1. These appeals have been filed by the above appellants against the order No. 31/MP/94 dated 29-1-1994 of Central Excise and Customs, Surat praying of setting aside the same both on grounds of limitation and merits with the consequential relief and other relief as deemed fit.
2. The brief facts of the case are that during the course of internal audit of Highland Dye Works Pvt. Ltd. (Highland for short), Bombay it was noticed that the said unit had internal relation both administrative and financial with M/s. Epsilon Inds. (Epsilon for short), Vapi, Syntho Organics Pvt. Ltd. (Syntho for short), Vapi, Highland, Vapi and Gujarat Indl. Chemicals, Vapi. Simultaneously search and seizure operations were carried out in the premises of the unit at Bombay of Epsilon and Highland. On 22-10-1990 number of incriminating documents were seized under the panchnama. On the scrutiny of the said records, documents, and subsequent investigation disclose that the above said units had suppressed the fact that the entire affairs were managed by a single family under the stewardship of S.K. Suratkal and all these units have mutual financial and commercial interest in the business of each other. He had played a parental role in their organisation called by them as Highland Group of Industries by acting on behalf of all other noticee units while dealing with third parties like purchasers, sellers, wholesale dealers, Govt, bodies etc. in the matter of commercial and financial interest of these units. All home clearances of all these units during financial year beginning from May 1987 are required to be clubbed together under clause 2 of Notification No. 175/86-CE dated 1-3-1986 as amended for the purpose of admissibility of grant of exemption of duty. On clubbing together all home clearances of these units during financial year from May 1987 it exceeded the stipulated limit of Rs. 1.5 or 2 crores as the case may be. Highland, Bombay floated Highland Vapi as soon as stipulated limit of Rs. 2 crores of earlier unit was to be crossed and that floating of another unit at Vapi was a deliberate act with intent to evade payment of duty. Similarly all the other units had mutual financial and commercial interest in the business of each others under the shadow of Highland group, and administratively controlled by one person S.K.Suratkal, under whose overall supervision the other units were managed as could be seen from the documents seized. The control was by a single licence. The above units were not entitled to the benefit of exemption under notification 175/86, dated 1-3-1986.
3. There is a contravention of Rules 173B, 173C, 173F read with Rule 9(1) of Central Excise Rules by four units namely Epsilon, Vapi, Syntho, Vapi, Highland, Vapi, Gujarat Ind., Vapi, as they have failed to file price list and determine and pay appropriate Central Excise duty on the excisable goods prior to the removal in their factory.
Suratkal, S.M. Shetty, Mohini Suratkal, Kiran Suratkal Koshar S.Suratkal, S.K. Suratkal, R.N. Shetty, S.R. Shetty, B.V. An-jaria, Rajendra Shah, Jagdish T. Shetty, Shrikant S. Shetty, Sainath Shetty, V.V. Phadnis were responsible for the conduct of the business of these units generally altogether referred as Highland group of Industries also were concerned in transporting, removal depositing, keeping, concealing, selling or in any other manner dealing with the excisable goods which they knew or had reason to believe were liable for confiscation under Central Excises & Salt Act, 1944 and rules framed thereunder. Epsilon, Syntho, Highland, Gujarat Inds. of Vapi availed Modvat credit on higher rate than they would have legally entitled to, had they not availed wrongfully of exemption under Notification 175/86 in respect of duty paid goods received from among these units in contravention of Rule 57B of Central Excise Rules, 1944 read with Notification 175/86 as amended. The show cause notice was issued to all the above persons on 22-5-1992 seeking to recover differential duty of Rs. 74,61,625/- on home clearances valued at Rs. 7,28,45,173/- during the period May 1987 to March 1992 under Rule 9(2) of Central Excise Rules read with proviso to Sub-section (1) of Section 11A of Central Excise Rules & Salt Act, and to debit or reverse the Modvat credit of duty taken at higher rate in respect of duty paid goods