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TMI Blog2009 (1) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... arant - hereinafter referred to as the RE) who are the manufacturers of Butyl Rubber Tubes/Rubber flaps and moulds/special engineering goods (hereinafter referred to as the "the said goods") are evading payment of Central Excise duty. Simultaneous searches were conducted on ARPL and other premises on 6-3-1997 and recovered various records under various panchanamas. 2.1 Consequent to the investigation and recording of the statements, show cause notices were issued to ARPL, TMTTPL, MR and RE, Shri Deendayal Agarwal, M.D. of ARPL, TMTTPL and Shri Ashok Kumar Agarwal, Director of ARPL directing them to show cause notice as to why the clearances made by all the units be not clubbed together and duty be not demanded from them and why penalties be imposed on them. The said show cause notice was contested by the respondent and culminated in Order-in-Original No. 20/2000 dated 24-11-2000 wherein the learned Commissioner of Customs and Central Excise (Hyderabad-I) after considering the facts of the case and the defence put forth, came to the conclusion that apart from having common management and directors, sharing of office premises and other facilities and common utilization of services o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely. However, in view of the existence of facts such as the units being controlled by the same set of members of the family having major shareholding in each unit, mutuality of interest in the business between the units, financial interdependence as evidenced by the frequent flow of funds in the form of interest free loans for the functional activities of the other units without any stipulation for the repayments and huge outstanding amounts in the books of accounts without repayments, supervisory control over marketing and production of the other units without any consideration etc., the clearances are required to be clubbed to determine the eligibility limit of each unit up to which the SSI exemption calculated on the basis of the aggregate value of clearances of the units could be availed by the units in terms of the SSI Notification No.1/93 CE, 8/98 CE, 8/99 CE etc. In Priya Corporation v. CCE - 1990 (48) E.L.T. 26 (T) the Tribunal held that when the units were having common proprietary interest controlled by only one person with interconnection in various respects within the units, the value of clearances are liable to be clubbed for the purpose of small scale industry benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management control are prima fade indicators of interdependence. She would also rely upon the decision of the Tribunal in the case of Priya Corporation v. CCE - 1994 (48) E.L.T. 28 (Tribunal) and Supreme Engineering Works v. CCE, Pune - 1996 (82) E.L.T. 102 (Tribunal) for the proposition that impugned order be set aside and all the clearances be clubbed together for arriving at the duty liability. 4. The learned advocate Shri B.V. Kumar appearing on behalf of the respondents would submit that there is no proposal to treat other companies as dummy units. It is his submission that there cannot be a case for clubbing in these cases, as it is accepted and admitted that all the four units have got their own machineries and manufacturing plants. It is his submission that the lease deed between the main company ARPL and others as regards the rent fixed being very low, it is the submission that the lease deed between two companies cannot be a question or a bone of contention, for clubbing the clearances. It is his submission that the finding of the Adjudicating Authority on this issue is very clear and revenue has not adduced any evidence. It is his submission that the interest free loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g accounts separately, there cannot be any clubbing of clearances. He would also reply upon the recent decision of this Bench in the case of CCE, Mangalore v. Sushil Chemicals as reported at 2008 (230) E.L.T. 117 (Tri.-Bang.) to submit that mutuality of interest among two units or several units of a group of family members cannot be reason for clubbing the clearances. 4.7 He would also submit that the Adjudicating Authority has clearly given detailed findings which are not contraverted by the revenue by giving contrary evidence. 5. We have considered the submissions made at length by both sides and perused the records. It is undisputed in this case that this is a second round of litigation. It is also undisputed that the entire case of revenue revolves around only on the three following allegations for clubbing of the clearances. (i) That there is lot of financial accommodation in form of interest free loans, sale of goods, none repaid. (ii) Rent charged by ARPL from others is ab initio low. (iii) Use of brand name without any agreement and that letter addressed by the Managing Director Deendayal Agarwal to State Bank of Hyderabad seeking term loan for TMTTPL. 5.1 We find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies units having separate machinery owned through bank loan, separate electric meter, maintaining records, obtaining orders and selling goods separately should not be clubbed together on mere fact of close relationship and the fact that head office located in same building and same room are immaterial in absence of any flow back of money: In the case of M/s. Cheryl Laboratories v. CCE it was held that the use of godown of one by the other, use of common registered office and telephone would not be factors for clubbing of the clearances of the units. 