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TMI Blog2015 (11) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notices to the dummy units and whether the failure on the part of the CESTAT in not giving its own reasoning or finding vitiates the order of remand ? " 2. The respondent assessee was isssued with a show cause notice on 03.10.2001 demanding the duty on goods manufactured and cleared to Integral Coach Factory and in the course of verification by the Officers attached to the Head Quarters Preventive Unit of Chennai II Commissionerate on 26.09.2000, records were unearthed showing the case of clearance of goods in the name of the respondent assessee as well as in the name of M/s. Core Tech Glass Composites Pvt. Ltd. (CTGC) and M/s. Glass Composites Company (GCC). The case was first adjudicated ex-parte and by an order of the Tribunal it was remanded and was re-adjudicated. Thus, the Order-in-Original was passed by the Commissioner on 14.02.2007 rejecting the stand taken by the assessee and held that M/s. Core Tech Glass Composites Pvt. Ltd. and M/s. Glass Composites Company are mere paper creations i.e. Dummy manufacturing units of the respondent assessee and hence, the value of clearances shown in their name for the periods in question are liable to be included in the turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel appearing for the parties on either side and perused the materials made available on record. 5. The first question of law may not really arise if the second question of law is answered and hence, we proceed to consider the second question of law first. 6. For better understanding of the case, the findings of the original authority in so far as the nature of business activities of the two units which is sought to be clubbed with the respondent assessee has been culled out by the adjudicating authority in paragraph 17 of its order, which reads as under : "17. In the interest of justice, it will be proper and necessary to examine the status of GCC/CTGC as available on records. The SCN has stated [para 4 iii] that, GCC a proprietary concern in the name of Shri.M.Suresh, an employee of M/s. UI during 1998-99 had shown clearances of goods valued Rs. 1,11,500/-, though the unit did not have any machinery, labour and no purchases of raw material was made by him. Shri.R.Krishna Mohan, Managing Partner of M/s.UI, in his statement recorded on 1.3.2001, [Annexure A to SVN Sl. No.39 - Q/A No.7], specifically admitted that GCC was floated by him to get more orders from ICF, Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2,50,000/- and they have been paying Rs. 35,000/- per month to Mrs.Polammal Naidu, as rent for the premises leased by M/s.UI and used by CTGC viz. - Hydraulic Presses - 4 Nos., Genset - 1 belonged to M/s. UI [Annexure A to the SCN - Sl. No. 19]. These machines were used for manufacture of goods which were cleared on account of M/s. UI as also on account of CTGC [Annexure A to the SCN - Sl. No. 39 Q/A 8]." 7. Though it is said that both CTGC and GCC are only paper units, in view of the statements made and the findings rendered, atleast in so far as CTGC is concerned, there are materials to show that the unit was functioning. The assessee claims that it is an independent private limited company in which Smt. R. Sasikala, wife of Shri.Krishna Mohan, and her brother Shri. Vijaya Kumar are Directors and it is a separate legal entity. 8. A cursory look into the following decisions can be made to consider the issue of clubbing of clearances dummy units : (i) Alpha Toyo Ltd vs. Collector of Central Excise, New Delhi,- reported in 1994 (71) E.L.T. 689 (ii) Ogesh Industries vs. Collector of Central Excise, Kanpur,- reported in 1987 (94) E.L.T. 88 (iii) Ramsay Phar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trols its activity in terms of profit sharing, management control, decision making, and acts of such nature. The dummy unit would be a mere facade one and in reality it is one and the same with the main unit. In this particular case, there is no such evidence at all, to show that such an arrangement is in existence. The mere fact of management control and a few directors being common and also by the fact that interest free loans are being given to the other units by the first unit, these factors, by itself, is no ground for holding them as dummy units and for ordering clubbing of all their clearances, and to deny the benefit of the exemption Notification. There is no dispute in all these cases that all the four units are independent in existence, with independent transactions, without any profit sharing, management control or money flow back to the main unit. Each unit is having independent bank transactions, loans, sales, purchase & tax registrations. Therefore, on the facts and circumstances of this case, the ground taken by the department is not sustainable. The concept of related persons, as envisaged under Section 4 of the Central Excises and Salt Act, 1944, is for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at