1. All these appeals arise from common Order-in-Original No. 16/90 dated 16.11.90 by which the Commissioner has ordered for clubbing of clearances of all the above units and to treat them as one and as a consequence has denied the benefit of SSI exemption in termsof para 4 (a) and Para 4 (b) of Notification No. 175/86. Thereby, duty demand of Rs. 16,89,398.36 has been confirmed on Smt. Madana in respect of the entire fireworks manufactured and cleared from M/s. Mercury Fireworks, M/s. Sri Bannari Amman Fireworks, Universal Fireworks and Saraswathi Fireworks, under Rule 9(2) read with proviso to Section 11A(1) of the Central Excise and Salt Act, 1944. A further demand of Rs. 7,240.38 has been confirmed on fireworks found short during the officer's visit on 19.9.89 in all the four factories under Rule 9(2) read with proviso to Section 11A(1) of the Central Excise and Salt Act, 1944. There are separate penalties also imposed: Rs. 1,00,000 on Smt. Madana under Rule 173Q of CE Rules and Rs. 5000 each on M/s. Mercury Fireworks, M/s. Sri.
Bannari Amman Fireworks, M/s. Universal Fireworks and M/s. Saraswathi Fireworks under Rule 173Q of the CE Rules. Also, there is penalty of Rs. 1000 each of the persons indicated in the order under Rule 209-A of the CE Rules, who are said to be the partners of respective firms. A penalty of Rs. 1,00,000 has also been imposed on A. Ramamurthi under Rule 209-A. Besides, penalty of Rs. 1000 on Shri A. Abdul Kareem of Mercury Traders under Rule 209-A of CE Rules; Rs. 5000 each on Shri R.Mohan, Order Processing cum Despatch Clerk and Shri P. Gaberial John, General Manager of Ramamurthi Group of companies under Rule 209-A have also been imposed. Further penalty has been imposed on A. Bhaskaran, K.Sankaraj, M. Kanakaraj, K. Venugopal, D. Rajendran under Rule 209-A of the Act. The department's allegation against these appellants are that Smt. Madana and Shri A. Ramamurthi by wilful consent and collusion with intent to evade payment of duty have-- (a) floated bogus partnership firms to avail SSI exemption under Notification No. 175/86 in respect of fireworks manufactured in firms under the following names: The constitution of the aforesaid firms has been found to be declared differently to different agencies under: (i) Constitution of firms as declared to the Superintendent of Central Excise having jurisdiction over the firms: Name of the Unit.
L.4.No. Partnership Name of Partners.M/s Mercury F.W. 12/FW/88 Partnership a) Smt. R. MadanaInd.,E.T. Reddipatty b) Sri S. Palanisamy.Sri Bannariamman 1/3604/10/89 -do- a) Smt. R.MadanaF.W.,0. Mettupatti b) Sri V.R. Arjunaraja.Saraswathi F.W. 14/FW/87 Proprietory Shri G. SrinivasaInd., Sengamala- Naicker.nachiapuram.Universal F.W., 3/F.W./88 Partnership a) Shri Murhurajan.Perapatti.
b) I. M. Chidambaramc) M. Thirumavalavan(2) Constitution of firms as declared to Industrial Centre, VirudhunagarFactory Name SSI No. & Date Names of Partners1. Mercury F.W. Ind.
18/17/92043/PMT/ a) S. PalanisamSSI dt. 16.7.87 b) b) S. Madasamy2. M/s Bannariamman 18/17/03597/PMT/ a) R. MadanaF.W. SSI dt. 21.12.89 b) R. Arjunaraja3. M/s Saraswathy F.W. 18/17/02745/PMT ProprietorSSI dt. 20.9.88 G. Srinivasan4. M/s Universal F.W. 18/17/03119/PMT a) C. MuthurajanSSI dt. 6.3.89 b) M. Chidambaram(3) Constitution of firms as per partnership deeds entered-Partners Share of Profiti. Mercury F.W. Ind a) Smt. R. Madana 99%from 24.6.87 b) Sri S. Palanichamy 01%ii. M/S Bannariamman a) Smt. R. Madana 99%F.W. (from 3.6.88) b) Sri R. Arjuna Raja 01%iii. M/S Saraswathy a) Smt. R. Madana 19%F.W. (from 21.12.88) Minor R. Karthik 40%Minor R. Janaki (3) M/s Universal F.W. appears to be a proprietory concern as per.
