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TMI Blog1998 (2) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1 lakh on SD 1110/85-A M/s. Luna Dye-chem (for short, LD 3. Penalty of Rs. 1 on LD ) 4. Duty of Central Excise at the appropriate rate under erstwhile T.I. 14D should be levied and collected on Synthetic Organic Dyes valued at Rs. 73,88,950.32 on the basis that prices charged by UC from buyers at the final stage of transaction as mentioned in para 3 of the show cause notice illicitly manufactured and removed during 1978-79 and 1979-80 was the real assessable value invoking the proviso to Section 11A(1) of the Central Excise Act, 1944. 468/90 UC Period : 1978-79, 79-80 and 1980-81 Show cause notice : Dated 27-2-1982 Demand of Rs. 2,46,488.29 confirmed under Section 11A of the Act Period : 1-4-1981 to 31-3-1982 Show Cause Notice : dated 27-2-1982 2. The three concerns referred to above are partnership firms engaged in the manufacture of Synthetic Organic Dyes (for short, SOD) having their factories situated in the same premises and holding separate Central Excise licences. They were clearing the goods on payment of Central Excise duty on approved prices. Each of the concerns was availing benefit of SSI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Some of the employees of UC were working for the benefit of SD and LD. Cheques of SD and LD were written by J.P. Goenka ostensibly on the instructions of his wife who was ostensibly looking after those concerns. Some employees of SD were actually sitting in the premises of UC and attending to work. Hence, the clearances of UC and the clearances shown as having been made by SD and LD must be regarded as clearances by a manufacturer and clubbed. In this view, each of the concerns is not entitled to exemption to the extent of Rs. 5 lakhs. Out of the whole clearances in the names of the three concerns, only clearances of the value of Rs. 5 lakhs are exempt and duty should have been paid on the excess clearances. Duty reckoned on this basis is payable. 4. Diaries of 1977 and 1979 were seized from the residence of Shri J.P. Goenka. The figures shown in the diaries were the accounts of batches of dyestuff manufactured and cleared by UC. This is clear from the fact, that figures of export shown in the diaries tallied in most cases with the clearances for export disclosed in the excise records of UC. Entire quantity of SOD shown in the diaries as manufactured was not shown therein as dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /90-A. 7. Three aspects arise for consideration in these appeals : (a) Whether clearances in the names of all the concerns during the years 1978-79, 1979-80 and 1980-81 can be treated as made by a manufacturer for the purpose of Notification No. 71/78 and clubbed. (b) Whether the Collector was justified in adopting the sale price in the last sale by the manufacturer and not the sale price in the first sale, as the basis for determination of assessable value. (c) Whether UC had made any clandestine clearances as alleged. (d) Whether show cause notice in regard to the year 1981-82 was barred by time. 8. The particulars of and relationship among partners of the three concerns are as follows :- Concern Partners Relationship Person managing UC (1) J.P. Goenka J.P. Goenka (2) G.P. Birla (HUF) (3) Gayitri Devi Birla Mother of G.P. Birla and wife of B.P. Birla (4) Shrikant Benefit Trust established by J.P. Goenka s father - Trustee is J.P. Goenka - Beneficiary is Shri-kant s/o J.P. Goenka SD (1) B.P. Bir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -ditto- -ditto- Jupiter Dyechem (Trust) -ditto- -ditto- Hema Trading Corporation Residence of V.P. Patel,Chemist of UC Proprietor is Mrs. Hemalata V. Patel. w/o V. Patel Sonal Dyechem -ditto- -ditto- Eclat Entra Corporation - Trustee V. Maheshvar, close relation of J.P. Goenka Prabhadevi Cor-poration - Partners close relations of J.P. Goenka 12. The other circumstances emerging in the case are :- (a) SD and LD are located in a part of the premises of UC, on monthly rental. (b) Trading concerns referred to in the preceding paragraph were under the direct control of J.P. Goenka. (c) SOD cleared in the names of UC, SD and LD were shown to have been sold to some of the trading concerns referred to in the preceding paragraph. (d) Most of the raw materials, machinery and empty drums were shown to have been purchased by SD and LD from UC. Receipt of these articles were acknowledged by J.P. Goenka or V.P. Patel. (e) J.P. Goenka admitted that sometimes marks on drums containing SOD were obliterated and replaced by marks of UC. (f) L.C. Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elivered the goods to M/s. Uma Traders. (o) B.S. Shah, Proprietor of M/s. Prabhadevi Corporation stated that he has purchased and sold SOD to J.P. Goenka. 13. Learned Counsel for the appellants contended that the circumstances established are not sufficient to hold that UC, SD and LD are not independent units and to hold that they must be regarded as one unit or a manufacturer as contemplated in the exemption notification. He stressed that revenue has no case that sales of raw materials and machinery by UC to SD and LD were not for consideration. He also stressed that premises involved are different and SD and LD are using parts of premises of UC on rental arrangement and not gratis. Relying on the decision in J.N. Marshall Pvt. Ltd. - 1997 (96) E.L.T. 149 (Tribunal), he contended that there is no evidence of financial control on the part of UC over SD or LD or financial flow from UC to SD and LD or vice versa and hence clubbing cannot be resorted to. The Revenue rebutted these submissions and contended requisite conditions warranting clubbing have been established. Analysing various decisions referred to, the Bench in J.N. Marshall Pvt. Ltd. observed as follows :- ....... