2000 (3) TMI 293 - AT - Central Excise

Summary

Issues: Clubbing of clearances under notification 175/86 for three firms - SGPL, Classic, and Trinova.

Analysis:
1. The Commissioner found that SGPL was manufacturing goods excisable by Classic and Trinova, directing clubbing of clearances exceeding the limit under notification 175/86, demanding duty, interest, and imposing penalties.
2. The advocate for the appellants argued that the firms had different constitutions, with SGPL and Classic as private limited companies and Trinova as a partnership firm. They contested the Commissioner's inferences from the project report and lack of facilities at Trinova for carton manufacture.
3. The departmental representative emphasized the Commissioner's reasons for concluding that the Shetty brothers created the firms to benefit from the notification, citing relevant case laws.
4. The constitutions of SGPL, Classic, and Trinova were detailed, showing familial connections but disputing direct control by the Shetty brothers as concluded by the Commissioner.
5. The control and management of the firms were analyzed based on statements from directors and partners, indicating professional involvement in day-to-day affairs and crucial decision-making.
6. The Tribunal highlighted that day-to-day management by professionals does not equate to control by individuals or families, citing relevant case law.
7. The pattern of stock holding and partnership alone does not establish control, referencing a relevant judgment from the Rajasthan High Court.
8. The shared office space at Raja Industrial Estate was acknowledged, but the Tribunal noted that sharing office space alone is insufficient to justify clubbing, citing precedents.
9. The lack of machinery at Trinova for printing cartons was discussed, with the Tribunal finding that outsourcing printing does not warrant clubbing.
10. The Commissioner's reliance on a project report indicating Trinova as an expansion of SGPL was countered, citing precedents that such claims do not establish control for clubbing.
11. An interest-free loan from SGPL to Classic was disputed, with insufficient evidence to conclude on the interest aspect, and the Tribunal found this claim inconclusive for clubbing.
12. An investment and guarantee by SGPL for Trinova and Classic's loans were addressed, with the Tribunal finding no conclusive evidence to support clubbing based on these transactions.
13. The diversion of an order from Classic to SGPL was analyzed, with the Tribunal concluding that it did not establish Classic as a dummy firm.
14. The lack of evidence for common marketing networking and pricing policy was noted, and the proximity of units alone was found insufficient for clubbing.
15. Precedents where clubbing was justified based on common sales network and financial inter-relationship were discussed, but the Tribunal found no such evidence in this case.
16. A Tribunal decision emphasizing common control of production and sales or financial relationships for clubbing was referenced.
17. The absence of common control of production and sales or management was highlighted based on statements from involved parties, leading to the rejection of clubbing.
18. The activities of Colorica were separately considered, with the Tribunal determining that its operations did not constitute manufacturing, thus not warranting inclusion in SGPL's clearances.
19. The Tribunal concluded that clubbing was not established, allowing the appeals and setting aside the Commissioner's order.