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TMI Blog2016 (11) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... he liability of Central Excise Duty has to be decided for the period of one year preceding the date(s) of the show-cause notice issued to the appellants. The matter requires quantification of liability of duty of Central Excise, if any, and for imposition of penalties, if any, in respect of the impugned periods - April 1997 to March 2003, for which respective show-cause notices were issued to the appellants. This will require detailed verification of figures and documents at the field level. Therefore, the matter for re-quantification of the liability of the appellants and imposition of penalties is being remanded to the original adjudicating authority, Commissioner of Central Excise, Bangalore, who shall decide the matter based on our findings, within four months of receipt of this Order after giving necessary opportunity for personal hearing and for production of documents to the appellants - appeal allowed by way of remand. - E/1407-1411/2004-DB - Final Order No. 21155 -21159 / 2016 - Dated:- 17-11-2016 - Shri S. S. Garg, Judicial Member And Shri Ashok K. Arya, Technical Member Shri V. Raghuraman Shri Raghavendra, Advocates For the Appellant Shri Mohammed Yous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ols Pvt. Ltd. (referred as MBC) is located in No.64, Antharasanahalli Indl Area, Tumkur. MBC is wholly owned subsidiary of PJM having separate factory premises and is engaged in manufacture of Ecoderma, Ecohume, Echohume G, Delfin, Heligard etc. Both factories are located at a distance of 1.5 kms from each other. (iii) The Department issued show cause notices (SCNs) for the period from April 1997 to March 2003 demanding Central Excise duty on various allegations. The first and the main allegation is that PJM is running one more manufacturing unit in the name of their subsidiary MBC alleging that they have financial control over MBC and the value of their clearances should be clubbed resulting in denial of benefit of SSI exemption to both PJM and MBC. (iv) The details of show cause notices issued to PJM and MBC along with demands under various allegations are given as under: SCN NO Date Demand confirmed by Commissioner in OIO 9/2004 Dt 12.10.2004 PJM MBC Total Demand PJM MBC Clubbing of clearance MBC-Clubbing clearance Clandestine-Mfr- Econeem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove referred Final Order dated 25.10.2005 issued by Hon ble CESTAT, the respondent-Commissioner of Central Excise, Bangalore II filed five appeals before Hon ble Supreme Court numbered as Civil Appeal No.5851 of 2006. (V-C) The Hon ble Supreme Court held that whether the excisable goods manufactured by the holding company and the subsidiary company have to be clubbed together has not been satisfactorily answered either by the learned Commissioner or by the CESTAT in the impugned judgment. Supreme Court held that CESTAT, without adverting to either the facts stated in the show cause notice or the reply thereto, directly arrived at a conclusion that the manufacture of the excisable goods by both the holding company and the subsidiary company cannot be clubbed only on the basis of a circular dated 29.05.1992. Considering the decision of Supreme Court in CCE, New Delhi Vs. Modi Alkalies Chemicals Ltd., Ors 2004 (7) SCC 569 which held that the above referred circular would have no relevance to the notifications other than the Notification mentioned therein and therefore, Supreme Court held that CESTAT has decided the issue of clubbing is bad in law. On the issue of suppression of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., Vs. CCE, Chandigarh 2015 (327) ELT 103 (Tri. Del.) e. The Hon ble Supreme Court in Commissioner v. Modi Alkalies and Chemicals Ltd.: 2004 (171) E.L.T. 155 (S.C.) in the context of clubbing of clearances held that the pervasive financial and management control are prima facie indicators of interdependence between the units. However, it was held that whether a unit is dummy is to be based on the facts of each case and there could not be any generalization or rule of universal application. f. It is submitted that the holding company PJM and MBC, the subsidiary are separate legal entities having separate factories with separate plant and machinery. This fact has been accepted by the respondent and two companies are engaged in manufacture of entirely different types of products. g. No clubbing could be done when two units have separate sales tax, income tax, SSI registration and have separate legal entity under Companies Act. h. PJM MBC have their own Plant and Machinery: i. There is no evidence of common funding and financial flow back. Departments letter dated 15.9.98 was replied to by appellant stating no flow back and department has not led any evidence to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by both the aforesaid companies. a. Commencement of manufacturing activity by MBC is intimated vide letter dated 20.07.1998. b. Application dated 10.8.1998 for registration under Central Excise. c. Marketing pattern filed u/r 173C (3A) indicating routing of goods through related party (MBC). d. Price declaration dated 14.10.1996. e. Copy of Dept Letter dated 15.9.98 reply by PJM. f. Appellant had filed price declaration and other details starting from 1996 and continued to file during 1998 as well. g. Show cause notice dated 12.3.2001 has been issued two years after the intimation and 4 years after registration by MBC. h. No SCN could be issued by invoking extended period after a gap of many years after intimation and filing of price declaration having details of subsidiary. 