received from among these units under Rule 57-I of Central Excise Rules; confiscate land, building, plant & machinery belonging to these units under Rule 173Q(2) of Central Excise Rules; and for imposing penalty on all the noticees under Rules 173Q(1) and 209A of Central Excise Rules, 1944. In the show cause notice dated 22-5-1992 at page 42 in paragraph 7, four units namely Epsilon, Vapi, Syntho, Vapi, Highland, Vapi were called upon to show cause to the Collector, Central Excise, Surat, (stationed at Baroda) as to Central Excise duties amounting to Rs. 74,61,625/- on the home clearance made by them from all the factories during the period May 1987 to March 1992 detailed in Annexure D should not be demanded and recovered from them under Rule 9(2) of Central Excise Rules read with Sub-section (1) of Section 11A of the Central Excise Act, and Modvat credit of duty taken at higher rate in respect of duty paid goods received from among these units should not be debited in the RG23A credit accounts under Rule 57-1 of Central Excise Rules; and why penalty should not be imposed on them under Rule 173Q read with Rule 9(2) and also under Rule 209A for Central Excise Rules and any land, building, plant and machinery, materials in conveyance of other things used in connection with the manufacture production, storage, removal or disposal of the goods etc. should not be confiscated under 173Q(2)(a) of the Central Excise Rules; and Highland Bombay and S.K. Suratkal and the remaining 12 persons mentioned therein to show cause as to why penalty should not be imposed under Rule 209A of Central Excise Rules, 1984.
4. In response to that the above four units mentioned have submitted the replies on 10-3-1993, 20-7-1993 and 26-7-1993 in detail denying the case of the department, and explaining their stand under clauses a to v as per the impugned order. S.K. Suratkal has submitted his reply on 31-7-1993 supporting the reply of the above mentioned units and adding is personal defence. The parties were heard on 8-2-1994 and written submissions were also filed by them. After considering all the available material on record, the impugned order was passed on 29-4-1994 demanding Central Excise duty from the above four units under Rule 9(2) of Central Excise Rules read with proviso to subsection (1) of Section 11A of Central Excise Act and also ordered them to reverse or pay the amount of duty so taken and utilised them as notional higher credit under Rule 57-1 of Central Excise Rules and proviso to Sub-section (1) of section 11A of Central Excise Act. The Jurisdictional Asstt. Collector was directed to work out the same and get it reversed from the RG23A Part II and PLA debit or by cash recovery. Penalty was imposed of Rs. 5 lakhs on Epsilon, Vapi and Rs. 2 lakhs on Syntho, Vapi and Rs. 3 lakhs on Highland, Vapi and Rs. 1 lakh imposed on Gujarat Indl. Chemicals, Vapi under Section 173Q(1) of Central Excise Rules and Rs. 2 lakhs on S.K. Suratkal under Rule 209A of Central Excise Rules. Hence these appeals.
5. In support of the appeals, Shri J.C. Patel, the ld. Counsel for the appellant has filed a synopsis and submitted in the course of the arguments that the duty demand from the four firms/companies at Vapi, after holding that they are only a facade and were in fact the units of Highland, Bombay and the real manufacturer was Highland, Bombay, the duty demand is not sustainable and ought to have been demanded from Highland, Bombay as per the decision in 1997 (92) E.L.T. 451 Gajanan Fabrics Distributors v. CCE. The clearance of the above said firms are not liable to be clubbed. The Board under Section 37B has stipulated in the instructions issued that limited companies whether public or private are distinct entities, and hence two or more limited companies are eligible for separate exemption irrespective of the composition of the shareholders. Two or more partnership firm having some but not all partners common are eligible for separate exemption as per the Board instructions and binding on the department. The fact that some partners are common or close family relations cannot be a ground for clubbing and has cited 26 case laws from 1983 E.L.T, to 1998 (101) E.L.T. 695.
There were other partners/directors also apart from the Suratkal family members namely Biwi An-jaria, Gajendra Shah, N.K. Hegde, S.M. Shetty.
