1999 (7) TMI 223 - AT - Central Excise

Summary

Issues Involved:
1. Clubbing of production of three units.
2. Constructive res judicata.
3. Mutuality of interest and dummy units.

Summary:

1. Clubbing of Production of Three Units:
The issue pertains to the clubbing of production of three units: M/s. Supreme Washers (P) Ltd., M/s. L.D. Industries, and M/s. L.R. Industries (P) Ltd. The Collector of Central Excise, Pune, confirmed a duty demand of Rs. 14,92,190.99 against M/s. Supreme Washers (P) Ltd. and imposed penalties on the three entities. The Collector found that the three units had mutuality of interest through common control by Shri S.L. Raheja, common procurement of raw materials, interdependence in manufacturing operations, and common marketing arrangements. The Collector concluded that the production and clearances of the three units should be clubbed for computing their duty liability and for claiming benefits of Notification No. 175/86.

2. Constructive Res Judicata:
The appellants argued that the show cause notice dated 28-8-1989 relied on the same evidence as an earlier adjudication order dated 13-6-1989 by the Additional Collector, which held that only M/s. L.D. Industries and M/s. L.R. Industries were to be clubbed. They contended that the principle of constructive res judicata should apply, preventing the Department from issuing a further show cause notice. However, the Tribunal found that the earlier order did not consider the inter-se relationship between all three units and thus, the plea of constructive res judicata did not apply.

3. Mutuality of Interest and Dummy Units:
The appellants contended that mutuality of interest is relevant only for the valuation of excisable goods and not for determining dummy units. They argued that the Collector's findings of common raw-material procurement, free heat treatment, machinery sharing, and fund transfers were not supported by reliable evidence. The Tribunal, however, held that mutuality of interest is relevant when considering whether one manufacturer is producing and clearing goods for another. The Tribunal found that the cumulative factors, including financial flow back, common procurement, and shared facilities, established mutuality of interest between the units. The Tribunal upheld the Collector's findings and confirmed the penalties imposed.

Conclusion:
The Tribunal dismissed the appeals, confirming the clubbing of production and clearances of the three units based on mutuality of interest and rejecting the plea of constructive res judicata.