2002 (6) TMI 548 - AT - Central Excise

Summary

Issues Involved:
1. Clubbing of clearances of nine units with MTPL.
2. Imposition of duty and penalty on MTPL and nine units.
3. Invocation of the extended period of limitation for demand of duty.

Issue-wise Detailed Analysis:

1. Clubbing of Clearances of Nine Units with MTPL:
The main allegation was that MTPL set up nine units to evade Central Excise duty. The respondents denied this, asserting that the nine units were independent entities with separate bank accounts, premises, and registrations with sales tax authorities, and were assessed to income tax separately. They had their own labor and sourced raw materials independently. The Commissioner upheld the respondents' contention, noting that the units were independent and merely manufacturing items marketed by MTPL under its brand name did not justify clubbing the clearances. The Commissioner cited several judgments, including the Apex Court's decision in UOI v. Cibatul, which held that goods produced with a customer's brand name cannot be considered manufactured on behalf of the buyer.

2. Imposition of Duty and Penalty on MTPL and Nine Units:
The Commissioner found no evidence of financial flow back or control by MTPL over the nine units. The units were receiving components from Mansfield and making payments directly, with no evidence of debit notes prepared by MTPL. The Commissioner also noted that advances made to certain units were normal trade practices and recorded in the accounts of both MTPL and the units. The Commissioner rejected the charges of clubbing based on the relationship between MTPL and the units, citing the Tribunal's judgments in Cheryl Laboratories and Alpha Toyo Ltd., which held that common managerial control and supply of raw materials alone do not justify clubbing clearances.

3. Invocation of the Extended Period of Limitation for Demand of Duty:
The Commissioner noted that there was no suppression of facts to justify invoking the extended period. All units had filed their declarations, and one unit had taken out a Central Excise license. The Commissioner observed that the department had issued a similar show cause notice in 1984, which was dropped, indicating that the department was aware of the units' existence and operations. The Commissioner held that the subsequent show cause notice was barred by time, citing the Tribunal's judgment in Neyveli Lignite Corporation Ltd.

Conclusion:
The appeal against MTPL without including the nine units was found to be not maintainable, as per the Tribunal's decisions in similar cases. The Commissioner's findings on the independence of the units, lack of financial flow back, and normal trade practices were upheld. The demand was also found to be time-barred due to the lack of evidence of suppression of facts. The appeal was thus rejected on both procedural and substantive grounds.