Malik and Company Vs. Commissioner of Central Excise - Court Judgment

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CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided OnFeb-20-2003
JudgeJ Balasundaram, S T S.S.
Reported in(2003)(161)ELT466Tri(Mum.)bai
AppellantMalik and Company
RespondentCommissioner of Central Excise
Excerpt:
1. the brief facts of the case are that based on interception of one hand cart transporting arc welding machine on 29-04-87 and statement of partners of m/s. malik & company and m/s. malik weld, it appeared to the department that the clearances of both the above mentioned units were required to be clubbed, as both were run by the members of the same family and the units were shown on paper as separate units for the purpose of availment of small scale exemption, which was not admissible. show cause notice proposing recovery of duty of rs. 3,60,475/- on goods cleared. over and above, the exemption limit set out in notification no. 175/86, dated 1-3-86, proposing confiscation of seized goods and penalty upon the partners of the m/s. malik & company and m/s. malik weld was issued to the appellants. notice was adjudicated by the commissioner of central excise, mumbai, who confirmed the duty demand issued to m/s. malik & company, which was found to have floated m/s. malik weld for fragmentation of value of clearances and directed payment of duty amount by m/s. malik & company and its partners, and the partners of m/s. malik weld, by invoking the proviso to section 11a(1) of the central excise act, 1944. he ordered confiscation of seized goods; since the goods were provisionally released, he imposed redemption fine in lieu of confiscation and directed appropriation of the fine amount from the cash security furnished by both the units. he imposed the following penalties:- (ii) shri shamin a. siddiqui, partner of m/s. malik & company -rs. 30,000/- 2. penalty of rs. 12,000/- was imposed upon each of the other partners of both the units, viz., shri noor mohammed vali mohammed (floated unit), hence these appeals.3. we have heard shri k parasurampuria, ld. counsel and shri uma shankar, sdr.4. the respective partners of m/s. malik & company and m/s. malik weld are as follows:-(a) malik & co. - (i) shri noor mohd. vali mohd. (ii) shri mohd. yakub mohd. yasin(b) malik weld - (i) shri shamin ahmed noor mohd. siddiqui (ii) shri naseem ahmed noor mohd. siddiqui 5. the statement of shri. shamin ahmed noor mohammed siddiqui revealed that m/s. malik & company is being run by his father shri nassem ahmed noor mohammed siddiqui along with one son and a nephew, while the partners of m/s. malik weld are the wife and two sons of shri noor mohammad vali mohammad. the material on record shows that final product being manufactured by both units is one and the same i.e. arc welding machine and that the factory premises of m/s. malik weld is also used as factory of m/s. malik & company. it also comes out from the material on record that common machinery is used for manufacture of goods of both the units and workers are common in both the units. from the statements of shri noor mohammad vali mohammad, it transpires that electricity bill for both the units is received only by m/s. malik & company, which is making the payment for both the units. shri noor mohammad vali mohammad is admittedly looking after the production and management of m/s. malik weld of which his wife and two sons are partners.6. in the light of the existence of the above facts, commissioner having held that m/s. malik & company floated m/s. malik weld in order to wrongly avail the benefit of exemption available only to small scale industries, confirmed the duty demand and attracted payment of duty by not only m/s. malik & company and its partners but also the partners of m/s. malik weld. he ought to have confirmed the demand only against m/s. malik & company, applying the ratio of supreme court judgment in the case of m/s. gajanan fabrics distributors v. collector of central excise, pune [1997 (92) e.l.t. 451 (s.c.)] in which the apex court has held that by confirming the demand upon all the units including gajanan weaving mills which he held to be the real manufacturer, the collector treated them all as assesses and, implicitly recognised their independent existence. the supreme court remanded the case to the commissioner for de-novo adjudication without reference to the earlier orders of the collector and tribunal (which had upheld the commissioner's order).7. the facts of this case are also required to be reconsidered and, therefore, we set aside the impugned order and remand the case to the commissioner for fresh decision after extending a reasonable opportunity of hearing to the noticees. the commissioner is also required to consider the c.b.e. & c. circular no. cer(5), dated 1-3-56 and circular no. 6/92, dated 29-5-92 on the issue that a limited company should be treated as a separate entity for the purpose of the exemption limit, as held by the supreme court in the case of supreme washers (p) ltd. v. commissioner of central excise, pune [2003 (151) e.l.t. 14 (s.c.)].
Judgment:
1. The brief facts of the case are that based on interception of one hand cart transporting Arc Welding Machine on 29-04-87 and statement of partners of M/s. Malik & Company and M/s. Malik Weld, it appeared to the department that the clearances of both the above mentioned units were required to be clubbed, as both were run by the members of the same family and the units were shown on paper as separate units for the purpose of availment of small scale exemption, which was not admissible. Show cause notice proposing recovery of duty of Rs. 3,60,475/- on goods cleared. Over and above, the exemption limit set out in Notification No. 175/86, dated 1-3-86, proposing confiscation of seized goods and penalty upon the partners of the M/s. Malik & Company and M/s. Malik Weld was issued to the appellants. Notice was adjudicated by the Commissioner of Central Excise, Mumbai, who confirmed the duty demand issued to M/s. Malik & Company, which was found to have floated M/s. Malik Weld for fragmentation of value of clearances and directed payment of duty amount by M/s. Malik & Company and its partners, and the partners of M/s. Malik Weld, by invoking the proviso to Section 11A(1) of the Central Excise Act, 1944. He ordered confiscation of seized goods; since the goods were provisionally released, he imposed redemption fine in lieu of confiscation and directed appropriation of the fine amount from the cash security furnished by both the units. He imposed the following penalties:- (ii) Shri Shamin A. Siddiqui, Partner of M/s. Malik & Company -Rs. 30,000/- 2. Penalty of Rs. 12,000/- was imposed upon each of the other partners of both the units, viz., Shri Noor Mohammed Vali Mohammed (floated unit), hence these appeals.