3.4 The learned advocate for the appellants additionally submits as under: * The reliance by the respondent during the hearing on 3.10.2016 on the decision of Tribunal in British Scaffolding India Pvt. Ltd: 2014 (313) ELT 87 (Tri.-Del.), is completely misplaced. (a) As in this case 6 units were set up, all sold goods at a deflated price to BSL which controls the finance and ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular No.6/1992 dated 29.5.1992 issue by CBEC, Ministry of Finance which clarifies that if the clearances are on behalf of the same manufacturer, it should be taken into consideration for purposes of interpreting the exemption Notification concerning SSI. In the present case, the two units under the name of PJ Margo and Margo Bio-controls Pvt. Ltd. (MBC) are units of one manufacturer only and their clearances are to be clubbed. (iv) In support, reliance is placed on the following case laws: a. British Scaffolding India Pvt. Ltd. vs. CCE, Delhi: 2014 (313) E.L.T. 87 (Tri.-Del.) b. NEC Industrial Project vs. Commissioner : 2015 (325) E.L.T. A145 (S.C.) c. Euro Scaff (India) Ltd. vs. Commissioner: 2015 (323) E.L.T. A124 (S.C.) d. Premium Suiting (P) Ltd. vs. CCE: 2016 (331) E.L.T. 589 (All.) e. Modern Engg. Plastics Pvt. Ltd. vs. CCE, Trichy: 2009 (243) E.L.T. 289 (Tri.-Chennai) f. Parle Bisleri Pvt. Ltd. vs. CCE, Ahmedabad: 2011 (263) E.L.T. 15 (S.C.) g. Apex Electrostatics vs. CCE, Hyderabad-I: 2015 (330) E.L.T. 701 (Tri.-Bang.) (v) Shri N. M. S. Babu, Deputy Manager of PGM who is looking after day-to-day affairs was also authorised signatory to MBC but wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PJM. (ii) Administrative office and branches/depots are in common premises (iii) Entire quantity of one the products econeem manufactured by PJM is sold through MBC and no commission is paid to MBC by PJM. (iv) Entire funding to float MBC is done by PJM only. 7.3 We find that by and large PJM and MBC have separate existence in terms of separate factory premises, separate machinery, separate product items and so on. However, there are some key features/elements, whereby this separation (separate private limited companies) merges into one and these two units give the appearance of one only. The said features which merge these companies into one and preponderantly indicate that they are one manufacturer only are: (i) The Deputy Manager of PJM, Shri NMS Babu is Authorised Signatory of both the units and also looks after day-to-day affairs of both the units. (ii) The entire funding for starting MBC in respect of its start and manufacturing activities was done by PJM. (iii) MBC had the license from Ecotech International and Technology for manufacturing neem based products, which was passed on to PJM without any consideration. (iii-A) The appellants argue that MBC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of liability of duty of Central Excise is PJM only. Therefore, all the liability of Central Excise duty and other taxes becomes payable by PJM only. Consequently, the clearances from both these units have to be clubbed together and thereafter it has to be decided if they are entitled to SSI benefit and what is their liability of payment of duty of central excise. 7.3.1 It is to be noted that the value of manufacturing and clearances of exempted goodsfrom any unit (PJM and MBC) has to be excluded, when the clearances of both the units are clubbed to determine the eligibility of SSI benefit to the appellants. 7.4 We have held that both the companies are one and the same. The principal company is PJM and it will be liable for payment of duty of Central Excise, if any, for the clearances made by both the units. We take support from the Ministry of Finance, CBEC Circular No.6/1992 dated 26.5.1992. The text of the Direction issued under Section 37B has been mentioned in the said Circular. From the said direction one of the general principles given in Clause 4 is quoted below: (iv) Whether or not in the expression by or on behalf of a manufacturer the expression from one or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in the Notification. Thus, when a manufacturer has four factories located at different locations, and the SSI Exemption Notification prescribes nil rate of duty for first clearances of specified goods worth ₹ 50 lakhs in a financial year, each of these factories would not be separately eligible for full duty exemption in respect of its first clearances worth ₹ 50 lakhs in a financial year and for the purpose of this exemption, it is aggregate value of clearance of all the factories put together which would be considered. Similarly, eligibility for SSI Exemption during a particular financial year, shall be determined on the basis of aggregate value of clearances of all excisable goods for home consumption during the preceding financial year made from all the factories of the manufacturer and if the aggregate value exceeds the threshold limit, none of the units would be eligible for SSI Exemption even if the value of clearances for home consumption of all excisable goods made by each individual unit during the preceding financial year is well within the threshold limit for SSI exemption. It may happen that a manufacture may have several factories located in dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit owned by another private limited company C with shareholding by A, B and another son Z2 of X and if these four units owned by X, A, B and Care each availing of SSI Exemption, a question arises as to whether they are to be treated as separate entities or units owned by the same person, for the purpose of SSI Exemption. 