on the basis of a show cause notice sent to M/s. Ogesh Industries alone, are patently violate all the principles of natural justice. We find the various claims made by Shri Gujral to be correct. A show cause notice had to be issued to M/s.Gore Industries. Thereafter the adjudicating authority could go into the question whether the two units were really independent or whether one was a dummy unit of another. But he could not pre-determine the issue and limit the show cause notice only to that unit which he considered to be the only real unit. As per the statements of S/Shri Raizada and Verma, the partners in the two units, there was movement of goods in process from M/s. Gore Industries to M/s.Ogesh Industries for completion of certain manufacturing processes. The failure to issue the show cause notice to one of them would show non-application of mind on part of the authorities. As a consequence, the show cause notice must be held to be bad in law. " 10. In the decision reported in Ramsay Pharma (P) Ltd. vs. Commissioner of Central Excise, Allahabad, reported in 2001 (127) E.L.T. 789, the Tribunal followed the decision rendered inOgesh Industries cited supra and held that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad acknowledged the RT 12 returns, and even had inspected the premises of both the units which were located separately. Both the units had been filing income-tax returns and also sales tax returns and maintained separate registers under various legislations. They had separate plan and factory plan which have been approved. The said plan had been filing with the department and the department had acknowledged the receipt of the same. There is a rental agreement in respect of both the units. They had been having separate profit and loss accounts and separate dealings. Goods manufactured by both the units are different and have different brand names. Further we notice from the records that Rama Industries was issued with a letter dated 20-8-90 by Superintendent of Central Excise, Range III C. Madras-III Division directing them to file the details pertaining to SSI certificate and details regarding the same, brand name certificate, xerox copies of invoices for the goods received from Ambala (Mixie Parts), turn over details for the financial year 1989-90. The Rama Industries by their letter dated 3-9-90 furnished all the details which has been received by Inspector of Central Excise. Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rama Industries has been separately located with separate lease deed and unit has been manufacturing different items namely LPG domestic gas stoves while Meera Industries had been manufacturing domestic pressure cookers and pans. The item being different the brand name is also different and the evidence on record here shows that Meera Industries could not have used the brand name of Rama Industries as the product of the Rama Industries is different. Be that as it may it is fundamental principles of natural justice that when these enormous evidences were examined at the time of inspection and the department was aware of the existence of Rama Industries then it was incumbent to have put the Rama Industries to notice. The violation of issue of show cause notice to Rama Industries has vitiated the proceedings. However we notice that the department in the show cause notice had alleged that Meera Industries were using brand name of Rama Industries and made themselves ineligible for the benefit of notification, while the Commissioner in the impugned order has proceeded to hold besides holding that Rama Industries is only on paper and a deemed unit and has also held flow back of funds be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been issued and the Tribunal remanded the matter for issuance of notices and that has been accepted by the assessee and not by the Department. 13. In the light of the various decisions of the Tribunal and also the findings of the adjudicating authority in the present case, it is clear that the department should have issued notice to all the units. However, learned counsel appearing for the respondent / assessee states that in respect of the other matter for which no appeal has been filed, they are not aggrieved and that the order of the Tribunal need not be set aside only on the ground that it has called upon the department to issue notice to the two units namely CTGC and GCC. According to him, the issue is only regarding the clubbing of clearances which could be agitated on merits before the authority as and when Show Cause Notice is issued in terms of the orders of the Tribunal. 14. Accordingly, the authority concerned is directed to issue show cause notice to allthe parties, afford them an opportunity of hearing and pass appropriate orders afresh, on merits and in accordance with law. With the aforesaid observations, the Civil Miscellaneous Appeal stands disposed of and the q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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