1987 (9) TMI 281 - AT - Central Excise

Summary

Issues: Determination of whether two firms, M/s. Kinjal Electricals Pvt. Ltd. and Naveen Enterprises, are a single entity in law for the purpose of excise duty payment and benefit eligibility.

Summary:
The case involved a notice issued to M/s. Kinjal Electricals (P) Ltd. regarding the creation of M/s. Naveen Enterprises to evade excise duty. The authorities concluded that the two firms were one entity, leading to the appeal against this decision.

The main issue revolved around whether the two firms were indeed a single entity in law, with the Department alleging that M/s. Naveen Enterprises was created solely for tax evasion purposes. The lower authorities upheld this view based on various physical and operational factors.

The Assistant Collector's reasons included the lack of demarcating walls between the buildings, shared office space and telephones, common guard and power meters, among others. The Collector also supported this view, emphasizing the shared machinery and lack of financial independence between the firms.

However, upon review, the appellate tribunal found that the evidence did not conclusively prove the firms were one entity. The tribunal highlighted the lack of financial flowback between the firms and separate dealings with government departments as indicators of distinct legal identities.

Ultimately, the tribunal concluded that the lower authorities erred in treating the clearances of both firms as belonging to a single entity. The appeal was allowed, and the orders of the lower authorities were set aside.