1997 (4) TMI 521 - AT - Central Excise

Summary

Issues:
Whether Asclepius Pharmaceutical is a dummy of A.C. Pharmaceuticals.

Analysis:
The lower authority found that Asclepius Pharmaceutical is a dummy of A.C. Pharmaceuticals based on the control exerted by Shri Amal Chakraborty over both companies. The authority noted that Shri Amal Chakraborty, the Managing Director of both companies, controlled the financial and sales aspects of Asclepius Pharmaceuticals as well. It was observed that products of Asclepius Pharmaceuticals were sold through the sales representatives of A.C. Pharmaceuticals, indicating a financial flow between the two entities. However, the appellant argued that mere management control does not warrant designating one unit as a dummy of another, citing a relevant judgment. The appellant also highlighted differences in incorporation details, registration numbers, and licenses for both units, emphasizing their separate identities.

The appellant contended that there was no basis for clubbing the clearances of both units and demanding duty payment. It was argued that penalties on A.C. Pharmaceuticals and Shri Amal Chakraborty were unwarranted due to the lack of sustainable duty demand. The appellant also challenged the denial of SSI Exemption Notification benefits to Asclepius Pharmaceutical from 1986-87 onwards. On the other hand, the respondent reiterated the findings of the lower authority, emphasizing the financial transactions between the two companies and the observed flow of funds from Asclepius to A.C. Pharmaceuticals.

Upon careful consideration, the Tribunal observed that legally, the two companies were distinct entities with separate legal standings. The Tribunal noted that the control exerted by Shri Amal Chakraborty did not suffice to classify Asclepius Pharmaceutical as a dummy of A.C. Pharmaceuticals. Differences in machinery, employees, and financial records of the two units supported the conclusion that Asclepius Pharmaceutical maintained its separate identity. Consequently, the Tribunal set aside the lower authority's finding, the duty demand, the denial of SSI Exemption benefits, and the imposed penalties on A.C. Pharmaceuticals and Shri Amal Chakraborty. All appeals by the appellants were allowed, providing them with consequential reliefs.