Customs, Excise and Gold Tribunal - Mumbai
Arihant Arts, Mr. Malsi Thawar Rita And ... vs Commissioner Of Central Excise on 23 July, 2004
Equivalent citations: 2004(173)ELT194(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. These appeals, against the common order passed by the Commissioner of Central Excise are being disposed by this order.
2. (a) Pursuant to enquiries made, a notice was issued to
i) M/s. Mayur Print N Pack (hereinafter referred to as M/s MPP)
ii) M/s. Raihant Arts (hereinafter referred to M/s. AA)
iii) M/s. Ganga Packaging (hereinafter referred to as M/s. GP)
iv) Mr. Malsi Thawar Rita
v) Mr. Ramji Thawar Rita
vi) Smt. Maniben Malsi Rita
vii) Smt. Jayshree Ashok Rita
viii) Smt. Champaben Velaji Rita While MPP was declarant unit under the Central Excise Act & Rules, was enjoying the benefit of exemption on Printed Cartons, was managed by Mr. M.T. Rita, a partner, the two other firms, viz. M/s. AA and M/s. GP, operating from Mr. M.T. Rita's residence were floated to obtain in eligible exemption on cartons since they did not have any factory or office premises and were alleged to be bogus units created on paper to fragment the clearance value of Mayur to obtain benefits not eligible under notification 1/93.
(b) The clubbing of the production has been alleged as
a) Management and Control
i) with Malsi T. Rita of MPP started in 1980-81 with partnership with Shri Ramji T. Rita who retired and started M/s. AA with another partner Smt. Champaben V Rita in 1989-90. Yet Malti T. Rita looked after the affairs of M/s. AA and has several offer, quotations as partner for M/s. AA without any remuneration of M/s. AA or M/s. GP.
ii) One Prasanna S. Kasawarkar was production supervisor working for M/s. MPP, but was also looking after the work of M/s. AA as for directions of Malsi T. Rita, but drawing salary only from M/s. MPP
iii) Office premises were common.
iv) Partners of the three firms are close relatives of Shri Malsi T. Rita who was the main person in the family.
b) Common finance.
i) As evidenced by loan of Rs. 1,20,000/- received by M/s. MPP from Mr. Ramji T. Rita and repaid without interest by M/s. AA from M/s. GP of Rs. 3,87,000/- without interest and personal guarantee given of Mr. Malsi T. Rita for bank loan to M/s. AA and receipt of loan of Rs. 1,87,000/- by M/s. AA on fixed deposit receipts of Mr. Malsi T. Rita.
ii) Purchase orders on M/s. MPP transferred to M/s. AA and vice versa and purchase of raw material transfers.
iii) Common advertisement in a school magazine for which payment was made by M/s. MPP.
(c) The adjudicator relying upon Shri Agencies case (1977 ELF J 168 SO dropped the proposal of clubbing the clearances of M/s GP with M/s MPP after finding that Mr. Malsi T. Rita had not floated M/s. GP as dummy or camouflage unit for availing benefit of SSI Notification 1/93.
(d) However, regarding the material on records as regards finance management control, mutuality on marketing, raw material, recommended plant and machinery and common advertisement, he found that M/s. MPP is the main unit. M/s AA is a dummy unit and therefore the turnover of M/s. MPP is to be clubbed with the turnover of M/s. AA to arrive at and to determine the benefit available under SSI exemption Notification 175/86 as amended by 1/93. He ordered so, and found that benefit was not available.
(e) Since clearances were effected without obtaining licence and nonpayment of duty therefore penal liabilities for breach of rules was established with intend to evade duty. Hence, he ordered -
i) Duty demand of Rs. 19,76,200.32 on M/s. MPP under Section 11A.
ii) Consolidated penalty of Rs. 40,00,000/- under Rule 173CP(1), 52A. 226 and 210 of the Central Excise Rules.
iii) Penalty of Rs. 20 lakhs on Mr. Malsi T. Rita under Rule 173Q and dropped the proceedings on other persons.
iv) Ordered confiscation of plant and machinery of M/s. MPP and M/s. AA and gave an option to redeem an a fine of Rs. 1 lakh to M/s. MPP ans M/s. AA
v) Interest demanded.
