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TMI Blog1996 (12) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... s - 600 034 (hereinafter referred to as CBA) by the Officers of Head Quarters Preventive Group, Madras for the alleged evasion of Central Excise Duty. In pursuance of the intelligence gathered that M/s. CPI and CBA are evading Central Excise duty, the Officers of HPU, Madras visiting the factories and office premises of both M/s. CPI and M/s. CBA on 23-11-1991 on preliminary perusal of documents and enquiry it appeared that : (a) Both M/s. CPI and CBA are engaged in the manufacture of Cisterns and their internal mechanism, using the brand name `DURALITE which was stated to be owned by CPI, and they are availing the benefit of Notification No. 175/86, dated 1-3-1986 as amended, (b) Though M/s. CPI and CBA are registered as two separate limited companies, they are managed by the same set of persons, (c) Only M/s. CPI was found to have independent marketing set up in respect of the goods manufactured by them and this is being made use of by M/s. CBA. (d) During the year 1990-91 M/s. CPI had first cleared the said goods valued to the tune of Rs. 74.87 lakhs till January 1991 and M/s. CBA started clearing the said goods from January 1991 onwards. A statement was recorded fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91, it was noticed, under the heading B Notes Forming part of the Accounts a paragraph reads as follows : A sum of Rs. 7,62,907/- was paid for providing the necessary administrative set up, sales force, financial assistance and moulds and dies for manufacture during the said period. From the foregoing it appeared that M/s. CPI CBA are to be treated as single entity, and under the circumstances the value of clearance made by M/s. CBA during the relevant period are to be clubbed with those made by M/s. CPI and the benefit of Notification No. 175/86 is to be granted accordingly as if the clearances were made by one manufacturer i.e. M/s. CPI from one or more factories. On verification of records, it was noticed that during the year 1990-91 and 1991-92 the total value of clearance of the said goods made by CPI and CBA were as follows :- Year Total Value of Clearance of CPI Total Value of Clearance of CBA 1990-91 Rs. 74,86,893.81 Rs. 34,80,239.67 1991-92 Rs. 57,81,259.39 Rs. 95,57,137.50 (Upto 10/91) Therefore, from the foregoing it appeared that for the year 1990-91 and 1991-92 M/s. CPI i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the mere fact that these two appellants are having common Directors is not a ground to hold that these are one and the same. In this connection he relied on the following decisions : (i) 1989 (43) E.L.T. 327 in the case of Kinjal Electricals Pvt. Ltd. v. CCE. (ii) 1989 (40) E.L.T. 95 in the case of Sakti Engineering Works v. CCE. (iii) 1994 (71) E.L.T. 689 in the case of Alpha Toyo Ltd. v. Collector of C.E. He pointed out that the learned Collector did not apply the ratio of the above decisions. It was further pointed out that the Collector s finding based upon the use of common brand name is not sustainable in law in view of the fact that Para 7 of the Notification at the relevant point of time did not disentitle the assessee to the benefit of notification in cases where the brand name used by one unit was also used by another unit. There is nothing illegal in this. He therefore stated that on this ground the clubbing is not permissible. 3. He further pointed out that the findings of the Collector that CBA did not have its own marketing facility and depended upon M/s. CPI and therefore the clearances of both the units are to be clubbed is not correct. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (62) E.L.T. 313 in the case of Swastik Engg. Works. v. CCE. (ii) 1985 (19) E.L.T. 441 in the case of Jagjivandas and Co. v. CCE. He further pointed out that since M/s. CBA was an independent bonafide unit and it can always stop its clearances before Rs. 75.00 lakhs and for that it cannot be inferred that M/s. CPI started clearing after that limit and therefore they are to be clubbed together. There was no deliberate attempt on the part of M/s. CBA to stop the clearances upto Rs. 75.00 lakhs. 4. Merely because the administrative office of these companies function from the same premises there cannot be any inference in law that the clearances by both the units can be clubbed together. In this connection he relied on the following decision : (i) 1985 (19) E.L.T. 441 in the case of Jagjivandas and Co. v. CCE. He also relied on the decision of the Hon ble Supreme Court in the case of U.O.I. v. Polyworld Electronics Ltd. reported in 1989 (41) E.L.T. 368 and contended that corporate veil can be lifted in justifiable cases of tax evasion but the true nature of the transactions as a whole should be considered before resorting to such course of action. He therefore stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to arrive at a finding. The cumulative effect of all the evidences available in the present case are to be taken into consideration to arrive at a finding of facts in this regard. 7. In the first instance it is seen that M/s. CPI and M/s. CBA had been floated by the same family and have common Directors. These facts have not been disputed. This fact alone is not sufficient to conclude that they are one and the same. Another factor is that when M/s. CPI has cleared the goods worth Rs. 74.00 lakhs the firm M/s. CBA was floated. It is no doubt true that this fact alone is not sufficient to conclude that these are one and the same. However this is also a relevant factor which requires to be taken into consideration. 8. Another factor is that these are not Public Limited companies. They are Private Limited companies. Both these units manufacture and clear the same items like Cisterns and components during the material period with the same brand name. This is the third factor which is emerging from the facts available in this case. 9. The fourth factor is that these two companies shared a common administrative office and also had common marketing and distribution infrastructu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses incurred by them. The above fact of arbitrary division of total expenditure of administrative, marketing and distribution, purchase of raw materials, maintenance of funded and interest-free current account by one over the other are ample factors which show the mutuality of interest in between these two firms and the financial flow back between them. 13. Another factor is that in the Notes Forming Part of the Accounts annexed to the letter dated 7-10-1994 addressed by M/s. CPI to M/s. CBA there is a repeated admission of the Directors that they are interested parties. This point was discussed by the adjudicating authority and for convenience of reference para 26 is reproduced below : It is also seen from the `Notes Forming Part of the Accounts annexed to the aforesaid letter dated 7-10-1994 to M/s. CBA that there is repeated admission of the Directors of M/s. CBA being interested in M/s. CPI. For instance, para 1 states, `Sundry Creditors for expenses includes ...... payable to M/s. CPI, a company in which Directors are interested . Para 2 reads, `Sundry Creditors for others includes ..... payable to M/s. CPI, a company in which Directors are interested . Further par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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