Each of the aforesaid companies or firms have separate SSI or income tax and sales tax registration and factory licence and machinery and electric and water connections. Each of the firms/companies had its own set of employees. The employees are liable to be transferred to another establishment of the same company or firm as per the letters of appointment and not from one firm to another firm. The auditors letter to Somnath Shetty was in respect of any of the firms at Vapi. Some employees attending to the work of more than one firms cannot be ground for clubbing. The firm at Vapi sold a portion of the products hardly 10% to Azo Dye Chem cannot be a ground for clubbing the clearances of the Vapi firms. Even if one firm was purchasing the goods of another that cannot be a ground for clubbing as per the rulings in 1989 (44) E.L.T. 92 in the case of Diamond Engineering, 1990 (49) E.L.T. 474 - Pimpri Gases and 1989 (43) E.L.T. 327 - Kinjal Elec-tricals, (pages 207,274 and 211 respectively).
6. It is further argued that each firm had its own separate premises at Bhandup, and placed its own orders separately. Even assuming that common office at Bhandup, Highland, Bombay placed orders for all firms cannot be a ground for clubbing in view of the decisions in 1987 (32) E.L.T. 94 and 1997 (96) E.L.T. 696. The letter of Highland for turnover discount is not in respect of Vapi firms, where partners of two or more firms are family relations use for common facilities is normal and cannot lead to clubbing as per 1990 (49) E.L.T. 474 of Pimpri Gases.
The finance of each of the firms are separate, with separate bank accounts, balance sheet and profit and loss account and separately assessed to income tax and sales tax and there is nothing to indicate the finance of one firm came from another and the profits of the former flowed back to the latter and there is no finance flowback. In the impugned order, in paragraph 30 it is held that there is no direct flowback of profits. The Collector has wrongly presumed that wherever Suratkal was a partner, the bank accounts could be operated only by him by looking to the only original partnership deed ignoring the amendment dated 19-2-1987. He has wrongly presumed that there was money transfer between the firms and companies. They were not the money transfers but payment made for commercial transactions such as purchase of goods. He has also wrongly presumed that there was a common receipt or payment book maintained- The firm had appointed a collecting agent Shivdas for collecting outstanding dues who had maintained a book wherein he entered the particulars of cheque receipts. The employment of a common agent cannot be a ground for clubbing. He has wrongly presumed that banking correspondence is only handled by Suratkal, which is contrary to the records produced in the paper book pages 223 to 256. He has wrongly presumed that S.K. Suratkal and his son had withdrawn from Epsilon capital account over and above their contribution as per the accounts annexed to page 257 of the paper book. The drawing of the amount of 12,000 and 20,000 was for financing a project of Syntho is ridiculous since the project of Syntho was to the tune of Rs. 60 lakhs, which was raised, from GSFC and banks.
7. Demand is barred by time and the larger period cannot be invoked in the present case as names of director or partners are mentioned in the 4 licences partnership deed or memorandum of application filed at the time of applying for the licence. The firms are within the same excise division and two of them are on the adjacent plots. Internal audit has taken place down the years and balance sheet has been filed. Search was on 22-12-1990, and thereafter there is no suppression of facts. He has prepared a chart showing the 12 allegations, explanation offered, and the case laws in support of it. He has also enclosed a tabular statement giving the address, date of incorporation, licence no., Central & Gujarat Sales Tax no., SSI registration no., income tax no., electricity and water connection no., factory licence no., partners or directors 1986 and the bankers and the product manufactured with respect to all the five films namely Highland, Gujarat Indl. Chemicals, Epsilon, Syntho and Highland. In the synopsis under the heading of facts he has given the date and events including the names of the partners and directors and a simultaneous search on 22-12-1990 at Bombay and Vapi on the basis of the audit done in the course of Highland Bombay and show cause notice dated 4-11-1991 issued by Collector of Central Excise, Mumbai in respect of Highland and 5 other firms/companies at Bombay and the show cause notice in this case and the impugned order. Appellants have strongly urged that the impugned order cannot be maintained and is liable to be set aside.
