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TMI Blog2012 (10) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... R., for the Respondent. [Order per : Mathew John, Member (T)]. This proceeding is for deciding seven applications filed under Section 35C(2) of Central Excise Act for Rectification of Mistake in Final Order Nos. 529-535/02B dated 19-12-2002 [2003 (153) E.L.T. 119 (Tri. - Del.)] passed by the Tribunal in Appeal Nos. E/4453-4459/93-B. These applications are being considered in pursuance of the Order dated 22-2-2010 of the Hon. Gujarat High Court [2010 (253) E.L.T. 520 (Guj.)]. 2. It is necessary to firstly record the history of the case in brief. A Show Cause Notice dated 4-10-1988 was issued by Revenue alleging that all the seven entities were virtually same and the clearances made in the name of all the seven units during the period 1984-85 to 1987-88 should be considered as the clearance of only one unit namely, M/s. Heemanshu Traders and the eligibility to exemptions for small scale units under Notification 83/83, dated 1-3-1983, 85/85 dated 17-3-1985 and 175/86-C.E., dated 1-3-1986 providing exemption to small scale units, should be decided on such basis. The constitutions of these seven units were as under : S. No. Name of the Party Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 (S.C.) and directed that the issue whether the clearances of a limited company could be clubbed with clearances of other units need to be examined by the Tribunal in the light of Circular No. 6/92 issued by C.B.E. C. and hence the court directed the applicants to file an application before the Tribunal for rectification of mistake apparent on record. 5. Pursuant to the direction of the Gujarat High Court the applicants filed another set of applications praying for Rectification of Mistake in the order dated 19-12-2002. These applications were dismissed by the Tribunal vide Misc Order Nos. 637 to 643/07 dated 27-7-2007 on the ground that the applications were barred by limitation of time prescribed under section 35C of the Central Excise Act. Aggrieved by this order the Appellants again filed Special Civil Application No. 1245 of 2010 before the Honorable High Court of Gujarat. The High Court disposed of the Application vide its order dated 22-02-2010 reading as under : 5. The short issue involved in this petition is that despite the order passed by this Court on 8-8-2006 in Special Civil Application Nos. 8003 of 2006 to 8009 of 2006, permitting the petitioners to withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering these two aspects of the matter. Since this has not been done, the impugned order passed by the Tribunal cannot be sustained either in law or on facts. We, therefore, quash and set aside the impugned order passed by the Tribunal and remit the matter back to the Tribunal to decide the Ratification Application on merits and after considering the decision of the Hon ble Apex Court in the case of Supreme Washers (P) Ltd. v. Commissioner of Central Excise, Pune (Supra) as well as the Circular bearing No. 6/92, dated 29-5-1992. 8. Subject to the aforesaid direction and observation, this petition is accordingly allowed. Rule is made absolute to the aforesaid extent without any order as to costs. 6. In view of the above order, the applications for rectification ROM 81 to 87/2006, have now come up for fresh decision before the Tribunal. Since there was argument from the JCDR on the issue as to what extent the decision of the Tribunal dated 19-12-2002 can be altered in consideration of an application for rectification of mistake we want to consider those arguments and give a finding on this issue first. 7. The Ld JCDR who argued the matter followed up his arguments with writt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T.R. 91 (Tribunal-LB)] held that a decision rendered by Apex Court if not considered at time of final disposal of an appeal, same would constitute error apparent by reason of applicability of doctrine of per incuriam. 10. Now we propose the issue being contested in these applications. 11. C.B.E. C. s Circular 6/92, dated 29-5-1992 reads as under : Subject : Clubbing of clearances of various firms - Different firms to be treated as different manufacturers for exemption limit - Regarding. The issue of clubbing of clearances of various firms to arrive at the aggregate value of clearances for the purposes of Notification No. 175/86-C.E., dated 1-3-1986 has been examined by the Board. Similar issue was also examined in the past for the purposes of regulating the exemption from duty granted under the Notification No. CER 8(5)-Central Excise, dated 1-3-1956 as under :- (i) Different firms will be treated as different manufacturers for the purpose of the exemption limit. But if a firm consisting of certain partners say, A, B, C has got more than one factory, all these factories should, of course, be combined. Limited companies whether public or private are separate entities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith only some of the partners in common, each firm is entitled to separate exemption limit and hence the question of distributing the exemption may not arise. If one firm or one individual owns several factories, he or it gets exemption only in respect of one lot and the manufacturer being only one entity, there will be no question of distributing the exemption. Whether or not in the expression by or on behalf of a manufacturer the expression from one or more factories is added, the effect would be the same if the manufacturer is also the same. The expression one or more factories only further clarified that whether the factory is one or more, it is the clearances by or on behalf of the same manufacturer which is to be taken into consideration for purpose of interpreting the exemption Notification. The matter requires to be viewed accordingly. 