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TMI Blog1999 (12) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... 1990 to March, 1994 under the provisions of Section 11A of the Central Excise Act, 1944. 3. I confirm demand of duty amounting to Rs. 27,41,483/- on rest of the items which was marked out after clubbing the total clearance value of goods and taking into consideration the slab rate of duty as applicable in terms of Notification Nos. 175/86 and 1/93. 4. I impose a penalty of Rs. 8 lakhs on IBPL and MIT under the provisions of Rule 9(2) and Rule 173Q of Central Excise Rules for contravention of Rules 9(l), 173B, 173F, 173G read with Rule 173Q of Central Excise Rules and evading central duty to the tune of Rs. 31,45,802/-. 5. I hereby also impose a personal penalty of Rs. 3 lakhs on Shri Arvind Nanda, Director of IBPL and partner of MIT, who played the vital role in designing the modus operandi with the sole intention to evade central excise duty. 2. The issues that arise for consideration are as under : (a) Whether duty can be demanded on goods aluminium shapes and sections, false ceilings, venetian blinds, etc., manufactured and cleared by IBPL (M/s. Interarch Building Products P. Ltd.) and M/s. MIT (M/s. Inter Tech) affixing foreign brand name. Luxaflex and Luxalon ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Hunter Douglas a company of Holland, known for their structural products, firstly to trade their goods in India, secondly to import machines and raw material from them and to use their brand names Luxaflex and Luxalon on similar goods to be manufactured and sold in India. Later on they also developed their own brand names for other goods. Soon thereafter, one of the Directors Shri Arvind Nanda, and another Director s wife Mrs. Shobhna Suri entered into a partnership agreement and formed a firm in the name and style of M/s. Intertec (MIT) on 19-8-1988. The object of this firm was also taken to be the same as that of IBPL. Thus for all the practical purposes the beneficiaries are the same persons or group of persons. What is of importance is that one is a private company and the other is a partnership concern. None of them are what is called a public limited company. There are only two Directors in the Pvt. Ltd., company and of those two one is a partner himself whereas the other Director s wife is the 2nd partner in the partnership company. With this kind of family set up, it can hardly be assumed that each one operates independently. It is clear that the partnership comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished goods in the market. Similarly the entire marketing of the finished goods, either manufactured by M/s. IBPL or MIT being done by the marketing executives appointed by M/s. IBPL. The catalogues, price lists printed for the finished products are one and the same. Even in one catalogue for Luxaflex blinds a copy of which was recovered from both the units, show varieties of venetion blinds and vertical drapes or blinds even though the venetion blinds are manufactured by M/s. IBPL and vertical blinds are manufactured by M/s. MIT and in the space for place of manufacture the name of M/s. IBPL alone has been shown. The dealers are appointed by M/s. IBPL, their meetings and conferences are arranged by them, they procure the orders and then allocate them. From these facts it is clear beyond doubt that M/s. IBPL and MIT do not have separate existence though constitutionally/legally a facade has been created to show these as two different entities. (iv) It is further noticed that both M/s. IBPL MIT are being common brand names including foreign brand names viz., Luxaflex, Luxalon, Interarch, Trac dee whereas M/s. IBPL have claimed to have applied to get them registered as per docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d them to MIT for use in manufacture. 5. The marketing of finished products of both the firms was done by the staff of IBPL for which common catalogue and price lists were used without distinguishing which product was manufactured by whom. No charges were found to be paid by MIT for various services extended by IBPL. The total expenses of the office were borne by IBPL though it was a common office for both. The foreign brand names Luxalon and Luxaflex were hired by M/s. IBPL under agreement and the brand names Trac, Interarch and Tracteck belonged to IBPL. All these brands were also used by MIT though there was no agreement with brand name owner or with IBPL for use of their brand and no actual payment was made by MIT for use of the same. It is obvious from the above that MIT is fully dependent on IBPL for financial support, procurement of raw material, marketing of finished product, management of production and account keeping etc. Thus it can be observed that MIT has been created only on paper by segregating the different products under two categories. Some of the products are shown as manufactured by IBPL and some are shown to be manufactured by MIT. The labour engaged in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is wholly based on the assumption that Arvind Nanda is a Director of IBPL and he is also a partner of Intertec. The Director of the private limited company is distinct from the company which is a separate legal person and, further, the Director is not owner of the private limited company, hence, there cannot be any allegation that IBPL and Intertec are having common financial interest. Intertec has its own capital raised by the contributions made by the partners in their own individual capacity and from their own funds not funded by IBPL. The finding of the Commissioner in the impugned order that both IBPL and Intertec are having common managerial control is also incorrect in law. This finding is based on the fact that Arvind Nanda is a Director of IBPL and he is also partner of Intertec. Apart from this, the impugned order also refers to the fact that Smt. Shobhna Suri, who is a partner of Intertec, is wife of Mr. Gautam Suri who is a Director of IBPL. Merely because certain persons are common for both the units in view of their individual capacity, it does not mean that both the units are having common management. The partnership firm, namely, Intertec has two partners, namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o hold that Intertec depends upon IBPL for the raw material. Similarly, if the marketing of the product manufactured by Intertec is being done by IBPL, it cannot be suggested that the two units are one and the same, particularly since Intertec has its own marketing staff and Intertec had advertised for its products and enclosed copies of bills raised by the advertising agencies for advertisement orders placed by Intertec, with the reply to the show cause notice. 4.4.1 The finding of the Commissioner that IBPL had allowed Intertec to use the brand name without any consideration also cannot be a ground to hold that the two units are one and the same, more so when the brand names like Trac Dec and Interarch are not registered brand names of IBPL and IBPL had applied for registration of these brand names. 4.5 The Commissioner had also observed that common facilities like transport, common office, FAX, telephones, etc., are indicative of the position that IBPL and Intertec are not independent and separate units in real terms. But we note that IBPL were paid Rs. 20,000/- per month by Intertec for use of their office and for other services like telephone, FAX, etc. We also note th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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