22. ARPL have extended interest free loans to MR as is evident from the Balance Sheets of ARPL. The Noticees' contention is that the interest free loans are not uncommon. From the records it is observed that ARPL has been extending interest free loans by almost all the years from 1995-96 to 1998-99 and during this period MR cleared certain amount of loans in every year. Availing loan from ARPL and payment of certain portion and again availing loan is a cycle. During this period MR cleared certain amounts of loans viz. Rs. 3.26 lakhs in 1995-96, Rs.1.72 lakhs in 1996-97, Rs. 3.72 lakhs in 97-98 and Rs. 31.42 lakhs in 1998-99. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Debtor/Creditors and the same shall not be conclusive evidence to infer that there is a mutuality of financial interests. 24. A copy of the letter dated 19-12-99 of Deendayal Agarwal, M.D., ARPL, addressed to the AGM, SBH, seeking a term loan for TMTTPL, was placed as an evidence to allege mutuality of financial interest and to substantiate that TMTTPL is controlled by ARPL. In the said letter it was represented and confessed that the Directors of ARPL are substantially interested in TMTTPL; that ARPL and TMTTPL belong to the same family. The Noticees' contention is that the said letter was addressed to the Bank in the context of obtaining a term loan for TMTTPL and the Directors of ARPL have not given any loans as Directors to TMTTPL. They contended that the said letter does not have any evidentiary value as the same was written to the Bank only to obtain financial assistance. Similarly the Project Report cum Application for financial assistance to TMTTPL cannot be taken as relevance to this case since it was prepared purely for the purpose of getting financial assistance from Banks. Even if it is mentioned in the said Project Report that the Goodwill and marketing resources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other three units by ARPL, are not sufficient evidences to infer that all the units are controlled by ARPL or by Shri Deendayal Agarwal and thereby clubbing of clearances of all the four units. 5.2 It can be seen from the above reproduced paragraphs of the Order-in-Original, that the Adjudicating Authority has gone into details of each and every allegation made by the revenue in the Show Cause Notice. After considering the entire facts of the case, the Adjudicating Authority dropped the proceedings. We may note here that as against the above said findings, the grounds of appeal do not bring on record any evidences which would controvert the findings of the Adjudicating Authority. On the contrary, we find that in the grounds of appeal at Para-3, the revenue has clearly admitted as under. 3. Though the four units are independent legal entities having their own manufacturing units, plant and machinery, labour force and are assessed separately under the Income Tax and Sales Tax Act with separate legal safeguards/registration with various statutory authorities, it is crystal clear that all these legal safeguards are for public consumption as the fact is that these four units are contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alry and bitter animosity between the different units of the same family. Both are possible. It so happens that in the present case, there is some sort of synergy among the various units. This is evident from the observations of the Adjudicating Authority. In Para 78, he has stated "in reality I find that by virtue of the transactions discussed above all the units are closely bound together as a group which is rare in business transactions between units with genuine separate identities." All the transactions enumerated by the Adjudicating Authority are available in the ledger accounts of the concerned units. It is also on record that the transactions have been reflected in the Income Tax Returns and accepted by the Income Tax Authorities. The proposal in the Show Cause Notice is for dubbing of the clearances of all the units for duty purposes. In that case the combined clearances would exceed Rs.1 crore and there would be duty liability. But this can be done only when there is a principal unit and all the others are dummies or sham. Here we have nine units A1, A2 to A9. It is the burden of the Revenue to show that A1 is the real unit and A2 to A9 exits only in paper. Unless such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation No.175/86-C.E.:- (i) The question whether different partnerships having common partners are treatable as separate manufacturers or the same manufacturer, would be a question of fact in each case to be determined on the basis of such factors among other, like composition of the partnership, existence of the factory, licence, nature of goods manufactured etc. (ii) Different firms will be treated as different manufacturers for the purpose of 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 distinct from the shareholders composing it. Hence each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. (iii) If there are two firms with 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 individual owns several factories, he or it gets exemption only in respect of one individual owns several factories, he or it gets exemption only in respect of one lot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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