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TMI Blog2011 (1) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... correct interpretation to “municipal corporation” as the municipalities has been defined in part 9 of the Constitution of India which defines municipal area as territorial area of the municipality as notified by the governor - Article 243(g) of the Constitution of India defines the term “village” as a village specified by the Governor by publishing Notification to be village. The terms “municipal corporation”/”village” are having concerns with the Land Revenue Authorities and the same are notified by the Governor from time to time on the basis of census - The “MIDC” cannot be equated with “Municipal Corporation - Thus, the certificate issued by various authorities which certified that the area in which the factory is located is within limit of village Digdoh, Taluka Hingna, district Nagpur - Hence, do not have any hesitation to hold that the factory of the appellants is located in a rural area - Accordingly, the appellants are entitled for the benefit of SSI Notification 8/2000 and 9/2000 - As the appellants are entitled for the benefit of Notification 8/2000 and 9/2000 as SSI Notification, are not required to go into the issue is using the brand name of others, as the appellants s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants agreed to manufacture certain goods on job work basis for Vaibhav. Both the units are located adjacent to each other having a boundary of barbed fence wire. 8. Investigations were undertaken by the officers of the Central Excise Department and search was conducted at the factory premises and office premises of the appellants on 11-8-2003. During the course of further investigation, statements of supervisors as well as directors of the appellant company as well as Directors of Vaibhav were recorded under Section 14 of the Central Excise Act. Based on the aforesaid investigation, show cause notice dated 4-7-2005 was issued to the appellants, inter alia, alleging that the appellants are liable to pay central excise duty totalling to Rs. 51,48,919/- for the period from 2000-2001 to 2003-2004. The show cause notice also proposed to impose penalty on appellants and directors of both the companies. The case of the Department in the show cause notice was, broadly, that Vaibhav is a dummy unit and facade floated by Mr. Vishal Agrawal in order to avail exemption benefit under small scale exemption Notifications. It was also alleged that the affairs of both the companies were being ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendently registered with the sales tax department and filing independent sales tax returns thereof. Similarly, both the companies are registered with the income tax department separately and filed separate income tax returns thereof. Both companies have separate and independent balance sheets along with profit and loss account. Both the companies have separate professional tax registration. Both companies have separate registration under the Factories Act. Both companies have separate factory premises. Both the companies have separate lease agreement with MIDC. Both companies have separate water connections from MIDC. Both companies are paying local taxes to the local gram panchayat separately. Both the companies have separate and independent electricity meters issued by MSEB. Both the companies have independent machinery for manufacture of the final products. Both the companies have independent purchases of inputs/raw materials. Both the companies have independent sales. Both the companies are manufacturing water tanks of different sizes. Both the companies have independent bank accounts. These facts are not in dispute. Above apart, both the companies are separately registered wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is not applicable in the facts of the present case. 16. In the said case the apex court has remanded the matter in the light of the Board circular 6/92 dated 29-5-1992 which clarifies that limited company should be treated as a separate entity for the purpose of examine the limit and production cannot be clubbed with other units. The said circular was followed by this Tribunal in the case of Jifcon Tools P. Ltd. v. CCE - 2007 (208) E.L.T. 345. He also relied on the decision of CCE v. Sotex - 2007 (209) E.L.T. 9 (S.C.), Superior Products v. CCE - 2002 (144) E.L.T. 187. [The said decision was confirmed by the Apex Court in 2008 (230) E.L.T. 3 (S.C.)], Shakti Tubes Limited v. CCE - 2002 (150) E.L.T. 359. [The decision of Shakti Tubes Limited was confirmed by the Apex Court reported in 2008 (231) E.L.T. 193 (S.C.)], Studioline Interior Systems Private Limited v. CCE - 2006 (201) E.L.T. 250, Shree Krishna Minerals v. CCE - 2005 (190) E.L.T. 251), CCE v. Electro Mechanical Corporation - 2008-TIOL-177-SC-CX = 2008 (229) E.L.T. 321 (S.C.) and Renu Tandon v. Union of India - 1993 (66) E.L.T. 375. After relying on the above decisions, he submitted that the clearance made by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L.T. 502 which was confirmed by the Apex Court reported in 2003 (151) E.L.T. A84. He also relied on the following decisions :- (a) CCE v. Progressive Organics Private Limited - 2005 (184) E.L.T. 221 (b) Katyani Foods Beverages Private Limited v. CCE - 2004 (170) E.L.T. 82 (c) Macfield Beverages India Private Limited v. CCE - 2008 (223) E.L.T. 231 (d) CCE v. Srijee Foods - 2006 (198) E.L.T. 219 19. Finally he submitted that from the above submissions, it is clear that the factory of the appellants is located in a rural area and even if assuming that appellants are manufacturing branded goods the benefit under SSI exemption Notification No. 8/2000 cannot be denied. 20. Finally he submitted that the demand is barred by limitation as the period involved in this case is 2000-2001 to 2003-2004. A show-cause notice has been issued on 4-7-2005 by invoking the extended period of limitation holding that the appellants have suppressed the facts that they are using the brand name of the other manufacturer on the product which is contrary to the material on record as the appellant from time to time has clearly disclosed the fact of using the brand name vide their le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating authority. In view of the above submissions, he prayed that the impugned order be upheld. 24. We have heard both sides at length on 6-1-2011 and the bench asked the Id. advocate for the appellants to file the copy of the documents on which he has relied that both the units are separate. The arguments were heard and order was reserved to be pronounced on 28-1-2011. 25. Ld. advocate filed certain documents. Same is taken on record. In the meantime, Id. DR also filed his written submissions along with copy of two judgements in the case of Navrang Art Printers (supra) and Modi Alkalies (supra) which were not relied on by the DR during the course of arguments, but in the interest of justice, both the decisions are taken on record. 