I.T. Records with Smt. R. Madana as Proprietor being run by her on the factory premises leased by Shri M. Tirumalvalavan, as per I.T. Records.
2. And whereas, it further appeared that goods manufactured in different premises were being labelled with brand name "Mercury" which is owned by M/s Mercury Fireworks Industries.
3. And whereas, as per para 4 of Notification No. 175/86, exemption contained in Notifications No. 175/86 shall be applicable only to a factory which is an undertaking registered with the Director of Industries as a small scale industry under the provisions of Industries (Development and Regulations) Act, 1951, provided that the value of clearances from a factory during the preceding financial year or in the current financial year did not exceed or is not likely to exceed Rs. 7.5 lakhs.
4. And whereas, it appears that the value of clearances in the proceding/current financial year is respect of each of the aforesaid units has exceeded Rs. 7.5 lakhs.
5. And whereas, it further appears that the aforesaid units are not registered/ endorsed as S.S.I. Unit, names of the firms as per constitution aforesaid with the Director of Industries inasmuch as S.S.I. Certificates as earlier issued in the aforesaid factory premises were for a different manufacturer and the SSI registration would not as such be applicable ipso facto to-the aforesaid units. Therefore, exemption under Notification No. 175/86 will not be available to any of the aforesaid units.
6. (a) The partnership deeds entered by Smt. R.Madana with Shri S.Palanichamy in the case of M/s Mercury Fireworks Industries, with Shri V.R. Arjuna Raja in the case of M/s Bannariamman F.W. and with Shri G.Srinivasa Naicker in the case of M/s Saraswathy F.W. Industries appears to have been entered with the sole aim of getting on lease the factory premises and the licence under Explosives Act being held by the aforesaid holders of the factory premises. The partnership deeds so entered seem to be dummy inasmuch as no distribution of profit as envisaged in the partnership deed had been made to any of the aforesaid partners, there is no mutual agency as per the partnership deeds on S/Shri S.Palanichamy, V.R. Arjuna Raja and G. Srinivasanaicker; as per their own statements they are partners solely for the purpose of receiving some remuneration in the form of lease rent for the licence leased to the firm and the use of the factory premises for the firm.
Smt. R. Madana as such seems to run four different units engaged in the manufacture of Fireworks with the aid and assistance of her husband Shri Ramamurthy and as such is a "manufacturer" by whom goods are cleared from more than one factory premises.
(b) Shri P. Gabriel John., G.M. of the Ramamurthy Group of Industries, Shri R. Mohan, Order Processing cum Despatch Clerk, Shri A. Baskaran, Manager of M/s Universal Fireworks, Shri K. Sankara,--Manager of Mercury F.W.I., Shri N. Kanagaraj, in charge of M/s Bannariamman F.W., Shri K. Venugopal, Manager of Shri Bannariamman F.W. were engaged by the aforesaid Smt. R. Madana and Shri A. Ramamurthy to further their cause in evasion of duty by way of manipulation of production and clearance records by active participation of the aforesaid staff.
(c) A trading firm, M/s Mercury Traders with Head office at 110, Kamaraj Road, Sivakasi and consisting of the following partners-- was floated to look after the sales of F.W. manufactured in the aforesaid four units. Shri Abdul Kareem was a dummy partner in M/s Mercury Traders inasmuch as he was paid some remuneration for being included as a partner in the firm wherein he had agreed to lease the licence held in his name under the Explosives Act so as to facilitate storage of Fireworks in depots under the control of M/s Mercury Traders by virtue of the licence held in the name of Shri Abdul Kareem. Shri Abdul Kareem has no say in the business and no agency to act for the firm is created in him. It was, therefore, Smt. R. Madana and Shri A. Ramamurthy who were managing the trading firm M/s Mercury Traders. The trading firm was employed to make a common indent of orders received from different parties and through manipulation of records, goods manufactured in the premises of one Unit were billed in the invoices of another firm. Shri A. Ramamurthy, husband of Smt. R. Madana, by virtue of being guardians of the two minors included as partners in M/s Saraswaty Fireworks as also being partners of M/s Mercury Traders along with Smt. R. Madana was actively taking part in the business and guiding the affairs of all the firms.
