Judgment:
1. This batch of nine applications seeking stay and waiver of the pre-deposit of the duty confirmed and penalties imposed on the applicants were argued by Shri S.P. Mathew, Advocate. Revenue was represented by Shri Deepak Kumar, SDR.3. M/s. Century Trading Company was engaged in manufacturing "Iron Clad Single Pole cutout" classifiable under sub-heading 8536.00 of the CETA 1985. This unit was operating w.e.f 1978. Another unit situated in adjacent premises by the name 'M/s. Sanjay Electric Works were manufacturing similar goods from 1980. Neither unit was in possession of a Central Excise Licence/ Registration. On a visit to the premises of the two units, the officers found that neither unit had sufficient machinery for manufacture of the goods and then machinery installed in both units required to manufacture such goods. The officers found that the two units were running with a common labour and the owners of the units were inter-related and that there was free financial flow between the two units. In the search of the premises of the persons in charge of the units, documents pertaining to two other units, viz. M/s. Neelam Enterprises and M/s. R.D. Enterprises were also found. These units were stated to be located at another premises. Check of those premises revealed that such units were not in existence. However, on record these units were shown to have manufactured the same goods and cleared the same. The statements of partners/persons in charge of both the units were recorded and documents in their possession were examined.
The documents showed frequent transactions between the four units of substantial sums. On the basis of these entries the officers believed that there was free financial inter-flow between the four units. The final accounts of the four units also showed the persons in other units as partners. Shri Sanjay C. Choksey was the Proprietor of M/s. Sanjay Electrical Works. He was also a Partner in M/s. R.D. Enterprises. In his statement recorded on 26-12-1997, he admitted that the raw materials and machinery was common between M/s. Century Trading Co.
(M/s. CTC) and M/s. Sanjay Electrical Works (M/s. SEW) and unless the machines in both the units were put into operation, the final product would not be manufactured. In his further statement, he admitted to looking after the work of all the units. He also admitted common resources and common labour. He admitted that the two other units viz.
M/s. R.D. Enterprises and M/s. Neelam Enterprises were fictitious. In his further statement, he admitted that M/s. R.D. Enterprises and M/s.
Neela Enterprises were not in existence. Shri Satish Nayak was the common supervisor of M/s. C.T.C and M/s. SEW and he corroborated all the facts. He named Shri Sanjay Choksey as the only person to be involved with both the units. He also confirmed that M/s. R. D.Enterprises and M/s. Neelam Enterprises were fictitious entities. At the end of the investigations the SCNs were issued quantifying the duty short levied at Rs. 41,95,191/- and alleging liability to penalty from the units as well as the Partners and the Proprietors thereof. In the SCNs the entire liability for short levy etc. was pinned down to Shri Sanjay Choksey. Paragraph 25 of the SCN extracts this which reads as follows : "25. All the other partners in M/s. C.T. Co. M/s. R.D. Enterprises and M/s. Neelam Enterprises, are not at all active in the business.
Shri Chandrakant Choksey and Shri Navin C. Choksey are not able to attend/look after the business of the respective units because of their old age/health problems. Whereas Smt. Daksha Choksey and Smt.
Ramila Choksey are basically house-wives and have no knowledge or experience regarding the business of any of these four units. On the contrary, they are totally unaware of the business affairs of the units in which they are partners, because Shri Sanjay Choksey is the only person who is looking after the business of all the four units.
All other partners i.e Noticee No. 4 to Noticee No. 8 are partners in the respective firms for name sake only. Shri Rajan Choksey, Partner of M/s. R.D. Enterprises is the partner on paper only and he is staying abroad and there is no question of is looking after the business matter of M/s. R.D. Enterprises, situated in Bhayander.
This fact has been accepted by Shri Sanjay Choksey in his statement dated 1-1-1998. Thus, Shri Sanjay Choksey has concerned himself in manufacturing, clearing, possession, depositing, transportation of excisable goods which he knew or had reason to believe were liable to confiscation under the provisions of Central Excise Act, 1944.
Thus, he has rendered himself liable for the penal action under the Central Excise Act, 1944.
After hearing the noticees the Commisioner of Central Excise, Mumbai VI passed the impugned order. In his order he confirmed the duty and levied penalty in the following words : "(i) I confirm the demand of Central Excise duty amounting Rs. 41,95,191/- (Rs. Forty one lakh ninety five thousand one hundred ninety one only) on M/s. Century Trading Co. and M/s. Sanjay Electrical Works under the provisions of Section 11A (2) of the Central Excise, Act, 1944. The noticees may adjust Rs. 50,000/- paid by them against the Central Excise duty payable by them by virtue of this order.