26. On careful consideration of the submissions made by both sides, we find that the appellant has challenged the impugned order on four grounds :- (a) extended period of limitation is not invocable. (b) Clearance of the appellants firm and Vaibhav cannot be clubbed. (c) The factory of the appellants are situated in the rural area and they are entitled for an exemption under Notification no. 8/2000 and 9/2000; and (d) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween them and MIDC. Both the companies are paying local taxes to local gram panchayat separately. Both the companies are having separate machinery and are manufacturing separate goods such as the appellants firm is manufacturing water tanks of various sizes ranging from the capacity of 200 litre to 2000 litre and Vaibhav is manufacturing the water tank of various sizes ranging from the capacity of 3000 to 5000 litres. Both the companies are having their independent bank accounts. These facts are not in dispute as same are on record. The only j allegation that Shri Vishal Agarwal is managing the affairs of both the companies which cannot be concluded that both the companies are one and the management of both companies is same. There is no common director in the company. As both the units are having common storage tank cannot be the ground to club their clearances as a separate account is being maintained for withdrawal of kerosene and LDO by common storage tank of both the companies. The common storage tank was installed to minimise the costs. As Vaibhav does not have extruder machine but they have entered into an agreement of job work with the appellants to carry out some process o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sale of finished goods; obtaining separate loans and credits from various banks; subjected to tax audit under Section 44 of the Income Tax Act; holding separate licences under the Factories Act and have their own separate supervisors and own separate labour. Further, in the case of Superior Products (supra), this Tribunal held that when two assessees are legally understood juridical persons, one was a registered Partnership firm and another limited company, the clearances could not be clubbed. It was further held that directors of a company or partners of the partnership firm should not necessarily actively involve themselves in managing the manufacture is not correct in law. Not ail directors or partners have to be engaged in managing companies or partnerships. Hence, if one director is managing both the entities cannot be a reason when both have separate capital, premises, machinery and labour. Both were carrying out separate operations. It was further observed that commonality of share holders and Partners and a common manager do not destroy the separateness of the two units. Further, the facts that they are manufacturing the same product or that one unit purchases a materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan from the appellants and same was repaid by Vaibhav to appellants along with interest and it is not a case of interest free loan. All the transactions were done by cheques only. In that case the mutuality of interest is not present. 34. In the case of CCE v. Electro Mechanical Corporation (supra) the Apex Court held that if there is no evidence to prove that there was mutuality of business interest or there was flow back of funds from one unit to another, it is not possible to hold that clearances of two units could be clubbed. The Hon ble Rajasthan High Court in the case of Renu Tandon v. Union of India - 1993 (66) E.L.T. 375. (in the facts, two units were situated in the same premises, manufacturing similar products, having common management, having common office and labour, having common electric connection and one unit was owned by father-in-law and other by daughter-in-law and both the units were being looked after by husband.) held that value of clearances could be clubbed unless mutuality of interest in the business of each other is proved by the Revenue. In this case the Revenue has failed to prove through evidence that there is a mutuality of interest. Reliance in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rol over Hydrogen gas even after the stage of bottling till it was sold to the customers. The Balance-sheets and other financial statements of the three units revealed that whatever income they earned had gone to MACL in the form of lease rent of cylinders. One Mr. Sita Ram Goswami, Accountant of MACL and Mr. Ashok Kumar, Chief Operating Officer of MACL admitted that some amount of cash was also collected by MACL over and above the invoice prices of Hydrogen gas supplied by three companies. It was noted that while front companies were being supplied gas by MACL @ 0.50 per unit, till August 1996, the same gas was sold by the three companies @ Rs. 5/- per unit. Keeping in view all these factors the authorities were of the view that MACL had created the three companies with the fraudulent intention to avail benefit of exemption granted under Central Excise Notification No. 1/93, dated 28-2-1993 and has mis- declared the assessable value in the invoices with the intention to evade central excise duty. The facts in the case of Modi Alkalies are different from the case in hand before us as in the case of Modi Alkalies (supra) the main company and three separate companies were incorpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not invocable in the facts of the case. 37. Now, we come to the issue whether the unit of the appellants firm is situated in rural area or not. 38. Clause (c) of para 4 of SSI Notification 8/2000 and 9/2000 defines Rural area which is reproduced hereunder :- Rural area as area comprising in a village as defined in the land revenue records excluding (i) the area under any municipal committee, municipal corporation, town area committee, cantonment board or notified area committee or (ii) any area that may be notified as urban area by the Central Government or State Government. 39. The appellants has been able to produce the certificate issued by MIDC certifying that the factory of the appellants is located outside the limit of Nagpur Municipal Corporation and comes within the village Digdoh. Similar certificate has been issued by Sarpanch of Village Gram Panchayat. A certificate has also been issued from the office of Zila Parishad Nagpur. A certificate has also been issued from Tehsildar, Hingna certifying that the factory of appellants is located in rural area of Digdoh village. The Commissioner denied the benefit to the appellants holding that MIDC is a notified area wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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