(d) As per the statement recorded from the aforesaid persons employed by Smt. R. Madana and Shri A. Ramamurthy to look after the manufacture and sales of fireworks from the aforesaid units, a common indent would be placed with the Head office of M/s Mercury F.W. and other units at 110, Kamaraj Road, Sivakasi by M/s Mercury Traders for different buyers. On receipt of the common order, the stock position as per stock statements received from the 4 units would be verified to match the indent. Despatch advice were prepared by Shri R. Mohan, Clerk of Mercury Fire Works Industries to be sent to respective units for packing fireworks as per the despatch advice. On receipt of despatch advice, Manager of respective fireworks unit make a packing slip and despatch the goods to Head office in a van or lorry as arranged. G.P.I.s were made as per the invoice bill issued from Head Office. In number of instances, it was found that goods were manufactured in one premises as per details available in the packing list so prepared and such goods manufactured in one premises were billed under the invoices of another unit without any record or entry thereto. As different units were availing different slabs of exemption under Notification No. 175/86, goods actually manufactured in one premises and not accounted therein as such were cleared in contravention of Central Excise law.
7. And whereas, on physical verification of stock in the aforesaid 4 units, the officers noticed excess of goods over and above the recorded balance as under: The goods found in excess were seized for action under C.E. Act and Rules, 1944. Besides, the officers noticed a shortage of the goods of the value as under in respect of the aforesaid units.
Value of shortage of Fireworks No satisfactory explanation appears to have been given for the excess/shortages noticed by the Officers at the time of their visit to the aforesaid premises and as such the excess goods seized as detailed above are liable for confiscation under Central Excise Rules, 1944.
Duty is liable to be demanded in respect of shortage of fireworks noticed inasmuch as it appears that the goods have been clandestinely cleared without any account thereof in contravention of provisions of Rules 9(1), 53, 52A and 173-G of Central Excise Rules 1944.
8. And whereas the officers of Central Excise, Madras has paid a visit to the premises of M/s Mercury Traders at Madras and has seized goods of the value of Rs. 1,12,000 as it appeared that goods as seized there from were cleared from the aforesaid 4 units in contravention of the provisions of Rule 9(1), 53,52A and 173G of the Central Excise Rules, 1944. The goods seized at Madras from M/s Mercury Traders were found to have been manufactured in one unit and billed under the invoices and Gate Passes of another unit in contravention of the aforesaid provisions and as such the goods are liable for confiscation under Rule 173Q and M/s Mercury Traders are liable for penal action under Rule 209A for having actively and consciously engaged in the disposal of goods which were cleared in contravention of various provisions of Central Excise Law from the aforesaid Units.
9. And whereas, in view of the facts as stated in the "statement of facts" and as above, it appears, that Mrs. R. Madana with wilful consent and collusion with Shri. A. Ramamoorthy and others as aforesaid, engaged herself in the manufacture of fireworks under the aforesaid 4 units and cleared goods in contravention of provisions of Rule 9(1), 52A, 53,173-B and 173-G of the Central Excise Rules 1944 from time to time.
10. And whereas, it further appears that the aforesaid parties have engaged themselves actively and consciously with intent to evade payment of duty in manipulation of production and clearance records of excisable goods.
