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TMI Blog2004 (3) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... M Sons Cones are engaged in the manufacture of paper tubes and cones of various seizes. The departmental officers on a visit to the said factory premises found that the following machines were installed therein : (1) Automatic cone making machine - 3 Nos. (2) Nosing machine - 1 No. (3) Semi Velvet Machine - 1 No. (4) Printing Machine - 1 No. (5) ABR model cone functioning machine - 2 Nos. (6) Jumbo Cone Semi velvet machine - 1 No. (7) Heater machine - 2 Nos. (8) Cone cutting machine - 2 Nos. (9) Paste making machine - 1 No. 3. Shri Selvaraj, Supervisor of M/s. MMSC informed officers that he was also working as Supervisor for the other factory viz. M/s. MPPP for short whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borated the statement given by Shri Richard Durairaj. Statements were also recorded from the machine operator of M/s. MPPP and Shri P. Kannan, Supervisor of M/s. MPPP who all stood by what they stated when the officers visited the factories. Proceedings were therefore, initiated by issue of show cause notice dated 18-12-96 addressed both to M/s. MMSC and M/s. MPPP alleging contravention of various provisions of the Act and the rules made thereunder and the proceedings culminated in the order impugned order as aforesaid. Aggrieved by the said order, appellants viz. M/s. MMSC have in appeal on the following grounds : (a) Both the units are separate legal entities. The orders of the Commissioner clubbing of clearance of the two units are not sustainable. (b) Both the units came into existence as early as 1985 and 1986 whereas the excise duty came to be levied only as late as 1-4-94. They were functioning for 8 to 9 years before the levy the same way as after the levy with the same pattern of manufacturing activity with the same set of machinery in each unit. (c) When two units are separately registered under Central Excise Act, 1944. Sales Tax, SSI having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of six months and hence the demand is hit by limitation. He also submitted that longer period of limitation is not invocable in the present case inasmuch as the department was aware of the activities being undertaken in the unit. He further submitted that the period of dispute in this case is between 1-4-94 to 16-2-96 i.e. much before the introduction of Section 11AC with effect from 28-9-96 and it is well settled that the provisions of the said Section cannot be invoked retrospectively. As regards imposition of penalty on the other appellants under Rule 209A, he submitted that there was no case for imposition of penalty on them and he prayed for setting aside the impugned order and allowing the appeal. He has also cited various case laws such as : (a) Kaur Singh v. CCE, New Delhi reported in 1997 (94) E.L.T. 289 (S.C.) wherein it was held that show cause notice issued beyond six months not even alleging fraud or collusion or wilful mis-statement or suppression of facts or contravention with intent to evade payment of duty, let apart giving particulars in respect thereof is not sustainable for demand of duty. It was also held therein that which ground is alleged again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or excise purpose. Examining this issue, we note that Selvaraj, Supervisor of M/s. MMSC has admitted that he was functioning as the supervisor of both the units. He has also clearly stated that semi-finished paper cones manufactured at M/s. MPPP were being brought to the other factory for nosing, end cutting and velvet finishing. His admission is corroborated by the availability of nosing machine. cone cutting machine, velvet machine at M/s. MSSC and non-availability of these machines at M/s. MPPP. This statement was corroborated by the statement of Shri Kannan, Supervisor of M/s. MPPP who stated that semi-finished goods used to be sent to the other factory for cutting, nosing and velvet finishing and these were packed and despatched from that factory itself. Shri Richard Durairaj, Proprietor of M/s. MMSC also stated that the managerial control of both the factories were looked after by himself and his sister G. Metilda who is the proprietrix of M/s. MPPP was not involved with the day-to-day activities of M/s. MPPP. He has also stated that in his voluntary statement dated 13-2-96 which was admitted as correct and true by his sister G. Metilda that the production of M/s. MSSC was di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he longer period of limitation in term of proviso to Section 11A(1), we observe that the appellants have taken the plea that longer period of limitation cannot be invoked in this case because there had been no suppression of facts as the existence of the units was known to the department. They have also cited various case laws wherein it has been held that there should be specific mention of the commissions and omissions on the part of the assessee in the show cause notice, for the purpose invoking the proviso to Section 11A(1). We have gone through the show cause notice and we find that Para 8 of the show cause notice clearly indicated that the interrogation and investigation clearly revealed that the production was centralised and clearances were bifurcated among the units with an intent to wrongly avail the SSI