8. Shri K.L. Ramteke, the ld. JDR on behalf of the respondent has argued that the clubbing of the clearance for home consumption of the five units at Vapi is based on two major ingredients, common administration and common financial and commercial interest. Regarding the common administration he has pointed out that S.K. Suratkal and his wife and two sons are major directors/partners in the units. The appointments of executives are made with a view to utilise their maximum services for all the units as per the statements of the commercial accounts officer Shri Somnath R. Shetty, purchase officer, V.V. Phadnis and the technical/commercial officer Shri Srikant S.Shetty, though they were employees of a particular unit. The above named employees without any reasons were shifted to another unit. The employees working in Epsilon and Highland, Vapi used to report to Somnath Shetty regarding expenses incurred in settling various dues.
Auditors for all the units used to call for particulars from Somnath for all the units. He also placed purchase orders with different suppliers on behalf of all the units in question. The middle level executives were appointed by Highland Bombay with a condition that they may be transferred to any other unit of the group, as stated by Shri K.Modi, N.C. Phadnis, A.R. Verma and G.K. Rao. Even the lower staffs are common for all the units.
9. He has further contended that products manufactured by one unit are used by another unit i.e. basic pigments manufactured by Epsilon, Gujarat Indl. Chemicals and Highland, all of Vapi are used by M/s. Azo Dye Chem the unit of the same group. S.K. Suratkal prescribed certain formats for daily production/despatch, weekly pending orders monthly raw material details, work order and follow up of payments collected at Bhandup office and put up for perusal of S.K. Suratkal for making easy availability of all the information for all the units, under the office memo which was kept at Bhandup office for his perusal. S.M. Shetty the partner of Highland Bombay and Epsilon, Vapi issued work order in format no. 8 to all the units, on the basis of the purchase orders received from customers at Bhandup office and used to give directions to all the units regarding the production particulars of goods.
Highland Bombay issued letters to the customers of all the units for overdue payments under format H-10. V.V. Phadnis of Epsilon, Vapi but sitting at Bhandup office is managing the purchase of raw material, consumable, fuel of all the units under format nos. H-4 & H-7. All the units send the monthly requirements to Bhandup office and V.V. Phadnis used to place orders for the supply of the same with the respective suppliers. Common inputs/raw materials were ordered in bulk required by more than one unit. Highland Bombay appointed area-wise dealers or commission agents for sale of finished goods for all the units with an offer of turnover discount calculated on the basis of the total sales made from all the units during the financial year. It used to issue consumer price circular for all of the units, and of all the dealers were instructed to send orders to Highland Bombay. S.K. Suratkal decided the dealers price structure in respect of finished goods of all the units. S.M. Shetty and Somnath R. Shetty employees of Azo Dye Chem, Thane looked after the promotion of sales, actual sales, sale realisation and dealer correspondence for all the units. The account book for all the units were maintained at Bhandup, separately unit-wise and the combined accounts of money receipt and payment to third parties in respect of transactions made by all the units. Both the above persons supervised the issuance of commission notes, credit/debit notes, instructions of payments of overdue bills of all the units at Bhandup office. M/s. Highland Bombay had played a parental role of managing various activities of all the units in addition to their own management and overall control of production, clearance of all the units in question. S.K. Suratkal being the chief person was supervising all the operations of all the units with the assistance of other directors or partners and employees and exercised direct control over all the administrative matters of all the units. He developed the product line for each unit with the view to form a chain of interdependent product of dyes and pigments. He has further urged that all these factors indicate the existence of common administration by Highland Bombay through the chief person S.K. Suratkal. Apart from commonness of administration as above, the most significant ingredients of control over production of the parent units Highland of Bombay and S.K. Suratkal chief of Suratkal family, who are the common partners or directors in all the said units holds good for clubbing the clearance of different units as per the decisions of the Tribunal.