2. The Board had then felt the position as mentioned above including in respect of Notification No. CER-8(5)-C.E., dated 1-3-1956 was sufficient to deal with the interpretation under Notification No. 176/77 dated 18-6-1977. Now in exercise of the powers conferred under Section 37B of the Central Excise Act, 1944 (1 of 1944), for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpreting the exemption notification . 12. The decision of the Hon. Supreme Court in the case of Supreme Washers (P) Ltd. was as under :- [Judgment per : N. Santosh Hegde, J.]. - The sole question for our consideration in these appeals is whether the Central Excise Gold (Control) Appellate Tribunal ( the Tribunal ) was justified in accepting the contention of the respondent Department that the three appellants herein are so inter-connected and have mutuality of interest among themselves, as to club their production for the purpose of either denying them the benefit of the exemption limit or to assess them as one unit for the purpose of levy of central excise duty. 2. The Tribunal while dismissing the appeals of the appellants herein agreed with the Collector of Central Excise, Pune that the three units (the appellants herein) procured raw materials together, they had common credit facilities from the suppliers, had common stock accounting and planning, they are inter-dependents in manufacturing operations, had common stock of raw materials and semi furnished goods, were having common use of the machinery between the three units, were having common marketing arrangements an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the three units with each other as also inter-relationship, cumulatively establishes the appellants inter-relationship and interdependence with each other, hence, the arguments of the appellants on this factual score must fail. 6. In regard to the second contention of the appellant in Civil Appeal No. 6161 of 1999, it is seen from the Circular dated 1-3-1956, which according to the appellants have been reiterated by another subsequent Circular No. 6/92, dated 29th of May, 1992 by the Central Board of Excise Customs, New Delhi that a limited company should be treated as a separate entity for the purpose of exemption limit. If that be the position in law, then there may be some justification for the appellant to urge, so far as M/s. Supreme Washers (P) Ltd. is concerned, it being a limited company, its production cannot be clubbed with the other units. However, since this aspect of the case and applicability of the Circulars referred herein above was not brought to the notice of the Tribunal we are in agreement with the suggestion made by the learned Attorney General that it will be just and proper to remand this matter, for this limited purpose, to the Tribunal for examining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al that it will be just and proper to remand this matter, for this limited purpose, to the Tribunal for examining the applicability of the Circular relied upon by the Appellants, M/s. Supreme Washers (P) Ltd. For the reasons stated above, we confirm the finding as to the inter-relationship between the three units, as found by the Tribunal, and remand the appeals back to the Tribunal for the limited purpose of deciding the applicability of the Circular referred herein as above. 3. Before us the learned Counsel for M/s. Supreme Washers (P) Ltd. has produced copies of the Circular No. 6/92, dated 29-5-1992 and Circular No. 5 issued vide F. No. 21/31/56-CX.MI, dated 10-8-1956. Notification No. CER(5)CE, dated 1-3-1956 referred in the circular dated 29-5-1992 taken note of by the Hon ble Supreme Court as such is not produced before us. But on going through the circular dated 10-5-1956, it is seen that paragraphs (i) to (iii) contained therein are quoted verbatim in circular dated 29-5-1992 as if those provisions stood contained in Notification dated 1-3-1956. Both sides submit before us that what is referred in circular dated 29-5-1992 and as contained in Notification dated 1-3-195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Ors., this Court held - The statements of the employees/Directors show that the whole show was controlled, both on financial and management aspects by MACL. If these are not sufficient to show inter-dependence probably nothing better would show the same. The factors which have weighed with CEGAT like registration of three companies under the sales tax and income tax authorities have to be considered in the background of factual position noted above. When the corporate veil is lifted what comes into focus is only the shadow and not any substance about the existence of the three companies independently. The Circular No. 6/92 dated 29-5-1992 has no relevance because it related to Notification No. 175/86-C.E., dated 1-3-1986 and did not relate to Notification No. 1/93. 