1987 (4) TMI 340 - AT - Central Excise

Summary

Issues Involved:
1. Whether the two appellants were independent entities or a single entity.
2. Validity of the demand for duty and the imposition of penalties.

Summary:

Issue 1: Whether the two appellants were independent entities or a single entity

The show cause notice alleged that M/s Navyug Engineering and Trading Corporation (NETC) and M/s Diamond Engineering and Trading Corporation (DETC) were in reality one entity, run by Shri D.D. Malhotra, and that part of the production was falsely shown to be that of DETC to avail the benefit of exemption notification. The Additional Collector and the Central Board of Excise and Customs upheld this view, citing several points:
- Both units were within the same family setup.
- Administrative control was exercised by Shri D.D. Malhotra.
- Use of a fictitious name "B.B. Khanna" by Shri D.D. Malhotra.
- Invoices and records of both firms were written by the same person.
- No machinery for manufacturing brass screws was found in DETC's premises.

However, the Tribunal found these conclusions incorrect. It noted that:
- The two units were legally separate entities with separate Central Excise licenses.
- Statements from Shri D.D. Malhotra and Shri B.B. Khanna were recorded on different dates, proving they were distinct individuals.
- There was no evidence to support the claim that DETC had no machinery.
- The allegation that invoices and records were maintained by the same person was unsupported by evidence.
- Occasional purchases of goods by DETC from NETC were accounted for in NETC's clearances.

Issue 2: Validity of the demand for duty and the imposition of penalties

The Central Board held that the extended period of limitation was not available for demanding duty, restricting the demand to the normal period of 6 months prior to the date of the show cause notice. Consequently, the duty demand was set aside. The Tribunal, agreeing with this view, focused on the penalties imposed. It concluded that no penalties could be imposed on either appellant due to the lack of factual basis for the allegations.

Conclusion:

The appeals were allowed, and the orders of the lower authorities were set aside, resulting in no penalties for the appellants.