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TMI Blog1991 (1) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The other order of the Collector against which the appeal No. E/2T70/90-C has been preferred, is dated 10-4-1990 by which he had demanded a duty of Rs. 12,78,098.47 for the period from April, 1987 to February, 1989 which is subsequent to the period covered by the earlier order, from the appellants, Vivomed Laboratories. 2. The facts leading to the appeal briefly are that the appellants, Vivomed Laboratories ( Vivomed ), Masiha Medica ( Masiha ), Sinkhai Synthetic Chemicals ( Sinkhai ), it is alleged by the Department, are manufacturers of P or P Medicines falling under Chapter 30 of the Schedule to the Central Excise Tariff Act, 1985. The technical knowhow and the product formulation were obtained by these units from M/s. Medley Laboratories Pvt. Ltd., Bombay and according to the Department, the goods were also marketed by M/s. Medley Labs. through the distributing agencies which are partnership firms. M/s. Medley Labs. is, basically, a research and development centre. On a reasonable belief that the three units, namely, Vivomed, Sinkhai and Masiha are evading Central Excise duty by suppressing the fact that they have mutual interest in the business of each other and also wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 31-7-1989, remanded the case to the Collector on the ground that opportunity for personal hearing had not been extended and directed the Collector to decide the case afresh after hearing the appellants in the matter. Accordingly, the appellants herein, were offered personal hearing by the Collector. After considering the submissions made, the Collector adjudicated the case afresh by the order dated 27-9-1989 which is presently challenged before the Tribunal. The other order of the Collector was only a further logical extension of this order by which duty was being demanded for a subsequent period. 3. Sh. S. Ganesh, the Ld. Counsel appearing for the appellants, submitted that the Collector s order is bad in law both on the grounds of limitation and also on merits. The Ld. Counsel pointed out that a show cause notice has been issued for a period beyond six months for demanding duty under Sec. 11A. According to the appellants, there can be no ground for alleging suppression of facts by the appellants. In this connection he pointed out that the period for which the duty has been demanded is between March, 1982 to February, 1987 for which the show cause notice had been issued on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm which had been raised in the show cause notice leading to the impugned order. Secondly, the Ld. Counsel contended that there is no question of suppression of facts by the appellants (Vivomed). As regards the other appellants, namely, Masiha and Sinkhai, they had also applied and obtained the Central Excise licence and duly submitted the classification lists in which they had enclosed labels which show that they are part of the Medley group of companies and after satisfying themselves, the Department had approved the classification lists and, therefore, there will be no case for alleging suppression of facts, according to the appellants. The Ld. Counsel, in this context, relied upon the decision of the Supreme Court in the case of Collector of Central Excise, Hyderabad v. Chemphar Drugs and Liniments -1989 (40) E.L.T. 276 wherein it has been held that the demand under Sec. 11A could not be extended beyond six months in cases where it could not be said that the manufacturer has withheld any information about the drugs manufactured by them deliberately. Something positive other than mere inaction or failure on the part of manufacturer is to be proved and conscious or deliberate w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en placed on certain financial transactions, between the firms without charging of interest. However, it was pointed out that none of these transactions were in the nature of long-term loans and where it exceeded a period of three months, interest had been charged. The Ld. Counsel, further, cited the following case law to show that even where there is certain aspect of commonality and pooling of resources among firms, it has been held in the orders by the Tribunal that there can be no clubbing of clearances : (i) 1983 (14) E.L.T. 1994 (T) - G.D. Industrial Engineers v. CCE, Chandigarh. (ii) 1985 (19) E.L.T. 441 (T) - Jagjivan Das Co. v. CCE, Bombay. (iii) 1987 (32) E.L.T. 204 (T) - Bhagwan Das Kanodia v. C C.E. (Bom.). (iv) 1989 (43) EUT 320-Swastic Metal Works v. CCE (v) 1990 (47) E.L.T. 635 - Annapurna Mills v. CCE . 