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TMI Blog1994 (4) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... no manufacturing activity of its own. The aggregate clearances of the two firms comes to Rs. 20,70,056.30 and penalties have been levied on the various partners of the three firms under Rule 209A of the Central Excise Rules, 1944. 2. The facts of the case are that during the year 1986-87 M/s. Spring Haven who were registered as a SSI unit made clearances to the tune of Rs. 14,96,539.50 till 2-11-1986 and thereafter clearances were made in the name of M/s. Rajamanickam Nadar Industries between 2-11-86 to 31-3-1987 to the tune of Rs. 12,70,219.65 and the third firm M/s. Pagalam came in the picture thereafter. The premises according to the appellants had been given on lease basis by M/s. Spring Haven to M/s. Rajamanickam Nadar Industries. These firms were established to manufacture the same goods, viz. chicory powder. It was found that these firms were constituted as Partnership concerns with the different members of the same family. While proceedings were initiated by the authorities on the ground that the three firms had mutuality of interest and managed by the same group of people and these different firms at different times were set up for the exclusive purpose of manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en and M/s. Rajamanicka Nadar Industries reached Rs. 14,96,539.50 and Rs. 14,10,892/- but this was not against the law. The appellants under the bona fide belief felt that they were acting within the frame work of the Central Excise law and leased out their factory after having reached the limit of total exemption which is available. He pleaded that all the three firms who manufactured the goods in the unit concerned were independent legal entities, duly constituted by Partnership deeds and have to be treated as independent entities. He pleaded that in fact the learned lower authority has treated them so and it is not the case of the Department that the three firms were not independent legal entities. He pleaded, in that view of the matter, therefore, each of them would be entitled to the benefit of the Notification 175/86 based on the certificate issued in the name of M/s. Spring Haven for the unit concerned. He pleaded, the learned lower authority was in error in holding that the SSI certificate issued in the name of a lessor could not be a valid certificate for the purpose of maufacture of the goods by a lessee. He pleaded that the learned lower authority has not appreciated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the visit of the officers, Chicory packed and marked as belonging to M/s. Spring Haven was found in the unit. This, he pleaded, clearly shows that in fact the operations which were being carried out were by the same group of people right from the beginning and did not matter as to whose name the goods were actually sent out. 5. We have carefully considered the pleas made by both the sides. We observe that the issue that falls for our consideration is whether the clearances made during 1986-87 from the unit were by M/s. Spring Haven upto 2-11-1986 and by M/s. Rajamanicka Nadar Industries thereafter and whether the benefit of the Notification 175/86 would be available of M/s. Rajamanicka Nadar Industries based on the SSI certificate issued in the name of M/s. Rajamanicka Nadar Industries. The further question to be decided is whether the demand is time barred. In respect of the year 1987-88 the point that falls for our consideration is whether the clearances during the year have to be held in the name of M/s. Rajamanicka Nadar Industries upto 3-10-1987 and thereafter in the name of M/s. Pagalam Narayana Saraswati; if so whether the SSI certificate issued in the name of M/s. Spr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of each of the firm for the purpose of Notification 175/86. We observe that the concession to small scale industries has been given with a view to encourage the small scale entrepreneurs to be competitive with the large scale units and this benefit is not to be allowed to be used as a means for evasion by doing any paper exercise by creating different firms with a view to take the benefit for clearances in excess of Rs. 15 lakhs, the limit fixed for the purpose for a manufacturer. Taking into consideration the nature of the constitution of the firms it has to be held that there was a convergence and identity of interests so far as the manufacturing operations of the different firms involved are concerned. In a similar context the Hon ble Supreme Court in the case of Mohanlal Maganlal Bhavsar (Deceased) through LRs. and others v. Union of India and others, reproted in 1986 (23) E.L.T. 3 (S.C.) in the context of Section 4 of the Central Excises and Salt Act, 1944 have held as under : The next contention of the Appellants, which was also negatived by the High Court, was that in determining the value of the medicinal preparations for the purpose of levying excise duty thereon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement for lessor and lessee has been entered into between Spring Haven and M/s. Rajamanicka Nadar Industries during 1986-87 when M/s. Spring Haven were about to cross the Rs. 15 lakhs limit, similar agreement has been entered into between M/s. Rajamanicka Nadar Industries and M/s. Pagalam Narayana Saraswathy, when M/s. Rajamanicka Nadar Industries were about to cross the limit of Rs. 15 lakhs during the year 1987-88, yet they did not approach the Directorate of Small Scale Industries for getting the SSI certificate transferred in the names of the respective firms. The SSI certificate continued to be in the name of M/s. Spring Haven. It is pertinent to note that one of the condition for the validity of the SSI certificate is that the constitution of the firm should continue to remain the same. When M/s. Spring Haven ceased to manufacture goods, the question of the SSI certificate being valid for the other two units would not arise and the benefit of Notification 175/86 would not be available to persons other than M/s. Spring Haven. We observe that the learned lower authority notwithstanding his findings that different firms had mutuality of interests and they resorted to the devi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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