exemption. Statements recorded from various persons including the proprietors of both the units and corroborated by the statements of other persons such as operator and Supervisors also admit of the above factual position of centralised production and clearance. Further Para 20 of the show cause notice also clearly brought out the details of the manner of wrong availment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. MPPP under the provisions of Rule 209A, we observe that though they were privy to the commission of offence committed by M/s. MMSC as evidenced by the statements given by various persons, the main appellants i.e. M/s. MMSC whose proprietor Richard Durairaj, was the person behind organizing the centralised production and clearances as noted above, have not been imposed any penalty under Rule 209A of the CER. Therefore, the penalty imposed on the other appellants M/s. MPPP cannot be sustained and is set aside. 12. In the result appeal of M/s. MMSC is partially allowed by setting aside the penalty imposed on them under Section 11AC and Rule 173Q while appeal of the other appellants is allowed. Sd/- (Jeet Ram Kait) Member (T) 13 . [Order per : Archana Wadhwa, Member (J)]. - I have gone through the Order proposed by my learned Brother. With due respect, my views on merits as also on limitation are different in respect of appeal of M/s. M.M. Sons (MMSC). Accordingly, I record a separate Order in the case of M/s. MMSC. However, in respect of allowing of appeal of M/s. Muthusavaari Pillai Paper Products (MPPP) by setting aside the penalty upon them, I concur with the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Excise Department as also with the Sales Tax and Income Tax Authorities. During all these years, they were being accepted by all the Revenue Departments as separate legal entities. The appellants were given a Central Excise Registration. They were regularly filing all the returns that are all assessed. Not only that, they were given permission to do job works on behalf of the other undertaking for certain processes like nosing, end-cutting and velvet finishing processes. For the above purposes, permission under Section 57F(3) was also granted to them. In these circumstances, merely because M/s. MMPP were not having the requisite machinery to complete the paper cones in their factory, they were getting it done from M/s. MMSC. Proper documentation under the authority of law will not be a factor to conclude that the clearances of the two units are required to be clubbed. Both the units were having separate SSI Registration and were having independent Balance Sheets. In these circumstances, the factors of one Supervisor working for two units and one unit doing certain finishing processes for another unit, cannot be made the basis for clubbing the clearances of the two. There are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adhwa) Member (J) DIFFERENCE OF OPINION Whether the appeal of M/s. M.M. Sons Cones is required to be rejected and appeal of M/s. Muthusavaari Pillai Papers Products is to be allowed as held by Member (Technical) or both the appeals are to be allowed as held by Member (Judicial). Sd/- (Jeet Ram Kait) Member (T) Sd/- (Archana Wadhwa) Member (J) 20 . [Order per : S.L. Peeran, Member (J)]. - The difference of opinion between the Members in the above matter has been placed before me for decision as a Third Member in terms of the Hon ble President s direction. 21. The point of difference of opinion is stated in the differing order. 22. I have heard ld. Counsel Shri Muthu Venkatraman for the appellants and ld. SDR, Smt. R. Bhagya Devi for the Revenue. Ld. Counsel took me through both the orders and pointed out that both the units are independently functioning and their independent status have never been challenged by the department. The department also did not allege that the other unit namely M/s. MPPP is the dummy unit of M/s. MM Sons. He pointed out from Paras 13 to 19 of ld. Member (Judicial) order to show that both the units are independent and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the second unit did not have machinery for completing the work. In this regard Member (J) has come to a precise conclusion in Para 18 of the order that The appellants have strongly contended that the pattern of movement of goods and their apportionment was exactly the same even after March, 1994 when their product became excisable. As such, in my view, this is not a proper case for clubbing the clearances of both the units. I order accordingly. I notice that this point has been arrived after due consideration of the facts and the appellants being independent in nature. On the other hand, I notice that the Member (T) has solely recorded his findings on the basis of the statements to consider that both the units are same oblivious of the fact the units are independent in all aspects of the matter. There has to be a clear flow back of funds between both the units or one of the units should be set up by the other by full financial assistance and there has to be entire flow back of funds. Such an allegation has not been not made by the department. Therefore, I conclude there is no financial flow back, centralised production, and distribution of final product for excise purpose a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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