10. Regarding common financial and commercial interest, the ld. JDR has further argued that S.K. Suratkal and his family members are the major directors/partners in the four units whereas the remaining held meagre shares like 25% only. One of the condition of partnership deed is banking operation will be done by S.K. Suratkal. As per the letter of Epsilon, the turnover of Highland Bombay was expected to cross Rs. 2 crores, and to meet the several increasing demand, a private limited company Highland at Vapi was floated, and S.K. Suratkal, being the major partner of Highland was also declared to be the promoter to the Vapi Company. In the letter to Syndicate Bank, he was referred as the main promoter Epsilon, Syntho, Gujarat Indl. Chemical, Vapi were mentioned as the associated concerns wherein Suratkal family was partners/directors. Day today finances of all the units were managed from the office of Highland Bombay as per the common money receipt book and payment book. Wherever S.K. Suratkal is a partner or a director, financial powers are vested with him, and wherever his family members are so, it was vested with them. S.K. Suratkal has handled the bank correspondence for grant of loan, enhancement of credit facility. S.K.Suratkal and his son Kiran S. Suratkal had withdrawn money over and above their contribution from Epsilon capital account for the project of Syntho, and thus withdrawal of money from one unit and complete control over bank operation establishes that S.K. Suratkal used to make common finance arrangements for all the units. One unit lent money to another unit interest free under the instructions of S.K. Suratkal as per the bank money slips, ranging from Rs. 5000/- to Rs. 5 lakhs on the various reasons namely paucity of money balance, urgency of money for payment of creditors or purchase of important raw materials or machinery. The transactions were accounted for in credit or debit account of the concerned units but it was just for the sake of accounting system, and if the unit had no relation with another, no such transaction could have taken place. It shows the mutual financial interest among the units. Highland Bombay exported all goods manufactured in the units and as per the contracts the cash compensatory assistance drawback and other benefits, received from Government agencies by Highland Bombay would have been passed on to such units, but were not passed and the other units never demanded which indicates that Highland Bombay and other units are one entity in all respects. Highland Bombay insures the goods in other units, which shows that if looked into the affairs of other units. The transfer of machinery by Highland to Epsilon Vapi, and they were purely commercial transaction and the payment for the same were made by Epsilon are based on the fabricated accounts shows that units are one and the same.
Similar is the case of glass lined vessel ordered by Syntho on 27-12-1988 and Highland Vapi on 12-12-1999, after paying advance to the suppliers. It was despatched to Epsilon by the manufacturer M/s.
Gujarat Machinery on the instructions of Highland Vapi, and the bill originally written in favour of Syntho was rewritten in favour of Epsilon, who reimbursed the advance by payment to Highland, Vapi after six months but did not reimburse to Syntho, Vapi. This is not a commercial transaction but mutuality between the units. Payment of labour charges and transport charges for one unit by another unit shows the mutual interest in the business of each other. The payment of materials received by one unit are made by another unit, so also audit fees, and advertisement charges. All these things show the mutuality of interest among the units. S.K. Suratkal is the chief person and the other directors/partners have no voice in the administration, the financial or commercial affairs of the units, showing that units are one and the same. The above factors show that the flowback of profit and financial assistance in the business of each other, though not directly. Highland Bombay is holding the 4 units at Vapi though physically they are situated in different places with separate registration but with common administration and financial control. The impugned order having considered all these aspects cannot be disturbed on the contention of the appellant. The invocation of the larger period is proper and correct in the light of the suppression of the material facts of the mutual and commercial interest in the business of each other from the department by not declaring the total activities managed by the same family or person and availed the small scale concession not admissible to them. The imposition of penalty is proper and correct in the light of the facts and circumstances as contended above.
