Customs, Excise and Gold Tribunal - Delhi
Lord Chloro Alkali Limited, Ujala Gas ... vs Cce on 27 April, 2006
ORDER K.C. Mamgain, Member (T)
1. These four stay applications have been filed for staying the recovery of duty and penalties imposed on the applicants. Show cause notices were issued to the applicants alleging that M/s Lord Chloro Alkali Ltd., Alwar (formerly known as Modi Alkalies & Chemicals Ltd) were engaged in the manufacture of Hydrogen Gas falling under sub-heading 2804.29 of the Schedule to the Central Excise Tariff Act, 1985. It was alleged that they have floated three front companies namely M/s Alfa Hi-tech Gases (P) Ltd., M/s Ujala Gas and Chemicals Pvt. Ltd. and M/s Zen Gas and Chemicals Pvt. Ltd. in the vicinity of their factory to compress and bottle the Hydrogen Gas purchased as a bye product by them during the manufacture of caustic soda with an intent to mis-use the SSI exemption in terms of Notification No. 8/2003-CE dated 1.3.2003 during the period from December, 2003 to December, 2004 by supplying Hydrogen Gas to front companies at a much lower rate than on which the hydrogen gas was sold by these companies to the customers. Similar show cause notices were issued for the period from April, 2004 to June, 2004, July, 2004 to September, 2004. These four show cause notices were adjudicated by the Deputy Commissioner of Central Excise, Alwar confirming the demand of Rs. 12.63.598/- against M/s Lord Chloro Alkalies Ltd. Alwar. Penalties of Rs. 1 lakh was imposed on M/s Lord Chloro Alkali Ltd. and Rs. 50,000/- on the three front companies namely M/s Alfa Hi-Tech Gases (P) Ltd., M/s Ujala Gas & Chemicals (P) Ltd. and M/s Zen Gas & Chemicals (P) Ltd.
2. It was argued before us that the duty has been wrongly demanded from M/s Lord Chloro Alkali Ltd. and penalties have also been imposed wrongly on all the applicants. All the four companies are independent companies and they have nothing common between them either in the form of financial arrangement or administrative arrangement. These companies were working on its own and were earning its own profit. It was argued that the findings of the Commissioner (Appeals) in para 6 and 7 are contrary to evidence on record. It was also claimed that filling of hydrogen gas in the cylinders is not a process of manufacture and no duty is chargeable from the companies filling the gas. They have claimed financial hardship and stated that the companies are under BIFR. It was stated that now the companies are being revived.
3. It was argued for the Revenue that the allegations in the show cause notice makes it clear that the three companies filling the hydrogen gas in cylinders were the front companies of M/s Lord Chloro Alkali Ltd. The lower authorities have given findings sufficient to hold that front companies were floated by M/s Lord Chloro Alkali Ltd. It was also pointed out that earlier the Supreme Court in the case of Commissioner of Central Excise, New Delhi v. Modi Alkalies & Chemicals Ltd. had held that company manufacturing gas and sending it for bottling to nearby facilities and all companies having common staff and accounting, marketing and supervision and directors being the employees of the manufacturing company, SSI exemption is not available to the companies filling the hydrogen gas. It was stated that in the present case, the three front companies floated by Lord Chloro Alkali Ltd. are on the same plot number separated by a wall and these are having directors which are the employees of Modi group of companies. Therefore, the ratio of the Supreme Court decision in the case of CCE v. Modi Alkalies is fully applicable in this case.
4. We have considered the submissions of both the sides. Since we are deciding only the stay applications filed by the applicants, we have to see the prima facie findings of the Commissioner (Appeals) and if there is no prima facie mistake in the findings, we have to go by the findings of the Commissioner (Appeals). The Commissioner has given a finding that directors of the three front companies are all employees of Modi Alkalies (now M/s Lord Chloro Alkali Ltd) or other Modi Group of Companies. Common staff and record of operation of these units is being utilised and the main plant and machinery and cylinders have been supplied on lease to these units by M/s Modi Alkalies & Chemicals. Financial assistance has also been provided by M/s MACL by way of unsecured loans or have been arranged by M/s MACL from such finance companies whose whereabouts are not known to the directors of the company. The Hydrogen Gas compressed, bottled and marketed by D.K. Modi, M.D. of M/s MACL. The balance sheets of these units revealed that whatever was their income, had gone to M/s MACL in the form of lease rent on cylinders.
The three companies namely M/s Alpha Hi-Tech Gases, M/s Ujala Gases Chemicals and M/s Zen Gas & Chemicals are in the same premises floated by M/s Modi Alkalies & Chemicals by providing loans and financial assistance. The Commissioner has also given a finding that M/s Lord Chloro Alkali cleared hydrogen gas to the front units at the rate of Rs. 0.50 to Rs. 1.50 per MT which in turn was sold by these companies at the rate of Rs. 5 to Rs. 15/- per MT by misusing SSI benefit as provided by Notification No. 8/2003-CE dated 1.3.2003 by M/s MACL by floating three front companies located in one single premises separated from each other by brick walls. He therefore, did not find any reason to interfere with the order of original authority denying the benefit of SSI exemption to the concerned appellant by demanding the duty from M/s Lord Alkali Ltd. We find that the finding of the Commissioner (Appeals) were contested by the applicants but they could not produce any tangible evidence. Therefore, prima facie, we have to go by the finding of the Commissioner (Appeals). We find that though the names of the front companies are different, the modus operandi has virtually remained the same which was earlier decided against the appellants in their own case. It will not allow these companies to get away from the ratio of the decision of the Supreme Court in their own case prior to the change of the name of Modi Alkalies to M/s Lord Chloro Alakli Ltd.
5. Therefore, having regard to the facts and circumstances of the case and the prima facie findings of the Commissioner (Appeals), M/s Lord Chloro Alkali is directed to pre-deposit 50% of the duty amount confirmed against them within six weeks. Rest of the applicants are directed to pre-deposit 50% of the penalty amount imposed on them within a period of six weeks. On such pre-deposit, the recovery of the balance amount of penalty and duty is waived for hearing the appeal of M/s Lord Chloro Alkali and the three other applicants. Compliance to be reported on 21st June, 2006. If the amount is not deposited as stated within the prescribed period, the appeal of the defaulting applicants will stand dismissed.
The applications are disposed of accordingly.
(Order dictated and pronounced in the open Court).