12. What this Court was emphasizing in the aforesaid decision was not only the fact that Circular 6/92 has no effect upon commencement of Notification No. 1/93, but also the fact that the distinct legal nature of Companies cannot be used as eyewash to portray its independent nature. Where the companies are indeed interdependent and possibly even related through financial control and management, the value of clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Tribunal on de novo proceeding in the case of Supreme Washers (P) Ltd also does not lead to such a conclusion. The matter has to be decided with reference to facts of each case. After appreciation of arguments on both sides we find that the issues to be examined are,- (i) Whether the circular or the decision in the case of Supreme washers (P) Ltd. deal with a situation where the separate entities are just a legal facade. (ii) If the goods manufactured by an entity are cleared by issuing bills in the name of a limited company whether such company was eligible for a separate quantum of exemption as a small scale unit for goods billed in the name of the limited company. (iii) In this case clearances of 7 entities were ordered to be clubbed, out of which one is a limited company. It is to be decided whether for the reason that one entity is a limited company clubbing of even the six partnership firms will also fail. 18. It is very clear that the circular and the decision in the case of Supreme Washers (P) Ltd by the Tribunal are with reference to a situation whether the entities are just a legal facade is also to be answered in the negative because no such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd issue is whether the High Court has directed to consider only the issue whether the clearances of the limited company could be clubbed with the clearances of the six partnership firms, in this case or whether to consider also the validity of clubbing the clearances shown in the name of the six partnership firms (minus the goods billed in the name of the seventh entity which is a limited company). In this context the following are relevant : (a) Para 3 of the decision of the Apex Court in the case of Supreme Washers; (b) Para 3 of the decision of the Tribunal while disposing of the case while deciding the case afresh in the context of directions from the Apex Court and (c) Para 5 of the order dated 22-2-2010 of the High Court of Gujarat. - These show that doubts are raised and required to be decided only in the matter of clearances shown in the name of the limited company with clearances of the other six firms and not about clubbing the clearances shown in the name of the six firms together. 21. Against the backdrop of the findings on the three issues the facts of the case can now be studied. Extracts from para 35 of the SCN and the relevant paragraphs in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 7-4-1988 on Umbergaon Sanjan Road carrying MS scrap of 12,285 kgs. and it was stated by the Driver of the truck as well as Sh. Shekhar Sanatkumar Mehta, partner of M/s. M.M. Steel Corporation of Baroda that the goods were actually loaded from the premises of M/s. Heemanshu Traders through Challan No. 862 dated 7-4-1988 was made by the excise clerk of M/s. Heemanshu Traders on the name of M/s. Heemanshu Auto Pvt. Ltd., Umbergaon. When the statement of Sh. Mahendra Kumar Kantilal Shah Excise Clerk of M/s. Heemanshu Traders, Umbergaon on 7-4-1988 was recorded, he stated that the challan was made on the name of M/s. Heemanshu Auto Pvt. Ltd. on the direction of Sh. Girish Bhai Shah, brother of Sh. Priyakant Shah though the said G.B. Shah has no legal locus standi in M/s. Heemanshu Traders as he is neither an authorized signatory nor a partner in the said firm. This aspect I have discussed in detail in the earlier part of the order. Thus, from the above, it would be seen that in order to remain within the exemption limit, M/s. Heemanshu Traders have been issuing challans for their goods on the name of Heemanshu Auto Pvt. Ltd. their sister unit. 32.3.4 Further, the following points ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of Heemanshu Auto Pvt. Ltd. Umbergaon and as such your bill should have been prepared in their name. Accordingly, your aforesaid bill is returned herewith which may please be treated as cancelled and a fresh bill in the name of Heemanshu Auto Pvt. Ltd. should be sent to them, at the under mentioned address. Heemanshu Auto Pvt. Ltd., 1305, Prasad Chambers, 13th Floor, Near Roxy Cinema Bombay-400004. (emphasis provided) Yours faithfully, For Heemanshu Traders Sd/-- Partner The above letter clearly establishes that they M/s. Heemanshu Traders were even manipulating bills to remain within the exemption limit. (b) I further note that