7.1.1 While a company is a legal person entirely distinct from its shareholders, in terms of Apex Courts Judgment in case of Income Tax Commissioner, Madras v. Meenakshi Mills, Madurai, reported in AIR 1967 Supreme Court 819, in certain exceptional cases, the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade and that the court has powers to disregard the corporate entity if it is used for tax evasion or to circumvent the tax obligation. Same view has been taken by the Apex Court in cases of :- (a) Calcutta Chromotype v. Collector of Central Excise, reported in 1998 (99) E.L.T. 202 (S.C.) = (1998) 3, SCC-681; (b) Subra Mikharjee another v. Bharat Cooking Coal Ltd., reported in (2000) 3 SCC-312; and (c) Delhi Development Authority v. Skipp Construction Co. (P) Ltd., report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... khs while to SCGCPL it was about ₹ 65 lakhs. The finding of the Commissioner that the financial assistance from the financial institutions were availed with the aid and assistance of MACL has not been seriously disputed. Apart from that, the cylinders were brought on lease by MACL from another concern and were sub-leased to the three companies. The cylinders bore the name of MACL. If the three companies had separate standing as contended it could not be explained why they could not get the cylinders directly from the lessors on lease basis and the need for introducing MACL as the lessee and then the three companies becoming sub-lessees. As noted by the Commissioner, entire receipts were paid as lease amount to MACL. Here again, the under-valuation aspect assumes importance. While the supply by MACL to three companies was ₹ 0.50 per unit, the sale price by the three companies was ₹ 5 per unit. It is on record that accounts were kept by common staff and marketing was done under the supervision of a person who belongs to the same group of concerns. The amounts have been collected by an employee of MACL. The so-called Directors of the companies were undisputedly emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions, has no existence in law. Though in case of Supreme Washers Pvt. Ltd. (supra), after upholding the principle of lifting of corporate veil the Apex Court taking note of the Boards Circular No. 6/92, dated 29-5-1992, had remanded the matter to the Tribunal for examining the applicability of this circular, since this circular being contrary to the law laid down by the Apex Court in the case of Income Tax Commissioner, Madras v. Meenakshi Mills, Madurai (supra), M/s. Calcutta Chromotype v. CCE (supra), Delhi Development Authority v. Skippe Construction Co. (P) Ltd. (supra), Associated Rubber Industry Ltd. (supra) and CCE v. Modi Alkalies Chemicals Ltd. (supra), has no existence in law, the Appellants plea for decision of this matter on the basis of Boards Circular No. 6/92-C.E. is not acceptable. 7.1.3 Thus, if there is evidence on record to prove that a particular person, whether natural or juristic, has comprehensive financial and management control over several entities and is the actual beneficiary of their activities, the clearances of the factories owned by these entities are to be clubbed for the purpose of determining their eligibility for SSI Exemption by treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that common balance sheet is being filed. It is, therefore, irrelevant to contend that the two factories have separate entrances, managing staff or central excise registration. What is relevant is that a manufacturer, if he has one or more factories, would be entitled for exemption at concessional rate of duty if the aggregate value of clearances of all excisable goods does not exceed ₹ 3 crores. Since the appellant has another factory, which is manufacturing an excisable commodity, its clearances have to be added while considering the exemption notification. Since the aggregate clearances exceeded the limit of ₹ 3 crores, the appellant was not entitled for exemption. The adjudicating authority rightly issued the show cause notice and quantified the demand. Above observations of Hon ble High Court are applicable to the present facts. Therefore, there can be no doubt that the clearances of both the units deserve to be added for deciding on the eligibility of SSI exemption Notification. 7.4.5 The Hon ble Supreme Court in the case of Commissioner vs. Modi Alkalies and Chemicals Ltd.: 2004 (172) E.L.T. 155 (S.C.) observes as under: 8. Whether there is inter-d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, therefore, they are two separate companies, has not been found to be of assistance to the appellants in their stand and these submissions/arguments do not stand the scrutiny of law as discussed above, when the key features of the appellantsunits and the case laws given above overwhelmingly support us to conclude that they are one and the same manufacturer, where clearances have to be clubbed together to decide on the eligibility of claiming SSI benefit under the respective Notification(s). 8. Limitation: The appellants plead that all the facts were in the knowledge of the Revenue/Department, therefore, the demands of Central Excise duty cannot go beyond one year and extended period clause for demand of central excise duty cannot be invoked. 8.1 Based on the facts on record and the submissions of both sides and the case laws cited, we are in agreement with this plea of the appellants that there has not been any suppression of material facts by the appellants, when the two appellants viz., PJM and MBC are under the jurisdiction of one Commissionerate of Central Excise, who have granted separate central excise registration to them and from time to time, there has been corres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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