11. And whereas, it further appears that Smt. R. Madana has entered into dummy partnership deeds with S/Shri. S. Palanichamy, V.R. Arjuna Raja and Srinivasa Naicker with the sole aim of availing S.S.I exemption falsely for each unit so floated under the cover of a bogus partnership deed. As per the statements recorded from S/Shri S.Palanichamy, V.R. Arjuna Raja and G. Srinivasa Naicker, even though each of them was entitled for one per cent share of the profit as per the partnership deed, yet no profit and loss account was shown to them nor one per cent profit given to them. Each of them was given an impression to have annually some amount for using the land and building on the basis of yearly profits of the firm but so far no such amount was given. No capital was contributed by any of them even though as per partnership deed, it was shown that a nominal amount has been contributed by each of them. Therefore, it appears that the aforesaid S/Shri. S. Palanichamy, V.R. Arjuna Raja and C. Srinivasa Naicker have entered into an active connivance with Smt. R. Madana in floating bogus partnership deeds with a view to abet her in evasion on duty. Each of them, as such is liable for penal action under Rule 209-A.Smt. R. Madana in her statement dated 29.9.89 had shown complete ignorance about the constitution of the partnership deeds and the day-to-day activities of the aforesaid firms. All the queries that were put to her in relation to the existence of the partnership, manufacture and clearances of fireworks, she had simply stated that all the affairs were within the knowledge of Shri Gabriel John who was their Manager and that she did not know anything. Shri Gabriel John on the other hand, in his statement dated 19.9.89 has stated that he was appointed manager of the aforesaid 4 Units since June 19th 1989 and that prior to him there was no Manager in any of the Units. The statement of Smt. R.Madana that all affairs relating to business of the aforesaid four units as well as relating to the relationship with the partners were within the active knowledge of Shri John contrary to the facts since Shri John has been appointed as General Manager with effect from 19.6.89. It appears that Shri A. Ramamoorthy, husband of Smt. R. Madana alone was actively and consciously furthering the cause of his wife and other beneficiaries of the aforesaid four units in evasion of duty by way of manipulation of records relating to production and clearance in the manner stated in the "statement of facts" as also aforesaid.
12. And whereas, Shri A. Ramamoorthy as also S/Shri. P. Gabriel John, General Manager, R. Mohan Order Processing Cum Despatch Clerk, A.Baskaran, Manager of M/s Universal FW, K. Sankaraj, Manager of Mercury Fireworks Industries, N. Kanagaraj Incharge of M/s Sri. Bannariamman FW, K. Venugopal Manager of Sri Bannariamman FW, V.R. Arjuna Raja Partner of M/s Sri. Bannariamman FW, D. Rajendran, Manager of M/s Saraswathy FWI, are liable for penal action under Rule 209-A for having actively and consciously dealing in excisable goods which were liable for confiscation under the Central Excise Act.
13. And whereas as per particulars furnished to the jurisdictional Central Excise officers the constitution of M/s Saraswathy Fireworks and M/s Universal Fireworks is shown to be as under: 1. Saraswathy Fireworks L.4.No. Proprietory G. SrinivasaIndustries, Sengamala 14/FW/87 Naicker.2. Universal Fireworks 3/FW/88 Partnership C. MuthurajanPerapatti.
M. Chidambarm And whereas as per the partnership deed/I.T. records, the constitution of the aforesaid firms is found to be as under: 1. Saraswathy Fireworks a) Smt. R. MadanaR. Karthik2. Universal Fireworks Proprietory firm with Smt.R. Madana as Proprietor.
And whereas in view of the foregoing it appears that Smt. R. Madana in collusion with the aforesaid G. Srinivasa Naicker, C. Muthurajan, M.Chidambaram, M. Thirumavalavan have furnished false particulars to the jurisdictional Central Excise Officer with a view to avail SSI exemption falsely and fraudulently. It further appears that Shri M.Thirumavalavan has deposed falsely on 19.9.89 and 16.10.89 while giving statement under the Section 14 of the CESA, 1944 in relation to the constitution of M/s Universal Fireworks and in relation to production and clearance of fireworks there from. Therefore, the aforesaid S/Shri G. Srinivasa Naicker C. Muthurajan, M. Chidambaram and M.Thirumavalavan are liable for penal action under Rule 209A of CER, 1944.
