1990 (11) TMI 243 - AT - Central Excise

Summary

Issues:
(A) Whether the Unit of M/s. P.J. Texdyes can be clubbed with the appellants unit on the grounds mentioned in the show cause notice.
(B) Whether the appellant firm have by reason of fraud and wilful suppression of facts wrongly availed of exemption of duty under Notification No. 71/78, with intent to evade the duty.
(C) Whether the appellant have manufactured any unaccounted dyes in the years 1978-79 and 1979-80 and liable to pay any duty on it.

Issue (A):
The Appellate Tribunal considered the relationship between the partners of the appellant firm and the proprietor of M/s. P.J. Texdyes, the proximity of the premises, sharing of technical staff, and maintenance of shiftwise notebooks. It was observed that both units operated with separate machinery, equipment, power, and workers, maintaining distinct statutory records. The Tribunal found no evidence to establish the manufacture of unaccounted dyes. Despite the clubbing of clearance values for exemption eligibility, the Tribunal held that the appellant was not entitled to exemption under Notification No. 71/78 due to exceeding the prescribed limit, thus liable to pay duty on the entire clearance value.

Issue (B):
The Tribunal analyzed the facts related to the alleged fraud and wilful suppression of facts by the appellant firm in availing duty exemption under Notification No. 71/78. It was noted that there was no prohibition against a blood relative of a partner starting a similar business. The Tribunal emphasized that both units operated independently, purchasing raw materials separately, maintaining separate records, and having no financial flowback between them. Relying on precedent, the Tribunal concluded that without evidence of common funding or financial flowback, it cannot be assumed that the two firms are not distinct. Consequently, the impugned order was set aside, and the appellants were deemed entitled to the exemption under Notification No. 71/78.

Issue (C):
Regarding the alleged manufacture of unaccounted dyes by the appellant, the Tribunal found no conclusive evidence to support this claim. The investigation revealed separate premises, machinery, and operations for M/s. P.J. Texdyes, with no irregularities noted during inspections. The Tribunal's decision to allow the appeal with consequential relief was based on the lack of proof linking the appellant to the manufacturing of unaccounted dyes, thus upholding the appellant's entitlement to the duty exemption under Notification No. 71/78.