(ii) I impose a penalty of Rs. 41,95191 (Rs. Forty one lakh ninety five thousand one hundred ninety one only) on M/s. Century Trading Co. and M/s. Sanjay Electrical Works under the provisions of Section 11AC of the Central Excise Act, 1944 read with Rule 173Q of the Central Excise Rules, 1944.
Thereafter he proceeded to impose penalties on Sanjay Choksey and all other noticees under Rule 209A of the Central Excise Rules, 1944.
Against this Order M/s. Sanjay Electrical Works and M/s. Century Trading Company have filed the appeals. Appeals have also been filed by Shri Sanjay Choksey, proprietor of M/s. SEW and partner in M/s. R.D.Enterprises, Smt. Ramila N. Choksey, Smt. Daksha S. Choksey partners in M/s. Neelam Enterprises have filed appeals. Rajan Choksey the second partner in M/s. R.D. Enterprises and Shri Navinchandra Choksey partner in Century Trading Co., Shri Chandrakant Choksey, Partner of Century Trading Co. as well as in M/s. Neelam Enterprises have filed appeals.
Shri Satish Nayak, Manager of the two units viz. Century Trading and M/s. Sanjay Electricals have also filed the appeals.
4. After advancing the arguments on merits, Shri Mathew referred to a copy of the judgment of the Supreme Court in the case of Gajanan Fabrics Distributors v. C.C.E., Pune - 1997 (92) E.L.T. 451. In the proceedings leading to this decision, the Collector of Central Exicse, Pune had held that M/s. Gajanan Weaving Mills was the working unit and that the other units were merely shadow units. However, when confirming the demand all the units were named liable to pay the duty short levied. The Tribunal in their order in appeal against this judgment rejected the contentions of the assessees on merits, but remitted the proceedings back to the Collector for recalculation, of the liabilities on each unit. This order of the Tribunal was challenged before the Supreme Court leading to the cited order. In the order the court observed as follows : "2. We find, after having heard ld. counsel, that it is necessary to remand the matters to the Collector to consider the entire case afresh. The principal factor that leads us to this conclusion is the finding of the Collector, upheld by the Tribunal, that the seven units which are the appellants before us "are only a corporate facade although registered with the various authorities with a view to camouflage their actual identity and thereby avail of the exemption which, otherwise, would be inadmissible to them." The Tribunal failed to give due attention to the fact that the Collector had confirmed, in the sum of Rs. 11,84,708.51, the demand made in the show cause notices upon all seven units and their partners or Directors. Having regard to this conclusion that all units other than Gajanan Weaving Mills were fictitious units, the sequitur, one would have assumed could only be that it was Gajanan Weaving Mills which was the assessee and liable to satisfy the demand. By confirming the demand upon all the seven units the Collector appears, however, to have treated them all as assessees and, implicitly recognised their independent existence.
3. The facts of these cases, therefore, require to be reconsidered, having regard also to the law that has now been settled by judgments of this Court and the High Courts subsequent to the passing of the order under challenge.
4. The appeals are, therefore, allowed and the order of the Tribunal under appeal is set aside. The matters shall go back to the Commissioner, Pune, to hear and decide the show cause notices afresh. The parties shall be at liberty to file additional documents, if they so chose. It is made clear that the remand is now unlimited and the matters shall be decided without reference either to the order of the Tribunal under appeal or the earlier order of the Collector." Shri Mathew urged that the facts in the preset disputes being identical, the cited judgment would fully apply to the present dispute.
6. When the Commissioner finds that only one unit was the real manufacturer and the other units were merely shadows or dummies then he was required to confirm the demand against one unit and his confirming the demand against all units would amount to tacit recognition of their independent existence. The manner in which the ld. Commissioner has framed his order, would make it appear that he had recognised the independent existence of M/s. Century Trading Company and M/s. Sanjay Electrical Works. However in his deliberations he has established his conclusion in paragraph 69 of his order in the following words : "69. Hence, there is a sufficient ground for considering the subject four units as a single entity. Therefore, M/s. SEW, M/s. C.T. Co., M/s. R.D. Enterprises and M/s. Neelam Enterprises should be considered as single entity. These are liable to pay central Excise Duty on the clearance value, after clubbing the value of clearances of above four units." In view of this conclusion, it was appropriate that the demand of duty should have been confirmed by him against a single unit. In this manner, the facts of this case, are identical to the facts before the Supreme Court in the cited order. In these circumstances, we allow the appeals, setting aside the order of the Commissioner. We remit the matters back to the Commissioner Mumbai VI to hear and decide the issues afresh. Adequate opportunity should be given to the parties to state their case. The appellants are directed to cooperate with the Commissioner.
7. In view of our above orders, the Stay applications become infructuous and are disposed of accordingly.