14. And whereas in view of the foregoing it appears that the aforesaid M/s M.F.W. M/s Bannariamman F.W., M/s Universal fireworks and M/s Saraswathy Fireworks have by wilful suppression of facts material to the availment of SSI exemption under Notfn. No. 175/86 as also by active collusion have contravened various provisions of Central Excise Rules as aforesaid with a view to evade payment of duty, the extended period as provided under proviso to Section 11A read with Rule 9(2) of CER, 44, will be applicable in demand of duty.
15. And whereas in view of the aforesaid, Smt. R. Madana, and M/s Mercury Fire works Industries, M/s Sri Bannariamman Fire Works, M/s Universal Fire Works and M/s Saraswathy Fire Works are required to show cause to the Collector of Central Excise, Madurai-2 as to why: i) the duty amount of Rs. 16,89,398,36 (As shown in the Annexure) should not be demanded from them under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944; ii) duty of Rs. 7,240.38 on shortages found at the time of visit of the factory should not be demanded under Rule 9(2) read with proviso to Section 11A(1) of the Central Excises and Salt Act, 1944; iii) Penalty should not be imposed on them under Rule 173Q of the Central Excise Rules, 1944 for the contraventions of rules cited above; iv) the goods seized from the following units as detailed below against each unit, should not be confiscated under Rule 173Q of the CER'44.
Name of the Unit Value of Fireworks1) M/s Saraswathy FW Rs. 4,508.002) M/s Universal FW Rs. 9,860.503) M/s Mercury FWI Rs. 98,000.004) M/s Sri Bannari Amman FW Rs. 53,530.005) M/s Mercury Traders Rs. 1,12,000.00 v) the land, buildings, plant and machinery, materials, conveyance and any other thing used in connection with the manufacture and removal or disposal of such excisable goods should not be confiscated under the provisions of Rule 173Q(2)(b)(i) of the CER'44.
16. S/Shri. P. Geberial John, General Manager, R. Mohan, Order Processing cum Despatch Clerk, A. Baskaran, Manager of M/s Universal Fireworks, K. Sankaraj, Manager of M/s Mercury FWI, N. Kanagaraj, Incharge of M/s Sri Bannari Amman FW, K. Venugopal, Manager of M/s Sri Bannari Amman FW, Arjuna Raja, Partner of M/s Sri Bannari Amman FW, D.Rajendran, Manager of M/s Saraswathy FWI, M. Thirumavalavan, C.Muthuraja and M. Chidambaram, Partners of M/s Universal FW, G.Srinivasan, Prop, of M/s Saraswathy FWI, S. Palanisamy, S. Madasamy and R. Palanichamy, Partner of M/s Mercury FWI, Shri. A. Ramamoorthy and Abdul Kareem of M/s Mercury Traders, are also required to show cause to the Collector of Central Excise, Madurai-2 as to why a penalty should not be imposed on them under the provisions of Rule 209-A of the CER'44 for the contraventions of rules cited supra.
17. The above charges brought out by department was seriously contested by the appellants on the sole ground that each of the factories indicated are independent units registered under various acts and they are functioning independently and that there is no flow back and the partners are not dummy partners nor the units are dummy units. Smt.
