1992 (1) TMI 358 - Other - Central Excise

Summary

Issues Involved:

1. Alleged wrong availment of exemption under Notification No. 175/86-CE.
2. Whether Noticee No. 1, 2, and 3 are separate entities or dummy units.
3. Applicability of extended period of limitation due to alleged suppression of facts.

Detailed Analysis:

1. Alleged Wrong Availment of Exemption:

The primary issue revolves around the alleged wrongful availment of exemption under Notification No. 175/86-CE dated 1.3.1986 by Noticee No. 1, 2, and 3. It was alleged that these three units were essentially one and the same entity, and the total value of their products, when clubbed together, disqualified them from the exemption. The case argued that Noticee No. 2 and 3 were dummies created by Noticee No. 1, orchestrated by Shri Ashok Agrawal (Noticee No. 4), to avoid central excise duty.

2. Whether Noticee No. 1, 2, and 3 are Separate Entities or Dummy Units:

Upon examining the evidence, it was found that Noticee No. 1, 2, and 3 are independent entities. Each unit was registered with the District Industries Centre, Hoshangabad, as a Small Scale Industry and was separately assessed for Income Tax, Sales Tax, and Central Sales Tax. They were also allotted raw material quotas by the M.P. Laghu Udyog Nigam and filed separate declarations and returns with the Central Excise Department. There was no substantial documentary evidence, continuous conduct, or irrefutable statements to conclude that these units were not distinct but merely created to circumvent the law.

3. Applicability of Extended Period of Limitation:

The judgment highlighted that there was no proof that Noticee No. 2 and 3 were dummy concerns or camouflaged for Noticee No. 1. The units possessed the necessary machinery for manufacturing coolers and functioned independently. Previous inspections by Central Excise Officers in 1988 and 1989 confirmed the independent existence and manufacturing activities of these units. The panchnama drawn on 26.6.1989, which was not relied upon in the show cause notice, indicated that Noticee No. 1 had the necessary machinery for manufacturing coolers.

The judgment referenced several case laws, such as the Appellate Tribunal's ruling in the case of AROMA Apparels, Bombay, and Jagjivan Das & Co., Thane, which supported the notion that mere suspicion or circumstantial evidence like common premises, telephone, or brand name usage does not conclusively establish that one unit is a dummy for another.

Conclusion:

The judgment concluded that Noticee No. 1, 2, and 3 are separate and independent entities, and their clearances cannot be clubbed for charging Central Excise Duty. The charge that Noticee No. 2 and 3 are dummy concerns of Noticee No. 1 failed. It was also established that the manufacturing activities of these units were known to the Central Excise Department, and there was no suppression of facts. Therefore, the extended period of limitation was not applicable, and the demand for duty was time-barred.

Order:

The show cause notice bearing F. No. V (CH. 48) 15-1/90/Adj. I dated 1.6.1990 was set aside, affirming that Noticee No. 1, 2, and 3 are separate and independent entities, and the clearances of their products cannot be clubbed for charging Central Excise Duty.