11. Perused the show cause notice, reply, impugned order and the appeal memorandum and the documents available on record from annexure 1 to 42 in the appeal file and also the synopsis produced in this case. The appellant have taken the preliminary objection that the Collector has demanded duty from 4 firms/companies at Vapi by holding that Highland Bombay was the only firm, and the four firms/companies at Vapi were facade units of Highland Bombay and that demand of duty from the four firms/companies at Vapi is unsustainable, and the duty demand ought to have been on Highland Bombay, as per 1997 (92) E.L.T. 451 (S.C.) in the case of Gajanana Fabric Distributors v. CCE.12. From the perusal of the show cause notice in this case at pages 41 and 42 shows, that in page 42 the noticee nos. 2 to 5 are required to show cause to the Collector of Central Excise, Surat as to why differential Central Excise duty amounting to Rs. 74,61,625/- on the home clearance made by these no-ticees from all the factories during the period from May 1987 to March 1992 a detailed in annexure D should not be demanded and recovered under Rule 9(2) of Central Excise Rules read with Sub-section (1) of Section HA of Central Excise Act, and Modvat credit of duty taken on higher rate in respect of duty paid goods received from among these units should not be debited in RG23A credit account under Rule 57-I of the Central Excise Rules and why penalty should not be imposed under Rule 173Q read with Rule 9(2) and land building, plant, machinery materials, conveyance and other things used in connection with manufacture, production, storage, removal or disposal of the goods should not be confiscated under Rule 173Q(2)(b) of the Central Excise Rules and the addressees at sr. nos. 1 and 6 to 19 are required to show cause to the Collector of Central Excise, Surat as to why penalty should not be imposed on them as to 209A of Central Excise Rules. In the impugned order, the Collector Central Excise and Customs, Surat has demanded Central Excise duty of Rs. 74,61,625/- that a total value of home clearance made by Epsilon, Syntho, Highland and Gujarat Indl. Chemical of Vapi during the period 1987 to March 1992 as detailed in annexure D to the show cause notice under Rule 9(2) of Central Excise Rules read with proviso of Sub-section (1) of Central Excise Act, 1944, and penalty of Rs. 2 lakhs is imposed under Rule 209A of Central Excise Rules on S.K. Suratkal. Penalty is also imposed on 4 units under 173Q(1) of Rs. 5 lakhs, Rs. 2 lakhs, Rs. 3 lakhs, and Rs. 1 lakh respectively. In paragraph 31 of the orders, he has held that it proves on record that all the noticee units at Vapi are holding units of Highland Bombay though physically situated on different places having different state registration like SSI income tax, sales tax.
Accordingly being holding companies/firm the complete administration control and financial assistance by Highland, their clearance value are correctly liable as per the provision of notification 175/86 dated 1-3-1986 as amended. In paragraph 30 it is clearly held that in the present case all the basic requirements for clubbing the clearances of units are forthcoming. There are also evidence of financial assistance and control over the production and sales of goods of other units of Highland, Bombay. There is frequent money transfer, payment of bills or charges of one unit by another, though it does not reflect direct flowback of profit being bank transaction, it is true that such frequent money transfer are flowback of profit and financial assistance in the business of each other. In the above background, the case law cited by the ld. Counsel for the appellant require consideration.
13. In 1997 (92) E.L.T. 451 (S.C.) in the case of Gajanan Fabric Distributors v. CCE, Pune it is held in paragraphs 2, 3 and 4 that "the Collector recording the finding and same upheld by the Tribunal that all seven units except Gajanan Weaving Mills were only a corporate facade although registered with various authorities with a view to camouflage their actual identity and thereby avail of the exemption which otherwise would be inadmissible to them and yet confirming the duty demand upon all seven units and their partners or directors - demand ought to have been confirmed only against Gajanan Weaving Mills which was the assessee and liable - By confirming the demand upon all the seven units, the Collector treated them all as assessees and implicitly recognised their independent existence - matter to go back to Commissioner of Central Excise, Pune with unlimited remand for de novo adjudication without reference to either orders of the Collector and Tribunal - Sections 2(f), 3, 5A(1) and 11A of Central Excise Act, 1944 - Rule 7 of Central Excise Rules, 1944."Universal Industries v. CCE, Pune the above judgment is relied upon along with the precedent order dated 2-9-1999, Order Nos. 2318-2335/99/WZB/C-II [1999 (114) E.L.T. 405 (Tri.)], wherein it is held in paragraphs 4 and 5 that for the purpose of demand clubbing of clearance of units unjustified while duty confirmed against each constituent unit. Demand may be confirmed against a single unit. In both these cases, the matter was remanded to the Commissioner, Pune to hear and send the show cause notice afresh in the light of the law settled by the judgment of the High Court and the Supreme Court up to date with parties to file additional documents if they so chose and the remand was unlimited. The matter is required to be decided independently. In the precedent Bench order indication is given that the Commissioner shall give adequate opportunity to the party to state the case and the appellant shall cooperate with the Commissioner. As against this, the ld. JDR has not submitted anything. So under these circumstances the contention of the appellant gains weight and it has to be and is accepted. The impugned order cannot sustain and it requires to be set aside only on this court. Regarding the reversal of the notional higher credit by the appellant as per the impugned order in clause (2) it depends upon the finding of the Collector/Commissioner (Appeals) that the duty liability falls on Highland Bombay which is the parent unit of the appellants, as per the case of the department.