4. The Ld. Counsel referred to the case law and contended that the Tribunal had held that where the units are two distinct entities, they are not to be treated as one even if there are common or related persons in management and having inter se relationship and sharing of storage and telephone facilities and common personnel, and the clubbing is upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Medley Pharmaceuticals. He also, in this connection, referred to the reasoning of the Collector in his impugned order rebutting the claims of the appellants. The fact that the classification list had been approved, will not be a bar for demanding short levied duty based on certain information regarding inter-linking of the appellants firms which the Department discovered only on visiting their units and on scrutiny of the documents recovered. Therefore, there was suppression justifying demand for a period beyond six months under Sec. 11A of the Act. As regards the merits of the case, the Ld. DR pointed out that there is evidence on record to show that the two appellants, Sami Khatib and Sohel Khatib are the persons really in control of the units as has been brought out by the Collector in his order. The firms, Masiha and Sinkhai have been promoted by Sami Khatib and in this connection, the Ld. DR referred to the documentary evidence showing the control of all the units by Sami Khatib and the financial and other interests of each other among them. The application for term loan submitted to the Maharashtra State Financial Corporation, by M/s. Masiha dated 11-2-1986 in Column 1.06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maceuticals and is Executive President of M/s. Vivomed and therefore, the question of clubbing the clearances has to be considered. On obtaining the reply from the appellants, M/s. Vivomed, saying that they are separately registered with the Registrar of Companies, Bombay, having their own land, plant and machinery and staff also denying any connection with Medley Pharmaceuticals as they have their own registration certificate, separate factory licence and Central Excise licence as well as Sales Tax registration, the Department seems to have carried out investigations and the classification list, submitted by the appellants, Vivomed, had been duly approved. Again on 28-5-1984, there was query by the Superintendent asking to know whether Vivomed have any other unit or proprietary interest in other units manufacturing these specified goods and the letter also says from the label of the product GROMIN, it appears that the said product is manufactured by Vivomed Lab. Pvt. Ltd. as well as Medley Pharmaceuticals Pvt. Ltd. Please clarify whether these units have any proprietary interest in each others business . The reply was also considered in which they denied having any proprietary in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial institutions like Maharashtra State Financial Corporation. The units also have been registered separately under the various Acts, like Income-tax Act, Sales Tax and separate Central Excise licences which have been granted after approval of the ground plan for the premises. No doubt, certain features are noticeable to show that Sami Khatib and Sohel Khatib have an over-all say in policy matters in the Medley Group of Companies. But that by itself may not be a criterion for clubbing the clearances of these firms because of the fact that the personnel discharging various functions, administration, production, in each of the firms, is not the same. There is also no conclusive evidence regarding financial flow back among these firms. In the case of Kinjal Electricals v. CCE -1989 (43) E.L.T. 327, this Tribunal had emphasised that the question whether two firms were independent would depend much on the question whether they have separate legal entities and functioned independently of each other though they may have transactions among themselves. One of the primary considerations for a resolution of such a dispute would be whether there was any financial flow back from one to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the evidence of common purchase of yarn, common source of funds, etc. and were held to be ineligible for exemption. The Tribunal noted that the units had been treated by the Income-tax authorities as separate assessees. They were registered separately under the Central Sales-tax Act and they had separate tax mark from Textile Commissioner as well as separate electric connections, besides, separate Central Excise licences. The Tribunal in this case held that there was no justification for the conclusion of the lower authorities that though the four units were separate legal entities they created a separate fifth entity akin to a consortium (which is similar to an unregistered partnership) is not correct. The Tribunal held that the four units were functioning independently though there was some amount of pooling of resources but with separation of benefits and liabilities periodically and adjustment of accounts. From the facts surrounding the units involved in the present appeal before us, the criteria adopted by the Tribunal would be applicable. In the same decision, the Tribunal observed that to establish the case against the appellants for imposing duty liability on them, someth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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