Custom, Excise & Service Tax Tribunal
Cce Pune Iii vs Mali Pipe Industries on 6 September, 2019
1
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH - COURT NO. I
Excise Appeal No. 415 of 2010
(Arising out of Order-in-Appeal No. P-III/VM/242-245 dated
23.11.2009 passed by the Commissioner of Central Excise (Appeals),
Pune-III)
Commissioner of Central Excise, Pune-III .... Appellant
ICE House, 41-A, Sassoon Road, Opp. Wadia College
Pune - 411001, Maharashtra
Versus
M/s Mali Pipe Industries .... Respondent
Plot No. 67, 68, 69, 84 & 85, Sangola Co-op Industrial Estate, Kamlapur, Sangola, Solapur - 413307, Maharashtra M/s Kumar Polyextrusion, Plot No. 94 & 95, Sangola Co-op Industrial Estate, Kamlapur, Sangola, Solapur - 413307 Shri Kumar Shankar Mali, Proprietor of M/s Mali Pipe Industries Plot No. 67, 68, 69, 84 & 85, Sangola Co-op Industrial Estate, Kamlapur, Sangola, Solapur - 413307, Maharashtra Smt. Latika Kumar Mali, Proprietor of M/s Kumar Polyextrusion Plot No. 94 & 95, Sangola Co-op Industrial Estate, Kamlapur, Sangola, Solapur - 413307 Appearance:
Shri N.N. Prabhudesai, Supdt, Auth. Representative for the Appellant Shri M.P. Joshi, Advocate for the Respondent CORAM:
HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. A/86566 / 2019 Date of Hearing: 08.03.2019 Date of Decision: 06.09.2019 Per: Dr. D.M. Misra This is an appeal filed by the Revenue against Order-in- Appeal No. P-III/VM/242-245 dated 23.11.2009 passed by the Commissioner of Central Excise (Appeals), Pune-III. 2
2. Briefly stated the facts of the case are that the respondent M/s Mali Pipe Industries is a proprietorship firm having its proprietor Shri Kumar Shankar Mali engaged in the manufacture of excisable goods namely, PVC pipes of various sizes falling under Chapter sub-heading 39 of Central Excise Tariff Act, 1985. They have availed benefit of SSI exemption under the relevant notification No. 8/2003-CE dated 1.3.2003 for the clearances made during the relevant financial years 2005-06 & 2006-07. On the basis of investigation that the respondent had wrongly availed the SSI exemption benefit for the financial year 2005-06 & 2006-07 against clearance of PVC pipes by not including the value of clearances from the other unit namely, M/s Kumar Polyextrusion, which is owned by the wife of the proprietor Shri Kumar Shankar Mali, show-cause notice was issued to the respondent for recovery of duty short paid for the said financial years 2005-06 and 2006-07, amounting to Rs.27,66,055/- by clubbing the clearance of both the units; proposed confiscation of unaccounted raw materials in M/s Kumar Polyextrusion valued at Rs.63,29,950/-, proposed for confiscation of machinery and raw materials valued at Rs.12,00,000/- and penalty under relevant provisions; personal penalty on the another noticees. On adjudication, the demand was confirmed with interest and penalty; seized materials were directed to be confiscated with an option to release the same on payment of fine and personal penalty imposed on other noticees. Aggrieved by the said order, the respondents filed appeal before the learned Commissioner (Appeals), who in turn, partly allowed their appeal by upholding confiscation of 3 goods directed by the adjudicating authority, however, set aside the demand of duty, penalty and interest of Rs.27,66,055/- confirmed on clubbing the clearance, confiscation of unaccounted raw materials, demand of Rs.34,466/- confirmed against M/s Kumar Polyextrusion, set aside the penalty against Mrs. Latika Kumar Mali and reduced the penalty to Rs.25,000/- against Shri Kumar Shankar Mali. Hence, the Revenue is in appeal with the prayer that the Order of the Commissioner (Appeals) be set aside as far as clubbing issue is concerned.
3. Learned AR for the Revenue reiterated their grounds of appeal. He has further submitted that the learned Commissioner (Appeals) has ignored the statements recorded during the course of investigation, the evidence on record indicating that even though on paper M/s Mali Pipe Industries and M/s Kumar Polyextrusion are shown to be separate legal entities but in fact in the former Unit , Shri Kumar Shankar Mali was the proprietor and in M/s Kumar Polyextrusion, his wife Mrs. Latika Kumar Mali was the proprietress for name sake. All the activities of both units have been controlled and managed by Shri Kumar Shankar Mali.