15. The alternative stand is also taken by the appellants that the demand is barred by time and the extended period cannot be utilised in the instant case as there was no suppression on the part of the appellant with an intent to evade payment of duty by them, and the department is well aware of the constitution of the units with the names of the directors/partners in the L4 licence Partnership deeds memorandum of association filed at the time of obtaining the licence and the internal audits have taken place down the years and the balance sheet have been filed. After the search has taken place on 22-10-1990 there can be no question of suppression. The show cause notice and the impugned order discloses that the appellants have failed to file the price list and failed to determine and pay the proper Central Excise duty on the excisable goods prior to the removal from the factory. As per the show cause notice there is a suppression by the appellants regarding the fact that the entire affairs of the units are managed by a single family under the stewardship of S.K. Su-ratkal and all these units have mutual financial and commercial interest in the business of each other and Highland Bombay had played the parental role in the organisation called by them as Highland Group of Industries acting on behalf of all the noticee companies while dealing with that third parties, purchaser sellers, wholesale dealers Government bodies in the matter of commercial and financial interest of these units. The floating of another unit by Highland was a deliberate act with an intent to evade payment of duty and all the other units had mutual financial and commercial interest in the business of each other under the shadow of Highland Group and administratively controlled by this single family of Suratkal. Appellants in their defence reply in written submission and the synopsis have specifically denied the said allegations and contended that the management of the units by S.K.Suratkal is without any corroborative evidence who was the full time technical director of Mazda Chem Pvt. Ltd. since 1978 and it was impossible for him to supervise the activities of several units situated at different places in different states, supposed to be several units of the so called Highland Group. The units situated at Vapi, filing under same Jurisdictional Asst. Collector had filed the relevant documents like classification list, price list, partnership deed, memorandum of association with the department and the Central Excise auditors after conducting the audit from time to time the question of suppression of partners or directors does not survive for any consideration. They have admitted that it is possible that one may take the help of another as per normal trade practice and relation.
However each unit had individual and independent existence with directors/partners, manager, production/ administration staff etc.
Firms are to be treated separately under the Central Excise law, which manufactures goods, and the directors or the partners of the company do not come within the purview of manufacture. Regarding the correspondence they have admitted that few letters might have been written by some employees /director or the partner, to bankers or Government organisation, only in over enthusiasm to impress or create confidence by indicating addressing the letter is not a new person but known to the said authority. They have also admitted that in spite of a separate unit, and the machinery and staff, it may happen that SKS being director /partner in few units might have called for information from the units for his own information and convenience, winch is not conclusive to indicate that the empire has been erected by SKS and all activities were conducted from his office. The documents under seizure did not indicate that Highland played a parental role. A single instance showing the correspondence of recoveries of payment to third parties cannot lead that all units constitute one entity. S.K. Suratkal has in his reply defended that he is a qualified technologist having master degree of science and technology, and well experienced, being employee of different unit right from 1961 to 1977, and from 1978 onwards working as director in M/s. Mastra Dye Chem Pvt. Ltd., and is getting a salary of Rs. 9,460/- The directors and partners in all units belong to the family of Suratkal, Shetty, Hanjaria, Shah and Hegde families. There is no question of suppressing of facts and all the units are situated at Vapi and all the relevant documents have been supplied from time to time to the Central Excise department and balance sheet is also produced before them and the Central Excise department have audited the statutory records and there is no suppression of fact or wilful mistake.
