Customs, Excise and Gold Tribunal - Delhi
Lubricare Relays Pvt. Ltd. And Ors. vs Cce on 7 November, 2005
Equivalent citations: 2006(106)ECC121, 2006ECR121(TRI.-DELHI)
ORDER
S.S. Kang, Vice President
1. The appeals are being taken up in pursuance of the remand order dated 17th March 2005 passed by Hon'ble Bombay High Court.
2. Brief facts of the case are that show cause notice dated 22nd Sept. 89 was issued to the appellant for clubbing of clearance of all the manufacturing units for the purpose of availing small scale exemption under the provisions of Central Excise duty notification issued from time to time. The adjudicating authority confirmed the demand and imposed the penalties and the adjudicating authority also confiscated the land, building etc and allow the same to be released on the payment of redemption fine. Appellant filed appeals before the Tribunal and the Tribunal vide Final order No. 112 to 118/99-B1 dated 9.2.99 dismissed the appeal and upheld the demand and penalties. The appellant challenged the order passed by the Tribunal in the Hon'ble Bombay High Court and the Hon'ble Bombay High Court vide order dated 17th March 2005 after taking into consideration the circular No. 6/82 dated 29.5.92 issued by Ministry of finance, Department of Revenue remanded the matter to the Tribunal.
3. The contention of the appellant is that out of seven appellants, five are Private Limited Companies and two are Partnership firm. The contention is that in view of the above circular dated 29.5.92 the Private Limited Companies are to be treated as different manufacturing units for the purpose of smell scale exemption notification. The contention is that as per Board circular the 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. In view of this circular the contention is that the clearance of five Limited Companies cannot be clubbed for the purpose of granting small scale exemption notification. The contention is that in respect of Partnership firms having common Partner are to be treated as separate manufacturer and it this question of fact in each case to be determined on the basis such like component of existence of factory license etc. The contention is that all the units are independent units registered with the Sales Tax authorities, Income Tax authorities and also with the Central Excise authorities and even before the Director of Industry. The contention is that five Limited Companies are being run by their independent Directors and there is no financial flow back from one company to another company. Therefore, in view of the Board Circular they are to be treated independent manufacturing units for the purpose of granting the benefit of small scale exemption notification.
4. In respect of two Partnership firm the contention is that there are no common Partner and they are registered with different authorities separately and they are also manufacturing different goods.
5. The contention is that in these circumstances the clubbing of clearance is not sustainable.
6. The contention of Revenue is that these manufacturing units are run by Sh. Madhav Kirloskar, Managing Director who is looking after day to day affairs of the manufacturing units and they have a common Company Secretary, Manager (Personnel) and even Manager (Production and Design) is also common. The Revenue is relying upon the various transaction between the Private Limited Companies where the interest free loans to other units was given as per SCN para -IV -11. The contention of the Revenue is that the evidence on record leads to the conclusion that there is mutuality of interest by diversion of money and financial flow back among the units. The Revenue is relied upon the following decisions in support of their claim:
(i) 1997 (69) ECR 29 (SC) McDowell & Co. Ltd. v. Commercial Tax Officer
(ii) CCE, New Delhi v. Modi Alkalies
7. The contention of Revenue is that the Tax planning may be legitimate provided it is within the framework of the law, colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges. The contention of Revenue is also that the Hon'ble Supreme Court in the case of Modi Alkalies & Chemicals Ltd., (supra) whether the issue in respect of issue of clubbing and after considering the Board Circular now relied upon by the appellant held that as more than ordinary interest in the financial arrangements for companies show that the whole show was controlled, both on financial and management aspects by MACL and corporate veil is lifted what comes into focus is only the shadow and not any substance about the existence of the three companies.
8. The contention of Revenue is that the financial flow back from one Private company to other Limited company and interest of common Managing Director, mutuality of interest in M/s Lubricare Relays Pvt. Ltd., and in other companies leads to the conclusion that all the companies are created just to avail the benefit of small scale exemption notification
9. In this case, the issue is clubbing of clearance of the seven appellant manufacturing units for the purpose of availing benefit of small scale exemption notification during the relevant period. The adjudicating authority in the impugned order after going through the finding portion held that M/s Lubricare Relays Pvt. Ltd., controls management, Consultants, Sales, Quality Control, Data Processing services etc. as mentioned in the Annexure-A to the show cause notice. Similarly, after taking into consideration the financial dealings between the companies as salaries and wages are paid by one company in respect of the other companies. The Board circular No. 6/92 dated 29.5.92 whereby it was clarified that the Limited Company or Private Limited Company are to be separate entities. We find that in the case of Modi Alkalies & Chemicals Ltd. (Supra) after lifting corporate veil of the Private Limited company held that the role of Modi Alkalies and Chemicals Ltd., had more than a ordinary financial interest in the other companies and the whole is controlled by the Modi Alkalies in respect of financial and management aspects. As the board circular which is relied by the appellant before the Hon'ble Supreme Court was not before the adjudicating authority at the time of passing the impugned order. In these circumstances, we find that it is a fit case for reconsideration by the adjudicating authority after taking into consideration the Board Circular dated 25.9.92 and after taking into consideration the ratio of the decision of the Hon'ble Supreme Court relied upon by the Revenue. The impugned order is set aside and matter is remanded back to the adjudicating authority to decided afresh after affording an opportunity of hearing to the appellant preferably within a period of six months.
[Pronounced and dictated in the open Court].