9911796707
TMI Blog1999 (3) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... and the aggregate value of the clearances of the three firms in the previous year had exceeded the prescribed exemption limit. The appellants have claimed that they (M/s. Accurate Engineering Company Private Limited) and M/s. Ahilya Udyog and M/s. Aditya Engineering Co. were separate legal entities and there was no justification for clubbing them together. 3. The appellants were a Private Limited Company manufacturing several excisable goods falling under Tariff Item 68 of the erstwhile tariff. They were also engaged in trading activity by which they bought and sold the same goods manufactured by M/s. Ahilya Udyog and M/s. Aditya Engineering Company. 4. The Department by its SCN dated Nil in April, 1986 alleged that M/s. Ahilya Udyog and M/s. Aditya Engineering Company were a single unit and were not eligible for the exemption claimed under Notification Nos. 77/83 and 77/85 as also 105/80 on the ground, inter alia, that the Proprietress of M/s. Ahilya Udyog was the wife of Chairman and Managing Director of M/s. Accurate Engineering Co. Pvt. Limited (the present appellants); that the goods manufactured by M/s. Ahilya Udyog and M/s. Aditya Engineering Company were given the bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er period of 5 years under Section 11A of the Act. 6. Ld. Counsel appearing for the appellants strongly urged before us that the Collector had based his findings on surmises and assumptions and had failed to appreciate the various submissions and case law relied on by the appellants. It was his submission that the mere fact that the Directors or Partners are common in the two firms would not make them a single unit especially when they are two distinct legal entities having separate registrations for purposes of Income Tax, Sales Tax, Balance Sheets etc. They relied on a number of decisions in support of their contention, namely :- (1) Meteor Satellite Ltd. Telstar Electronics, Ahmedabad v. C.C.E., Baroda - 1985 (22) E.L.T. 271 (Tribunal); (2) Jagjivandas Co., Thane v. C.C.E., Bombay - 1985 (19) E.L.T. 441 (Tribunal); (3) Pimpri Gases v. C.C.E. - 1990 (49) E.L.T. 474 (Tribunal); (4) Cheryl Laboratories v. C.C.E. - 1993 (65) E.L.T. 596 (Tribunal); and (5) Alpha Toyo Ltd. v. C.C.E., New Delhi - 1994 (71) E.L.T. 689 (Tribunal). 7. On behalf of the Department, ld. DR reiterated the findings of the Collector (Appeals) in the impugned order and submitted that the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a unit can be considered a dummy unit and observed that a dummy unit is a unit which is not in existence in reality but is merely created on paper. In other words, the physical existence of such a unit is not to be found merely in terms of investment of capital, machinery and labour. It was held that in the absence of any money flow back, profit sharing and total control of the dummy units by the main unit, it cannot be said that the other units were mere paper entities or a facade created for the purposes of evading duty. 11. In the facts of the case before us, though it is admitted that M/s. Ahilya Udyog and Aditya Engineering are firms with partners who were the family members of the Director of the appellants, there is nothing to show that the firms were controlled by the appellants. The fact that some of the appellants machinery were leased out to Aditya Engineering without payment of remuneration does not by itself make it a dummy unit. The impugned order had relied on the statement of the supervisor of the appellants dated 24-1-1986 stating that the appellants were using the leased out machinery of M/s. Aditya Engineering once or twice a week to conclude that the lease ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al relationship between the various `units . While it is true that financial flowback is one of the important considerations in this regard, in the ultimate analysis, it is the totality of facts and circumstances which can alone project the correct picture. The case becomes further complicated where it is claimed that a part was a manufacturing activity and a part was `trading activity and if so, the concerned persons are obliged to keep separate accounts and required to show so that it could be ensured that the central excise procedure is being duly complied with in respect of the items which are manufactured and cleared and in respect of which exemption, if any, is being claimed. The Collector has emphasised that the transactions between M/s. Accurate Engineering Co. and M/s. Ahilya Udyog were not on principal to principal basis and they were not only related but same unit and in this respect, he has pointed out that the machinery is said to have been leased out has not been utilised on an occasional but on regular basis without payment of any remuneration for the same. This can, however, be only one of the considerations and not the only consideration judging the issue. He is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to them to close down the unit of M/s. Ahilya Udyog and to form new unit of Aditya Engg. Co. And as the small and uneconomical products had to be formed out to ancillaries to maintain the market, they proposed to the workers to manufacture by themselves independently the products like verniers calipers and other but this could not be maintained, hence, they had given this offer to M/s. Ahilya Udyog or Aditya Engg. Co. for further sale to the customers after fixing price considering other charges like technical assistance, transport and miscellaneous expenses. Once this had been stated, the Collector was required to record a finding of fact with reference to the same particularly in respect of consequential relationship and similarly, with reference to the accounts, if any maintained in respect of the so-called trading activity. 19. From the above discussion, it is apparent that both the sides were required to make their position more clear and all the relevant aspects have not been duly considered but were required to be taken into account by the Collector/Commissioner. The impugned order is, therefore, set aside and the matter is remanded for de novo consideration in the lig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The totality of the facts and circumstances establish that separate small scale exemption to related units was not permissible and that financial flow back was not the only criteria. He referred to the observations made by the Collector of Central Excise, Pune, the adjudicating authority and submitted that the denial of exemption was not based only on the financial flow back and that a number of other grounds had been taken in account which had not been discussed by the ld. Member (J). He pleaded for acceptance of the order proposed by the ld. Vice President (now President). 23. I have carefully considered the matter. The ld. Member (J) in para 12 of the order proposed by him had observed that in the absence of any money flow back or profit sharing, it was not correct to come to the conclusion that the two units M/s. Ahilya Udyog and M/s. Aditya Engg. were dummy units set-up by M/s. Accurate to evade payment of duty. 24. The Collector of Central Excise, Pune, who had adjudicated the matter, had observed that in the facts and circumstances of the case it was the totality of the events that were to be taken together into account. It was an admitted fact that all the propriet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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