Causing these appeals.
3. After hearing both sides and considering the matter, it is found -
(a) Relying upon the decision of Supreme Washers (P) Ltd. 2GG3 (151) ELT 14 SC while inter-relationship of the two firms may be only established based on material brought on records which is being contested. The same material is not useful for clubbing the clearances of M/s MPP and M/s AA since the applicability of Boards Circular dated 1.3.1956 and 6/92 dated 29.04.92 have not been applied by the adjudicator. The same was required to be considered as per this decision of the Apex Court.
(b) Board's circular dated 1.3.56 and 6/92 dated 29.05.92 were circulated as a Trade Notice No. 42/92 dated 24.09.1992 by the Office of same Commissioner, who has adjudicated the case. A perusal of these circulars and the learned Dy. Legal Advisors of Ministry of Law, Justice and Company Affairs Union of India's advice dated 29.12.77 on which the Circulars and Trade Notice has been based and issued and is found to the effect -
"2......... If there are two firms with only some of the parties in common, each firm is entitled to separate exemption limit and hence distributing the exemption may not arise"...
Boards instructions vide para(ii) of letter FNo. 211311 SGCXM1 dt. 10.8.96 addressed interalise to Collector of Central Excise Bonds. The relevant para reads as -
"(ii) As mentioned above, if there are to firms with only some of the partners in common each firm is entitled to separate exemption limit, ........"
These instructions cannot be departed from by the Revenue. In the present case, the learned. Advocate submits that the confiscation of partnership of M/s. MPP to be Mr. Malsi T. Rita and Smt. Jayshree A. Rita while partners of Ms. AA are Mr. Ramji T. Rita and Smt. Champaben A. Rita. Revenue does not challenge that the clubbing is therefore of two independent partnership even with no common partner can be upheld, following the stipulations of the advise / orders. The two firms Viz M/s MPP & M/s AA would be entitled to separate exemptions under the Small Scale Exemption Notification. Making out of a case contrary to that by ignoring Boards instructions is to be set aside.
(b1) The finding of the Commissioner on suppression and the invoking of the larger period of demand under proviso to Section 11A (1) of the Act, as in this case is also not upheld. Since the two firms, M/s. MPP and M/s. AA are located in the same Industrial Estate separated by a floor or so. They are under the jurisdiction charge of the same Range and Division of the Commissioners for purpose of verification of declarations field. Therefore following the decision in the case of 1944 (file) ELT 725 Ashok Paper, 1997 (921 ELT 302 H.T. Bhavnani Chand, 1994 (70) ELT 273 Nikholdeep Cables, the demands cannot be upheld on grounds of limitations.
(c) When clubbing of clearances as per the Section 37B orders of Board are not permissible, the duty demands made on M/s. MPP cannot be sustained. The same are required to be set aside.
(d) When entitlement to SSI benefit separately granted to both firms i.e. M/s. MPP and M/s AA, the penal liability and that too in a consolidated manner, without arriving at a conclusion whether it is either on M/s. MPP or M/s. AA cannot be upheld. The order of penalty should in clear terms visit the person on whom it is intended. The order is silent on that aspect. Such consolidated penalties have not been approved by this Tribunal. Each rule has separate maximum limit, therefore from the order, application of mind should be apparent from the penalties imposed. In this case, from the consolidated penalty as ordered that cannot be inferred. It is bad in law. Penalty not called for on merits and in law is required to be set aside.
(e) The liability to confiscate plant and machinery under Rule 173Q (2) is not called for when no duty and penalty liability are being upheld. The confiscation and order of redemption offered to M/s. MPP and M/s. AA without splitting that offer of Rs. 1 lakh between M/s. MPP and M/s. AA is bad in law. The same is therefore to be set aside on merits and in law.
(f) When no duly demand could be effected, the orders on penalty under Rule 173Q interest riot called for and is to be set aside.
4) In view of the findings herein, the order on duty demand, penalty confiscation and redemption, fine and interest is required to be set aside and appeals allowed.
5) Ordered accordingly.
6) Appeals allowed with consequential relief.