M/s. Heemanshu Traders, Umbergaon, received stamping lamination from M/s. Heemanshu Auto Pvt. Ltd. (invoice No. A/42/43 dated 31-8-1982 and A/39/43 dated 31-8-1987) M/s. Heemanshu Traders, received electrical stamping and laminations from M/s. M.K. Industries, Umbergaon. M/s. Heemanshu Auto Pvt. Ltd dispatched C.B. Points to M/s. Heemanshu Traders, Umbergaon (Invoice No. A/36/43 and A/35/43 dated 8-6-1987) M/s. M.K. Industries sold electrical stamping and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1000 17-3-87 : By Bank - 50000/- 30-5-87 To Bill - A/9-29268/- 4-6-87 : By Bank - 1,50,000/- 26-6-87 To bill A/13-33633/- 28-3-88 : By Bank - 10,000/- 13-7-87 Bill A/15 - 15487/- 24-8-87 To bill No. A/35-560/- M/s. M.K. Industries - SY 2043 page No. 29 19-10-83 To bank - 25000/- 3-3-1987: By bank-20,000/- 9-3-87 By bank - 1,000/- 18-7-87 By bank - 20,000/- 33.1.4 From the perusal of General Ledger for the year 1987-88 of Heemanshu Auto Pvt. Ltd. (exhibit 162), I find that inter alia , the following debit/credit entries finds place in the name of Heemanshu Traders and M.K. Industries. M/s. M.K. Industries - SY-2044 Page : 29 2-1-88 : To Bank 7800/- 27-10-87 by bill D. 4 - 696.64 2-2-88 : To bank 10000/- 4-11-87 by bill D.14- 7293.68 10-11-87 : By bill D.22 - 2868.01 M/s. Heemanshu Traders SY - 2044 Page 55 6-11-1987 : To Bank- 50000/- 24-11-1987 by bank 20,000/- 28-12-1987 : to Bank 19700/- 24-12-198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u Traders, Bombay. The party namely M/s. Bajaj Auto, M/s. Jai Hind Industries, M/s. Scooter India Ltd, M/s. Vishal auto Pvt. Ltd. and all placed the orders against the said price list to M/s. Heemanshu Traders, Bombay. (c) I have perused horns and C.B. points price list file as on 1-9-1986 (Exhibit 79) : M/s. M.K. Industries issued revised price lists to the following customers viz 1. M/s. Bajaj Auto Ltd. Akurdi, Pune 2. M/s. Jai Hind Motors 3. M/s. Scooter India Limited 4. M/s. Vishnu auto Pvt. Ltd. new Delhi All these letters were addressed by the partner of M/s. M.K. Industries from their Bombay office indicating the following address: 1305, Prasad Chambers, 13 floor, Near Roxy Cinema. Bombay-400006 from which M/s. Heemanshu Traders, Umbergaon and M/s. Heemanshu auto Pvt. Ltd. are/were functioning (emphasis provided) (d) M/s. Heemanshu Traders, purchased raw materials i.e. bushes, nuts and brass sheets, screws, name plates for M/s. Maharashtra Scooter Ltd. and M/s. Himanshu Traders used to supply the same to all the working units at Umbergaon. (e) M/s. M.K. Industries sold parts of C.B. Points to M/s. Heemanshu Auto Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are a bill of copper wire and electrical stamping from M/s. Heemanshu Auto Pvt. Ltd., Umbergaon and further enquired whether the bills of stamping were being issued from M/s. M.K. Industries or otherwise, as there was a problem of excise. Further, directions were issued that all the sales of M/s. M.K. Industries should be from Heemanshu Traders as the benefits of excise was being taken from Heemanshu Traders. (n) I further note that M/s. Heemanshu Traders also directed Shri Pandya to prepare a bill of copper wire and electrical stamping from M/s. Heemanshu Auto Pvt. Ltd., Umbergaon and further enquired whether the bills of stamping were being issued from M/s. M.K. Industries or otherwise, as there was a problem of excise. In further, directions, directions were issued that all the sales of M/s. M.K. Industries should be from M/s. of M/s. Heemanshu Traders as the benefits of excise was being taken from M/s. Heemanshu Traders. (p) I note that Shri Pankajbhai Jaswantlal Mehta, Administrator of Heemanshu Traders of Bombay in his statement dated 6-5-1988 stated that he is dealing with purchase and administration work of M/s. Heemanshu Traders and M/s. Heemanshu Auto Pvt. Ltd. that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has been created to avoid some legal obligation or when the device of corporate personality is used to perpetuate fraud, as to evade tax or when it is used to evade a statute 22. Against the finding as in para 33.8.2 in the impugned order as reproduced above, which was affirmed by the Tribunal in its order dated 19-12-2002, which is sought to be corrected, need no correction in view of our legal finding in para 18 above. Further as can be seen, at least in the case of seized goods, the goods were actually manufactured in the factory of Heemanshu Traders but billed in the name of Heemanshu Auto (P) Ltd. Such goods are clearances from the factory of Heemanshu Traders only, though the facts available in the impugned order is not complete enough to conclude that all the goods shown to be cleared using invoices of Heemanshu Auto (P) Ltd. were in fact manufactured in the factory in the name of Heemanshu Traders. Further while considering the ROM applications in the context of the directions of the High Court of Gujarat there is no scope to negate the clubbing of the clearances of the six partnership firms. 23. In the first set of ROM filed in 2002 and the second set of ROM filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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