4. Further, he has submitted that during the course of search of all the units and common office premises, it was noticed that the screens of different brands were lying in the factory of M/s Kumar Polyextrusion, 150 Nos. of 63mm and 315 Nos. of 90 mm size were found short when compared with 4 RG-1 Stock of M/s Mali Pipe Industries and the Manager Shri Waghmare has admitted that these pipes were cleared on 20.4.2007 without preparing invoices and without duty paying documents. Similarly, the vehicle bearing No. MH-45-0012 loaded with 400 pipes of 90mm and 70 pipes of 50mm of Supriya brand was found at M/s Kumar Polyextrusion without any documents. Further, during the course of investigation, Shri Vitthal Ganpat Waghmare, Manager of M/s Mali Pipe Industries admitted to have been looking after production and clearance of both the units and loading of pipes were done as per Kumar Shankar Mali's instructions. The sales invoices were for both Units were prepared at the instruction of Shri Kumar Shankar Mali and manufacturing of pipes of different sizes in both the units were undertaken according to the direction of Shri Kumar Shankar Mali. Raw materials required for both the units were purchased by Shri Kumar Shankar Mali. All instructions in respect of M/s Kumar Polyextrusion was received from Shri Kumar Shankar Mali and the proprietress Mrs. Latika Kumar Mali was neither involved in day-to-day activity nor looking after the business of the company. Further, he has submitted that the screens of brand names viz, 'Mali Pipe', 'Finoflex' and 'Finorex' are in the custody of M/s Kumar Polyextrusion.
5. He has further contended that in his statement, Shri Kumar Shankar Mali has admitted to have financed M/s Kumar Polyextrusion by selling agricultural land and from the profit earned and loan from Sangola Branch of Pandharpur Urban Bank. Further in his statement, he had stated that he was 5 looking after all the activities of M/s Kumar Polyextrusion. The learned AR has further submitted that Mrs. Latika Kumar Mali in her statement admitted that she was not at all concerned with the day-to-day working of unit and entire work of factory was looked after by her husband for which she has executed the Power of Attorney in his name. Further, she has admitted that she was not aware of anything about business activity of M/s Kumar Polyextrusion and not knowing who is doing what work in M/s Kumar Polyextrusion; when specifically asked about the status of the company,she has stated that she did not know what is a power of attorney and that as per direction of her husband she has signed all the papers and what was written on the paper was not known to her; she had also stated that whenever required her husband was taking her signatures on papers and she did not know anything and that her husband never gave her full information, he used to ask her to sign and she used to sign. She also admitted that she was only a housewife and just lent her name as proprietress. Further, the learned AR has submitted that the aabak & Jabak i.e. incoming and outgoing records were maintained in the common office for both the units and the amount of Rs.2,00,000/- though advanced by M/s Mali Pipe Industries to M/s Kumar Polyextrusion, which the later had claimed to have been returned subsequently, but no evidence has been produced in this regard.
6. It is his contention that the goods are manufactured at both the units under common brands and common private 6 records maintained for purchase, issue for production of raw material and sale of finished products for both units, common register for inward/outward movement of manufactured goods and raw materials are maintained at M/s Mali Pipe Industries. In support, the learned AR has referred to the extract of incoming and outgoing register mentioned at para 34 of the adjudication order. It is his contention that learned Commissioner (Appeals) has erred in appreciating the said evidence brought on record by the Department that even though both the units are separate on paper, but controlled by one person i.e. Shri Kumar Shankar Mali, proprietor of M.s Mali Pipe Industries. It is argument that in such circumstances, the clearance of M/s Kumar Polyextrusion be added to the clearance value of M/s Mali Pipe Industries. In support, he has referred to the judgment of this Tribunal in the case of Libra Engineering Works Vs. Commissioner of Central Excise, Ahmedabad-I - 2017 (339) ELT 610 (Tri-Ahmd), Himgiri Plastics Vs. Commissioner of Central Excise, Delhi -II - 2017 (357) ELT 153 (Tri-Del), which has been upheld by the Hon'ble Supreme Court reported as 2018 (360) ELT A137 (SC), and Sansuk Industries Vs. Commissioner of Central Excise, Mumbai-IV - 2017 (350) ELT 265 (Tri-Mum).
7. Per contra, learned Advocate for the respondents has submitted that show-cause notice was issued to them on 16.10.2007 to all the four respondents proposing to deny SSI exemption by clubbing clearance of M/s Mali Pipe Industries and M/s Kumar Polyextrusion, which on adjudication was 7 confirmed and personal penalty imposed on other two respondents. All the four respondents had filed appeal before the learned Commissioner (Appeals). It is his contention that the Revenue has filed only one appeal mentioning all the four respondents whereas the Revenue ought to have filed separate appeals against every party. Since only one appeal has been filed, therefore, the appeal becomes infructuous.
8. On merit, the Ld. Adv. has submitted that both these units having separate Income Tax PAN No., Sales Tax registration, Bank A/c No., SSI registration etc. and these are separate in existence and also function independently having full-fledged machinery and manufacturing activity. It is his argument that there is no free flow of finance between respondent No. 1 and 2. Initially in the year 2001-02, a loan of Rs.2.00 lakhs was advanced to Shri Kumar Shankar Mali, which was later returned by M/s M/s Kumar Polyextrusion. Shri Kumar Shankar Mali is proprietor of Mali Pipe Industries. It is his contention that merely because two units are owned by husband and wife, clearance of one unit cannot be clubbed with another in considering the SSI exemption notification. Further, he has also submitted that merely because both Units were operating from common office, common inward and outward register of materials and finished goods, common staff etc. cannot be a ground to club clearance of both units. In support, they have referred to the judgment of this Tribunal in the case of Commissioner of Central Excise, Kanpur Vs. Sharad Industreis - 2013 (294) ELT 561, Commissioner of Central 8 Excise, Vadodara Vs. Tightwell Fasteners - 2008 (230) ELT 163, Shri Natraja Industries Vs. Commissioner of Central Excise, Salem - 2005 (187) ELT 45, Renu Tandon Vs UOI - 1993 (66) ELT 375 (Raj.).
