Rs. one crore, the petitioners were directed to pre-deposit a sum of Rs. 350/- lakhs without taking note of the fact that the companies had a net loss of Rs. 44.22 lakhs and a cash loss of Rs. 42.21 lakhs and that the accumulated loss of Rs. 53.54 lakhs on an equity capital of Rs. 5.36 lakhs gives it a negative net current asset with a total current liability of 293.18 lakhs.
6. The 1st respondent, in my opinion, has totally ignored the above financial position of the petitioners and without giving any prime facie reasoning on the clear merits of the case of the petitioners, has proceeded to pass the order impugned in these writ petitions by mechanically directing the petitioners to deposit 1/3rd of the demand when it is the first appellate authority. My attention was also drawn to the clarificatory Trade Notice viz., Direction No. 6/92 dated 29-5-1992 issued by the Government of India and the Central Board of Excise and Customs regarding clubbing of clearances. In this Board Circular it has been categorically stated as under : -
"Different firms will be treated as different manufacturers for the purpose of exemption limit. But if a firm consisting of certain partners say, A, B and C has got more than one factor, all these factors should of course be combined. Limited companies whether public or private are separate entities distinct from shareholders composing it. Hence, each limited company is a manufacturer by itself and will be entitled to a separate exemption limit."
7. The above will squarely apply, in my opinion, to the case of the petitioners. The 2nd respondent, as an adjudicating authority, ought to have followed the same and having so failed to do so, the 1st respondent, as the appellate Tribunal, ought to have, on the face of the record, noticed a prima facie case. Consequently, the direction to deposit a sum of Rs. 3.50 lakhs as a pre-deposit for maintaining the above appeal would be erroneous and amounts to a failure to exercise a statutory jurisdiction vested with it. As rightly pointed out by Mr. P. S. Raman, the 1st respondent has not rendered any finding on the question of prima facie case and balance of convenience. The impugned order is, therefore, liable to be quashed.
8. For the foregoing reasons, both the Writ Petitions are allowed and the impugned order is quashed. However, there will be no order as to costs.