16. The adjudicating authority in the course of his finding has confined this case only pertaining to the units situated within his jurisdiction that is Surat Collectorate. In pages 28 & 29, the Collector, Central Excise and Customs, Surat has observed that all the noticee unit had claimed a partial exemption from duty under notification 175/86 as amended separately in each financial year from May, 1987 to March, 1992 by suppressing the material facts of the mutual financial commercial interest of each other from the department.
They have also not declared to the department entire activities right from the installation of plant and machinery and purchase of raw material to finished products are managed by same family or person. All the said units with deliberate intent suppressed the material facts in their documents like classification list, application of Central Excise licence or registration to the department and availed of small scale exemption of duty wrongfully and thereby evaded the Central Excise duty as detailed in annexure D of show cause notice. So from this observation it is clear that the filing of the documents and application for Central Excise licence or registration is admitted. The point is whether the question of mutual financial/commercial interest in the business of each other should be mentioned in those documents or not. Whether it is necessary for the appellant to declare all the activities right from installation of plant and machinery, purchase of raw materials to finished product were managed by same family or person, was necessary.
17. As contended by the appellants, their units are within one common jurisdiction of Surat Collectorate, and they have produced the partnership deed, memorandum of association and agreements to the department with respect to their each units. The fact of taking place of Central Excise audit as pointed out by the appellant is not disputed by the department. The application and the documents disclose the nature of the firm and its status. As pointed out by the appellant there is no requirement of informing the department about how the unit are being run and by whom, when each unit is independent with separate directors/partners mentioned in the documents produced to the department. There is also no requirement by making a declaration as to the total activities right from the installation of plant and machinery and purchase of raw material to the finished products. As per the decision in the case of CD. Industrial Engineers, Faridabad v.Collector of Customs, Chandigarh in 1983 (14) E.L.T. 1994 it is held that the appellants were not bound to appraise the excise authorities of the position of the firm/company if already known to the department from the documents furnished to them. As per 1994 (71) E.L.T. 59 in the case of Gammon Fur Chemis v. CCE, Bangalore it is held that the allegation of suppression of facts cannot survive inasmuch as the information and details which are alleged to have been suppressed by the appellant are in normal course not required to be disclosed to the concerned excise authorities as there is no provision in law to disclose such information. The information known to the department are not required to be disclosed at every stage of activities of the manufacture and non-disclosure of such information at every stage cannot be taken as suppression of facts or wilfully withholding of the information with an intent to evade Central Excise duty. So the extended period cannot be made applicable. In respect of the goods supplied one unit to the another gate passes are available with the assessment range which are filed along with the RT12 returns and so the allegation of suppression of facts with wilful intent to evade payment of duty cannot survive in this case. Consequently the imposition of penalty does not arise. In response to this contention of the appellants there is no proper response by the ld. JDR to support the impugned order. As observed above, the discussion on this aspect as to the applicability of extended period is vague. As per the case of the department the appellant's firms are only a facade of the main company namely Highland, Bombay. These units are created by the main company Highland to avail the benefit of small scale exemption. In such a situation the question of liability to duty lies on the main company and not the facade and the question of suppression of facts with an intent to evade by these appellants do not arise as contended by the appellants. In fact, on the other hand, the appellants have made out that through the documents all the available informations were supplied to the department, and on the date of the search the department has come to know of knowing about the activities of the appellants. So the contention of the appellant regarding the issue of time bar is justifiable in the light of the decisions referred above. So it is accepted and it is held that the impugned order cannot be maintained against the appellants regarding the liability to pay duty and penalty amount. In view of this position, the following order is passed.
For the reasons discussed above, the impugned order cannot be maintained and it is set aside. The appeals are allowed on the ground of time bar, with consequential relief, if any according to law.