9911796707
TMI Blog1995 (12) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... ly a public Limited Company under the name and style as M/s. Paharpur Cooling Towers Limited), having of office at 8/1/B, Diomand Harbour Road, Calcutta-27 and factory at 5A, Oil Installation Road, Calcutta-700088 and holder of Central Excise Licence in Farm L4 No. 35AOC- NES (68) Cal.-Vll/75, dated 26-9-1975 for manufacture of All other goods not elsewhere specific which includes Perma Tower falling under Tariff Item No. 68 of the erstwhile First Schedule to the Central Excises and Salt Act, 1944 and with effect from 28-2-1986 under sub-healing No. 3419.00 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) are alleged to have manufactured (a) 56 Nos. of the said goods valued at Rs. 22,05,083.75/- involving Central Excise of Rs. 2,23,006.00/-; and (b) 39 Nos. of the said goods valued Rs. 16,72,682.90/- involving Central Excise duty of Rs. 2,03,970.50/- (total Central Excise duty involved was Rs. 4,26,976.50/-) during the financial year 1984-85 and 1985-86 respectively through their dummy firm in the name and style of M/s. Unifab Engineers having factory and office at 20B, Chanditala Main Road, Calcutta-53 which was floated by them with on intent to evade payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) The Appellant supplied plant and machinery free of cost to the said firm for manufacture of such Perma Towers. (iii) The appellant supplied raw materials free of cost to the said firm and got manufactured such Perma Towers from the said firm on payment of labour charges. (iv) The Appellant controlled the production and sale of the said firm. (v) The Appellant paid monthly rent of the manufacturing premises of the said firm. (vi) The Appellant paid Income-Tax levided by the Income Tax Department on the said firm. (vii) The Appellant also supplied working capital to the said firm. 5. The Appellant in their reply dated 9-9-1989 to the aforesaid show cause notice denied and disputed the allegation and stated that the said M/s. Uifab Engineers was not their dummy unit/firm and was also not floated by them with the intention to evade payment of duty as alleged, taking the benefit of small scale exemption granted by the Government. They, inter alia, stated follows : (i) M/s. Unifab Engineers, being a partnership firm has its own independent legal entity while M/s. Paharpur Cooling Towers Private Limited is a limited Co. The two are separate and independent legal entitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e did not indicate that the said Company was controlling the said firm s production or programme of work. The Perma Tower so assembled/manufactured were despatched direct from the said firm s premises to the customers without any entry in their factory. (iv) As the said goods as supplied by the said firm were actually manufactured/assembled by them with their own labour, finance etc. in their own premises and were sent direct to the customers, the liability for duty, if any, should be borne by them under Rules 9, 49 and 173G of the Central Excise Rules, 1944. As the transactions were made on principal to principal basis with on independent manufacturer like the said firm, the goods in question are to be treated as purchased or brought but items entailing no further liability for payment of the excise duty by the Appellant. 6. They stated in their reply that M/s. Unifab Engineers Manufactured the goods on their account and they are liable to pay duty. It was also pointed out that the Appellant Company is not supervising their work, nor are they on direct control of M/s. Unifab. It was further pointed out that the monetary transactions which were alleged in the show cause notice, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1987, Bank account, labour, Finance etc. which should entitle it to be considered as on independent unit or entity. 9. He pointed out that the Collector has brought in extraneous issues like alleged monetory transaction with the said firm, an ancillary unit of Appellant according to the agreements made in March, 1979 and October, 1984) viz. loans or advances as requested by it due to its inadequency of running capital which is quite normal for such a unit at the early stages of its operation. Such loans/advances may be exact amounts for payment to Income Tax Department or to the landlord which were adjustable from time to time against the firm s bills to Appellant for its work in the running account maintained for the purpose. Nothing has been given free to the said firm including some working tools and implements like Moulds, Checking stand, Blades and Hubs, files portable Drilling gadget, etc. of nominal value vide statement dated 24-12-1985 of Shri P.K. Banerjee and not plant and Machinery as alleged in the notice. Value of such equipments and tools was also adjusted in the running account. 10. He further submitted that the alleged monetory transactions which have been hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department that M/s. Unifab Engineers is a dumming of the Appellant. 13(b) He, therefore, prayed that the Appeal may be dismissed. 14. We have considered the submissions of both sides. The question for decision in this case is whether for deciding on the entitlement of M/s. Unifab Engineers to the benefit of exemption Notification Nos. 77/83, dated 1-3-1983, 77/85, dated 17-3-1985 or 175/86, dated 1-3-1986 as the case may be, the value of clearances of both M/s. Paharpur Cooling Towers Private Limited and M/s. Unifab Engineers should be clubbed together or not? It is urged by the appellant firm, M/s. Paharpur Cooling Towers that M/s. Unifab Engineers are a separate entity. But the Department is contending that M/s. Unifab Engineers are a dummy firm of M/s.Paharpur Cooling Towers and therefore, they are not eligible for duty exemption under the aforesaid Notifications. It is, therefore, to be decided as to whether M/s. Unifab Engineers are a dummy firm of the appellant firm or not? 15. The main thrust of argument of the learned Counsel, Shri D.B. Desai is to the effect that M/s. Unifab Engineers have a separate management without any sort of connection with the appellant com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Partnership, a