3. We have heard Shri K Parasurampuria, ld. Counsel and Shri Uma Shankar, SDR.4. The respective partners of M/s. Malik & Company and M/s. Malik Weld are as follows:-(a) Malik & Co.

- (i) Shri Noor Mohd. Vali Mohd.

(ii) Shri Mohd. Yakub Mohd. Yasin(b) Malik Weld - (i) Shri Shamin Ahmed Noor Mohd. Siddiqui (ii) Shri Naseem Ahmed Noor Mohd. Siddiqui 5. The statement of Shri. Shamin Ahmed Noor Mohammed Siddiqui revealed that M/s. Malik & Company is being run by his father Shri Nassem Ahmed Noor Mohammed Siddiqui along with one son and a nephew, while the partners of M/s. Malik Weld are the wife and two sons of Shri Noor Mohammad Vali Mohammad. The material on record shows that final product being manufactured by both units is one and the same i.e. Arc Welding Machine and that the factory premises of M/s. Malik Weld is also used as factory of M/s. Malik & Company. It also comes out from the material on record that common machinery is used for manufacture of goods of both the units and workers are common in both the units. From the statements of Shri Noor Mohammad Vali Mohammad, it transpires that electricity bill for both the units is received only by M/s. Malik & Company, which is making the payment for both the units. Shri Noor Mohammad Vali Mohammad is admittedly looking after the production and management of M/s. Malik Weld of which his wife and two sons are partners.

6. In the light of the existence of the above facts, Commissioner having held that M/s. Malik & Company floated M/s. Malik Weld in order to wrongly avail the benefit of exemption available only to Small Scale Industries, confirmed the duty demand and attracted payment of duty by not only M/s. Malik & Company and its partners but also the partners of M/s. Malik Weld. He ought to have confirmed the demand only against M/s. Malik & Company, applying the ratio of Supreme Court judgment in the case of M/s. Gajanan Fabrics Distributors v. Collector of Central Excise, Pune [1997 (92) E.L.T. 451 (S.C.)] in which the Apex Court has held that by confirming the demand upon all the units including Gajanan Weaving Mills which he held to be the real manufacturer, the Collector treated them all as assesses and, implicitly recognised their independent existence. The Supreme Court remanded the case to the Commissioner for de-novo adjudication without reference to the earlier orders of the Collector and Tribunal (which had upheld the Commissioner's order).

7. The facts of this case are also required to be reconsidered and, therefore, we set aside the impugned order and remand the case to the Commissioner for fresh decision after extending a reasonable opportunity of hearing to the noticees. The Commissioner is also required to consider the C.B.E. & C. Circular No. CER(5), dated 1-3-56 and Circular No. 6/92, dated 29-5-92 on the issue that a limited company should be treated as a separate entity for the purpose of the exemption limit, as held by the Supreme Court in the case of Supreme Washers (P) Ltd. v. Commissioner of Central Excise, Pune [2003 (151) E.L.T. 14 (S.C.)].