9. In his rejoinder, the Ld. A.R. for the revenue has submitted that there is no necessary to file separate appeals for each respondent against order of the Commissioner (Appeals). The Department has complied with the provisions of section 6 A of the CESTAT (procedure)Rules, 1982 .
10. Heard both sides and perused the records.
11. The short question involved in the present appeal is whether M/s Mali Pipe Industries and M/s Kumar Polyextrusion are entitled for SSI exemption benefit under Notification No. 8/2003-CE dated 1.3.2003 separately or the clearance value of M/s Kumar Polyextrusion be clubbed with that of M/s Mali Pipe Industries, in considering the said SSI benefit of exemption notification for the later Unit.
12. It is the contention of the learned Advocate for the respondents that both M/s Mali Pipe Industries and M/s Kumar Polyextrusion though proprietorship concerns and the husband and wife are proprietors of the said units respectively, but they have separate premises for manufacture and clearance of the same got separate existence in law inasmuch as they procured/purchased raw materials separately and processed 9 the same in their units and. They possess separate Income Tax PAN No., Sales Tax/ VAT registration number, hence clubbing of clearance of these two units in considering the benefit of exemption notification is not sustainable in law.
13. The Revenue, on the other hand, mainly relies upon the evidence of the proprietors of the respective concern. It is the argument of the Revenue that even though on paper M/s Kumar Polyextrusion has been shown a separate legal entity, whose proprietress is Smt. Latika Kumar Mali, W/o Shri Kumar Shankar Mali, but in fact, the said unit is fully controlled by Shri Kumar Shankar Mali, husband and proprietor of M/s Mali Pipe Industries. In her statement, Smt. Latika Kumar Mali has admitted that she is not at all aware of any of the activities of M/s Kumar Polyextrusion nor even aware of how the said unit is functioning and carrying out its day-to-day business of manufacture and sale of the finished goods. In her statement, she has categorically stated that the entire business and management had been carried out by her husband Shri Kumar Shankar Mali and she being a housewife signs all the paper as directed by her husband from time to time without being aware of what paper was placed before her for signature. The statements furnished by the proprietors and the employees were never retracted nor had been challenged during the entire proceeding as untrue or collected by application of force or question. Therefore, these statements cannot be ignored in absence of reasons.
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14. We find that the learned Commissioner (Appeals) has erred in appreciating the evidence as a whole and in particular the control and management of the unit M/s Kumar Polyextrusion by Shri Kumar Shankar Mali of M/s Mali Pipe Industries even though on paper both the units were shown and claimed to have separate existence and functions separately carrying out its business of manufacture and sale of goods independent to each other. On the contrary, the entire operation and business of both the units undoubtedly controlled and managed by one person that is Shri Kumar Shankar Mali, hence, the clearance of both units be clubbed. The facts of the present case are more or less similar to the facts of the case in Libra Engineering Works (supra) and Himgiri Plastics (supra) case, hence by the judgment of this Tribunal delivered in the said case. In these circumstances, we do not find merit in the impugned order setting aside the demand arrived at by clubbing the clearance value of M/s Kumar Polyextrusion with that of M/s Mali Pipe Industries while considering the benefit of SSI exemption under Notification No. 8/2003-CE dated 1.3.2003 as amended from time to time.
15. The learned Advocate for the respondents raised another issue that the Revenue has not filed four appeals but instead filed only one appeal, therefore, the same is not maintainable. Revenue's answer to the said argument is that the department has complied with the provisions of Rule 6A of CESTAT(Procedure) Rules, 1982 in filing the number of appeals as per the number of adjudication orders. We find merit in the 11 contention of the Revenue. The learned Commissioner (Appeals) has decided the issues partly in favour of the respondents, modifying the Order of the adjudicating authority, therefore, the Revenue has filed only one appeal challenging the Order-in-Appeal only to the extent it was not accepted by the Revenue, that is on the issue of clubbing of clearance. Consequently, we are of the view that the Appeal is sustainable.
16. In the result, the impugned order is modified by setting aside the same to the extent of dropping the demand of Rs.27,66,055/-, interest and penalty on the issue of clubbing of clearance of M/s Mali Pipe Industries & M/s Kumar Polyextrusion and the Order-in-Original to that extent is restored. Appeal disposed of accordingly.
(Pronounced in court on 06.09.2019) (Dr. D.M. Misra) Member (Judicial) (P.Anjani Kumar) Member (Technical) Sinha