new Deed between Smt. Gyan M. Swarup, wife of Sri Mahendra Swarup and Smt. Bindu Swarup, wife of Shri Vikram Swarup, and daughter-in-law of Shri Mahendra Swarup, was executed on 1-6-1982. There was no material change in this Agreement except for equal share of profit and loss amongst the two partners. It is also clear from the impugned order that according to the Serial No. 5 of Terms and Conditions of this Deed, the balance standing to the retiring partner, Shri Gourav Swarup was to be treated as loan in the new Firm without any interest so long as the same is not withdrawn by the said Shri Gourav Swarup. Thereafter, Smt. Gyan M. Swarup, wife of Shri Mahendra Swarup retired and another Partnership Deed was executed on 1-6-1983 between Smt. Parul Swarup, wife of Shri Gourav Swarup, Smt. Asha Khazanchi, wife of Shri Jaising Khazanchi and Smt. Kamala Rai, wife of Shri Raj Narain Rai. According to this Deed, all the partners agreed to take over the partnership business carried on by Smt. Bindu V. Swarup and Smt. Gyan M. Swarup under the name and style of M/s. Unifab Engineers. 17. It was, in this connection para 3.5(c)(ii) of the show cause notice, mentioned that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the daughters-in-law and another son of Shri Mahendra Swarup, came into existence just after introduction of the exemption to Small-Scale Industries based on value of clearance and investment on plant and machinery under Notification No. 176/77 on 18-6-1977 and was executed only to avail of the benefit of the said Notification and that from time to time, the partners have undergone changes as mentioned above only to create the impression regarding the independent character of the partnership business so as to remove any apparent connection between the management of M/s. Paharpur Cooling Towers Private Limited Company and the Partnership Firm, M/s. Unifab Engineers and for establishing eligiblity to the benefit of exemptions allowed to the Small-Scale Industries. 21. The above constitution of the Partnership Firm, M/s. Unifab Engineers in this case under the circumstance mentioned above, is one of the factors which is very relevant for deciding whether M/s. Unifab Engineers is only a dummy of the appellant firm or not? 22. The next circumstance which is available on record is that the Partnership Firm, M/s. Unifab Engineers was reconstituted first on 1-6-1982 by retiring on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, it is not a separate entity. It is also significant to note that M/s. Unifab Engineers have at no time got themselves impleaded in the proceedings. It cannot be said that M/s. Unifab Engineers are not aware of these proceedings. The reason is that all the partners in the Partnership Firm, M/s. Unifab Engineers, are connected either to the Directors or to the employees of the appellant firm. 25. The Partnership Deed of M/s. Unifab Engineers in this case has recited that the business of the Firm shall be the manufacturing and selling of engineering goods and other corresponding works as being contractors, suppliers and agents or Principals for supply of such engineering goods, as per decision being taken by the partners. But in fact, the Partnership Firm was engaged only in the manufacture of Perma Towers on behalf of, and out of raw materials supplied by the appellant firm and against payment of labour charges. The manufacturing activities of M/s. Unifab Engineers were carried on with the machineries and equipments of the appellant firm which supplied them free of cost. But we find that there is no proof of actual payment in this behalf. But it was contended by the learned Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. This is another strong circumstance which is in favour of the Department showing that M/s. Unifab Engineers are only a dummy firm of the appellant company. 27. The next circumstance available is that the appellant firm had supplied raw materials and got the final products manufactured for Perma Towers from M/s. Unifab Engineers, on its own account and they paid the labour charges accordingly. The machineries or tools as the case may be, were also supplied by the appellant firm. The partners of M/s. Unifab Engineers are either related to the Directors or the employees, of the appellant firm. The wives of the employees of the appellant firm are also partners and their profit and loss was proportionate to only 5%. It is on this count, the Department has contended that in order to create an impression that it is a separate entity, the wives of the appellant firm were taken as partners with a meagre entitlement or liability of 5% towards the profit and loss respectively. This case of the Department in the facts and circumstances, narrated above, has great force. Further there is also no proof to show whether this 5% profit was actually paid to the wives of those two employees of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above circumstances and facts clearly indicates that the money belongs to the Directors of the appellant firm and from time to time, they were made partners in M/s. Unifab Engineers and no evidence is produced to show that any one of them have invested any money as Share Capital. Therefore, taking into consideration, the overall circumstances as well as the evidence in this regard, the cumulative effect of all the above evidence indicates the irresistible conclusion that M/s. Unifab Engineers are only a dummy Concern of the appellant firm herein and the finding of fact to this effect arrived at by the learned adjudicating authority, is in accordance with law. In that view of the matter, his finding that the clearances made by M/s. Unifab Engineers during the periods-1984-85 and 1985-86 - were for and on behalf of M/s. Paharpur Cooling Towers, the appellant firm herein, is in accordance with law and accordingly, the demand of duties in the impugned order to the extent of Rs. 2,23,006.00 for the financial year, 1984-85 and Rs. 2,03,970.50 for the financial year, 1985-86 respectively is hereby confirmed and the imposition of penalty of Rs. 2.00 lakh being in order is also confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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