Madana on whom the charges are brought out of having floated these firms has filed a detailed explanation. It is her contention that as she was a lady to manage and control she had appointed labours and supervisors to carry out the activity. She has stated that she had invested a major share in the transaction by taking loans from the banks. However, all the activity was independent, handled by the respective partners and the a partners were not dummy ones. She has relied on the SSI Certificate granted by the authorities and also the Registration granted by various other legislation to support her plea that each are independent units and entitled for the benefit of the exemption under the notification. She has also submitted that under the Explosives Act, separate licences have been issued only after due satisfaction that each one is a separate unit by itself. The Central Excise Department also issued licences after duly verifying about the fact of the appellants being independent units. Separate Registration under the Central Sales-Tax and State Sales-Tax were also obtained and the business was done without any collusion or without mutual flow back of funds. Large number of evidences were produced by the appellants to support the plea of Smt. Madana had not floated these units and the appellants were independently functioning on their own strength of Registration in carrying out the activity independently. The appellants also relied on large number of judgments of the Tribunal, High Court and Supreme Court on all aspects of the matter. The same pleas were reagitated before the Commissioner. However, the Ld. Commissioner after drawing out the question, has failed to answer in appellants' favour and held that Smt. Madana was having the entire interest and the partners were having only 1% profit. The Commissioner in para 30 of his order held that there was a centralised procurement and distribution of raw materials required for the four fireworks units in Mercury Traders and Smt. Madana is a partner in Mercury Traders is mutually dependent of the free flow back of funds from Saraswathy Fireworks to Mercury Fireworks, Saraswathy Fireworks and Universal Fireworks, diversion of funds, for the capital investment of Smt. Madana in Universal Fireworks, from Mercury Fireworks, Employment of common labour staff, clearance of goods manufactured in one unit under the cover of documents of another unit to contain the Bank discounting ceiling limits, existence of agreement for royalty to use brand name "Mercury" and monogram "Flying Horse" and the printing of Mercury Fire Industries in the monogram non-fulfilment of terms of partnership condition and hence on this ground alone held that Madana had floated all the bogus partners with a view to avail the exemption. The matter was heard at great length on 15.9.99 when Sr. Advocate Shri V. Ramachandran strenuously argued and pointed out that the entire material evidence had not been discussed in the order and on the mere premise raised in para 30 the Commissioner has confirmed the order.
18. Ld. Sr. Advocate submits that there is no discussion about the mutual flow back and as to how and on what basis the Commissioner has arrived at this conclusion. He submits that law on the aspect pertaining to clubbing of clearance is well settled and the entire case law had been produced. Commissioner had noted about the judgment cited but without any reference to case law has in para 30 in the manner indicated above he concluded that Smt. Madana has created these units.
He also points out several other defects in the order, more particularly to the final order where the confirmation of demands have been made on all the units and separate penalties has been imposed on all the units. He submits that it does not satisfy the logic of clubbing of clearances. If in the opinion of the department, the clearance have been made by Mrs. Madana and on behalf of Mercury Fireworks, then question of confirming duty on other units and imposing penalties on other units did not arise. He also submits that merely because the partners had only limited profit that by itself is not a ground to reject the independent existence and partnership deeds. He submits that it is a well settled law that there can be a partner who is termed as a working partner without any benefits but on salaried basis. There cannot be a presumption in law that merely because one partner takes limited profit then a conclusion can be drawn that he is in mere name alone and the unit belongs to the person who have invested the amounts. He has also pointed out to the Provision of Partnership Act wherein a partner can only take the benefit and by an agreement the liability can be restricted between the partners. He submits that the entire order is a non-speaking order in total violation of principle of natural justice and the law laid down on the aspect pertaining to the clubbing of clearance. He submits that in all the Fireworks industries, the business itself was conducted in a particular pattern, in view of fireworks being under the supervision of Explosives Act. A lot of expertise was required and therefore there was an agreement between the various independent units with regard to procurement of raw materials.