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tner is Shrikant Benefit Trust, established by J.P. Goenka s father with his son Shrikant as the beneficiary. SD was set up in April, 1978, with B.P. Birla, father-in-law of J.P. Goenka as one of the partners and Lakshmikant Benefit Trust as another partner. This trust was set up by J.P. Goenka s father-in-law, with wife of J.P. Goenka as trustee and Lakshmikant S/o J.P. Goenka as beneficiary. Three months later, LD was set up with H.K. Sabu and Priyanka Benefit Trust as partners. The trust was established by J.P. Goenka s father-in-law, with J.P. Goenka and his wife as trustees and Priyanka, daughter of brother-in-law of J.P. Goenka as beneficiary. SD and LD are ostensibly under the management of J.P. Goenka s wife as power-of-attorney holder of the trusts. The dealings of the three concerns were with a few selected trading concerns. Venus Dyechem and Century Traders, supposed to be under the management of J.P. Goenka s wife operate in the residence of J.P. Goenka. Uma Traders, Veekay Enterprise and Vijay Trading Corporation of which the proprietors are wife and brother of L.C. Kedia, employee of J.P. Goenka operate in the residence of L.C. Kedia which UC had obtained on lease Jup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed. 16. We now turn to the dispute about valuation. According to the sale pattern disclosed and admitted, three concerns sell their manufactured SOD to a limited number of trading concerns (specified in paragraph 11 supra) at the declared prices. These sales are styled first in the show cause notice and impugned order. The traders, in turn, purported to sell SOD to UC at higher price. In some cases, there were other intermediate sales from one trading concern to another at higher price and finally sold back to UC. The sales can be illustrated thus : UC First Trading Sale to Trading Sale to SD sale to concern concern - UC LD - A - B last sale to independent wholesalers According to the Revenue, almost all these trading concerns were paper concerns brought into existence by J.P. Goenka and there was no physical movement of goods from the manufacturer to the trading concerns and back to UC and the transactions were make-believe, manipulated to suppre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the premises of Uma, i.e., his residence. He referred to various transactions and admitted that the second sale was either on the same day as the first sale or immediately thereafter. Many of the records of several trading concerns were found in a file at the residence of J.P. Goenka. All the trading concerns were situated in Ahmedabad. Since the later part of the subject period, the manufacturing units are situated outside Ahmedabad. Movement of goods across the limit of Ahmedabad Corporation is subject to payment of octroi. None of the parties was able to show payment of octroi on goods ostensibly sold by UC, SD and LD to trading concerns and the sale back to UC. This clearly leads to the inference that there was no physical movement of goods across the octroi border as a result of the transaction which clearly shows that the transactions were paper transactions. 18. The reply to the show cause notice dated 27-2-1982 denied that the goods sold by the manufacturer were received by them in the same condition without any processing. It was further stated that dyestuff is manufactured by coupling two or more different primary or secondary amines and other chemicals under control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g by the averments in the reply to the notice it is clear that UC has technical knowledge, experience and infrastructure to carry out the processes referred to above. That being so, it is difficult to accept that UC sold goods without carrying out any or more of the processes of Toning, Standardising, Improving, Stability and Solubility or Dilution. Hence, there was no occasion of any of the purchasing trading concerns to carry out any of these processes again and resell the goods to UC. The affidavit of J.P. Goenka, who was most interested in the result of the case cannot carry any weight, particularly in the absence of any corroborative evidence. 20. Apart from offering the aforesaid explanation in the reply to the notice and filing an affidavit, appellants did not attempt to substantiate the explanation to any extent. We have already drawn the inference that there was no physical movement of the goods from the manufacturer to various trading concerns and back to UC. First and second sales in many cases were on the same day. These circumstances also improbabilised the case of different processes being carried out after the alleged first sale by the manufacturer at several stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort figures of UC. The Revenue has proceeded on the basis that the balance quantity shown in each page had been clandestinely disposed without payment of duty. This is unacceptable. The Collector should have tallied the figures of quantities manufactured as shown in the diaries with the corresponding figures in the excise records, the figures of export and removals in the two sets of records to see if the balance shown in each page of the diaries had been declared in the excise records and cleared on payment of duty. No inference of non-accounting and non-payment of duty could have been arrived at without such comparison. Hence, the confirmation of the part of the demand referable to goods alleged to be illicitly manufactured and cleared is set aside. The case has to go back to the adjudicating authority to enable confirmation of demand based on the other findings of the Collector confirmed by us. 22. We find no error in the imposition and quantification of penalty in the order dated 29-12-1984. Appeal E/468/90-A 23. The appeal arises on order dated 16-11-1989 passed by the Additional Collector in respect of the period from 1-4-1981 to 31-3-1982. By this order demand of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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