He submits that merely because there was some arrangement for procuring the raw material and distributing the same that does not by itself imply that there is mutuality of interest and the other units are dummy ones. He submits that it is well settled that merely because there are common Directors, common workers or use of telephones that by itself is not a factor for clubbing the units. It is his further submission that there can be even mutual transfer of funds without mutual transfer of flow back. There can be an arrangement for mutual taking of loans or even raw materials on loans which are appropriately returned or interest paid on such arrangements. He submits that law of dummy units have been well laid down in several judgments of the Tribunal and confirmed by Apex Court wherein it has to be shown that the unit which is a dummy one should not have existed but should be only on paper and the entire operation of such dummy units are controlled by one individual. He submits that in the present case such a situation does not arise, and each of the unit existed on separate Registration under various statutes and more particularly the Explosives Act which is a very stringent legislation. There is no possibility of a person indulging in such an operation as if the same is detected under Explosives Act, then the consequences are very severe. He submits that Commissioner has not examined all these factors, more particularly the law laid down by the Tribunal in respect of similarly placed industries particularly Match works, whose appeals in a like manner were all disposed of in their favour. In this regard he draws attention to the judgment of the Madras High Court in the case of Rathna Fire Work Factory v. CCE as . He also refers to the judgment rendered in the case of A. Rathinam, Prop., Michael Match Works v. Collector as wherein the -department had attempted to club eight match factories situated in the same compound and having a common trading agent. The matter had been examined by the Tribunal at great length and had drawn certain conclusions and given findings with regard to the manner in which the clubbing is required to be done. The law laid has been discussed and the benefit had been given to the appellants and the Tribunal concluded that where there was separate existence of Matchwork factories, operating independently under separate licences, then they cannot be clubbed. In this regard the Tribunal referred to earlier judgment on Match factories as rendered in the case of Premier Matches v. Collector as , Sekar Match Industries v. Collector as . There was also reference to large number of other High Court; and Supreme Court judgments. Further reference was also drawn to the case of Padma Packages (P) Ltd. v. Collector as wherein the Tribunal held that common directors being related to each other in limited companies which are separate legal entities not significant for clubbing the value of clearances. It was also held that common authorised signatory for each of the companies not indicative of the fact of control over the affairs of the each of the limited companies units created much before the issue of the show cause notice and therefore, the value of clearances are not clubbable. It was also held that mere existence of common office and an employee common to more than one units not by itself shows the existence of "unified control" over the affairs of the units.
19. Ld. Sr. Advocate pointed out to the law laid down on the aspect of dummy units as discussed in Alpha Toyo Ltd. v. CCE as ; Prima Controls (P) Ltd. v. Collector as and L.M.P. Precision Engg. Co. Ltd. v. Collector as . He submits that the appellants have no objection for the matter being remanded for de novo consideration as the order even on a cursory look is not a speaking order and no factors as laid down in these judgments have been brought out by the department. He submits that although there are certain answers given by Smt. Madana in her cross-examination, but nothing comes out to show that the she was in fact holding away overall the units and other units were functioning on her command and they were all dummy units as held by the Commissioner in the order. He submits that the Commissioner should have gone to the factors leading to a conclusion that the other units were not existence in law. He also submits that there is no suppression in the matter in invoking the larger period and hence the demands were also time barred. He submits that the department was aware of the existence of other units as they were all functioning under Registration and regular visits and control by the department and hence it cannot be alleged that there was suppression in the matter. He also argued that there was no clandestine removal or suppression of figures or there was any short payment of duty in respect of goods seized. He submits that in any event of the matter, the matter has to go back for de novo consideration.
20. After the conclusion of noting all these points, the Tribunal had directed the Commissioner to file his report with regard to the aspect pertaining to the clubbing of clearances, more particularly the evidence on which the department relies to show that there was mutuality of interest in the matter. The matter had been adjourned for today to enable the Ld. SDR to call for comments and argue in the matter.
21. Ld. SDR draws our attention to the various findings given by the Commissioner and submits that the findings are sufficient for the purpose of arriving at the conclusion that Smt. Madani was the holder of the entire interest in the matter. She particularly draws the attention to the provisions in the Partnership Act wherein the interest of other partners is only one per cent which clearly indicates that the brain behind all operations were Smt. Madani. She submits that Commissioner's findings on the basis of Smt. Madani's statement and the provisions contained in the Partnership Act is sufficient to indicate mutuality of funds, mutuality of interest, free flow back etc. to show that all the clearances can be clubbed. It is the argument of Ld. SDR that this is the case of mutuality of interest and control by a single unit. She submits that the arguments made that they are dummy units is not a factor which has influenced the clubbing, but it is the mutuality of fundings of free flow back and the entire interest held by Smt.
Madani and on behalf of Mercury Traders and the use of common brand name, logo, etc. She submits that the entire matter has to be appreciated in the totality of facts and circumstances and not due to in the manner as brought out by the appellants. She also submits that she has received a fax message from the Additional Commissioner Shri V.V. Hariharan, a copy of which is produced. The same is extracted below:- Please refer to the discussion had with the undersigned regarding the appeal filed by Gabriel John and 17 others (Firework case) with reference to Order-in-Original No. 16/90 dated 16.11.90 passed by Collector of Central Excise, Madurai. In this regard this is to inform you that the case records have already been submitted in the ACJM Court, Madurai in connection with a prosecution case and hence it is not possible to examine as to on what basis Collector has decided that here has been a flow of money-funds(.)" She appeals to the bench for confirmation of demands as there is sufficient evidences on record to uphold the order.
22. On a careful consideration of the submission and on a perusal of the entire records, we notice that the Sr. Counsel has made a very strong case for remand of the matter for the reason that the impugned order is not a speaking order and the Commissioner has not brought out in the order as to how there is mutuality of interest and control of funds by a Single person namely Smt. Madani on behalf of Mercury Traders. The records clearly shows that each of the units were independently registered and they were functioning separately. The aspect pertaining to dummy unit is different one from units in existence with mutuality of interest. From the impugned order, we notice that the Commissioner has confused himself and he has taken a view that they are dummy units, but at the same time he has also concluded that the units are in existence and controlled by Smt.
Madani. In the Alpha Toyo case (supra) the Tribunal has noted that a dummy unit does not exist but exist only on paper and there is no existence of a factory in physical terms. In the present case, it is also not the case of the department that the registrations were for the purpose of creating a unit and no unit existed in physical terms. There were separate units functioning with separate records. The department has brought out that the entire operations in the four units were controlled by Smt. Madani in view of the fact that she held 99% of the profits and only one per cent of the profit was enjoyed by the other partners. It has been brought to our notice by Ld. Sr. Advocate that in a partnership, a partner can exist even without taking any profit; a partner can be a working partner, a sleeping partner and partner without taking any liability. This is the law of partnership and the details of which were explained and noted by us. It appears that there is no proper application of mind in this regard. The Commissioner ought to have appreciated the aspect of law pertaining to partnership before his conclusion with regard to clubbing of the clearances. If it is assumed that 99% of profit is taken by Smt. Madani and on that ground clearances are clubbed, then the reasoning does not sound perfect and valid, as in terms of Partnership Act, a partner can exist on separate profit or even without any share in liability. Therefore, the reasons given in para 30 of the order alone is not sufficient for the purpose of upholding the order. However, from the extracted show cause notice, we do see that the charges made out are very grave nature and are very detailed one. The Commissioner ought to have proceeded to examine the issue in the light of the allegations and not on the basis of the findings given in para 30 which is not based on supportive evidence.
Findings given in para 30 are inconclusive in nature without discussing the evidence which form part of the case. Before arriving at the conclusion, the Commissioner ought to have cited the entire evidence which leads to this conclusion. As there is no such citation of evidence to lead to a conclusion that all other units are dummy ones or were in existence solely floated and controlled by Smt. Madani, therefore we are of the considered opinion that the entire order is not in consonance with law as laid down on this aspect of the matter. As the order suffers from several infirmities, we are of the considered opinion that the same is required to go back to the Commissioner for further consideration in the matter. We also notice that the Ld. Sr.
Counsel was justified in drawing our attention to those judgments pertaining to Match Works wherein the entire industry works in a particular pattern. The Commissioner ought to have appreciated this aspect of the matter. In all the Match work cases, the Tribunal has discussed the pattern of work carried out in this industry. After such a discussion and examination of the evidence the appeals were allowed by holding that the units are independent ones and the benefit of exemption notification is required to be extended. If the Commissioner on fair examination of the evidence concludes that the cases fall within the ambit of the cited judgments, then the appellants' case is required to be considered in that light subject however with regard to payment of duty on no clandestine removal without payment of duty. For the reasons indicated, the impugned order is set aside and matter remanded to Commissioner for de novo consideration. The appellants shall all be heard in the matter and the Commissioner shall discuss every piece of evidence in the light of law laid down and pass a speaking order.