ORDER
Jyoti Balasundaram, Member (J)
1. Vide the impugned order, the Commissioner of Central Excise, Indore has confirmed a total duty demand of Rs. 98,14,714/- jointly on M/s. Kores (I) Ltd., M/s. Mars Stationery Pvt. Ltd., M/s. Neha Stationery Pvt. Ltd., M/s. Nandini Stationery Pvt. Ltd. and M/s. Neptune Stationery Pvt. Ltd.
2. The break up of the total duty demand is as follows :
(a) Rs. 38,11,587/- has been confirmed for recovery from M/s. Mars Stationery Pvt. Ltd. along with their principal M/s. Kores India Ltd. being duty short-paid on staple pins manufactured and cleared by M/s. Kores India Ltd. through M/s. Mars Stationery Pvt. Ltd.;
(b) demand of Rs. 23,06,961/- has been confirmed for recovery from M/s. Neha Stationery Pvt. Ltd. along with their principal M/s. Kores India Ltd.;
(c) demand of Rs. 29,24,105/- has been confirmed against M/s. Nandini Stationery Pvt. Ltd. along with their principal M/s. Kores India Ltd.;
(d) demand of Rs. 7,72,061/- has been confirmed against M/s. Neptune Stationery Pvt. Ltd. along with their principal M/s. Kores India Ltd.
3. Penalty of amount equal to duty has been imposed under Section 11AC of the Central Excise Act on appellants Nos. 5 to 8. Further penalty of Rs. 4 lakhs, Rs. 3 lakhs, Rs. 2.5 lakhs and Rs. 1 lakh under Rule 173Q has been imposed respectively on appellants Nos. 5 to 8. Penalty of Rs. 20 lakhs and Rs. 10 lakhs respectively has been imposed under Rule 209A of the Central Excise Rules on appellant Nos. 1 and 2 while a penalty of Rs. 5 lakhs each on appellant Nos. 3 and 4 has been imposed under Rule 209A. The duty demand has been confirmed on the ground that staple pins shown as having been manufactured by appellant Nos. 5 to 8 during the period from September, 1992 to December, 1996 and cleared without payment of concessional rate of duty by availing the benefit of SSI exemption, under Notification No. 175/86 and Notification No. 1/93 were actually manufactured by appellant No. 1 and that four SSI units (appellant Nos. 5 to 8) were set up as a cover for the purpose of fraudulently availment of exemption from duty by appellant No. 1 who was not eligible to the benefit of SSI exemption since the value of clearances of appellant No. 1 exceeded the ceiling limit prescribed in the above mentioned SSI notification. In other words, the Department has treated appellant No. 1 as the manufacturer of staple pins cleared by appellant Nos. 5 to 8 during the relevant period. Further the duty demand has been calculated by adopting the price at which the staple pins were sold by appellant No. 1 from its sales depot to its customers as the basis for assessment and determination of duty.
4. The facts of the case are that on 28-9-96, the Central Excise officers intercepted a vehicle at Thane which was found to be loaded with 50 cartons of Kores brand staple pins. On verification, it was found that staple pins contained the brand name of ‘Kores’ and were manufactured by M/s. Neha Stationery Pvt. Ltd. “Kores” brand belonged to M/s. Kores India Ltd. which is a large scale manufacturer not coming within the scope of Notification No. 1/93, dated 28-2-93 and therefore, the staple pins seized from the vehicle did not appear to be eligible to the benefit of SSI Notification No. 1/93. In follow up action, at the warehouse of appellant No. 1, various records relating to the enquiry into evasion of duty, were seized by the Central Excise officers. Further investigation revealed that appellant No. 1 launched a project for manufacture of staple pins and in order to give shape to the project they created a manufacturing facility/unit at Pithampur which facility was fragmented into four different entities with a view to avail benefit of Concessional rate of duty for SSI units. Appellant No. 1 created four different units by acquiring lands and leasing the same in the name of appellant Nos. 5 to 8 (hereinafter referred to as the four SSI units). Although these units were separately registered with the Central Excise Department and the District Industries Centre, Directors of these four units were related to each other in the sense that they were all employees of either M/s. Kores India Ltd. or their related companies or their relatives. After creating the four SSI units, appellant No. 1 initiated the process of regular infrastructure such as installation of plant and machinery, procurement of raw materials etc. Appellant No. 1 created a Wire Division to develop and manufacture wire which was suitable for the production of staple pins.
5. Statements of Directors of the three SSI units were recorded from which it transpired that they had not invested any money for becoming Directors in the SSI units but money was made available to them by Shri S.S. Bhandari (appellant No. 3).
6. The Director of M/s. Neha Stationery Pvt. Ltd. stated that an amount of Rs. 10,000/- which he paid as Director’s contribution was subsequently refunded to him by appellant No. 1. This statement of Lt. Col. Harbhajan Singh who was deployed by appellant No. 1 as Chief Executive officer of its Wire Division was also recorded. Examination of correspondence between appellant No. 1 and the four SSI units as well as foreign suppliers of raw materials, was also conducted and from the various records, documents and statements, it was brought out that the four SSI units were set up by appellant No. 1 who was the actual manufacturer of the staple pins (through the 4 SSI Units) and that all the activities of the four SSI units were controlled by appellant No. 1. The Department was of the view that small-scale industrial benefit was not available to the four SSI units as they were part and parcel of appellant No. 1 who is a large scale manufacturer and that the four SSI units had wrongly availed the SSI benefit. The Revenue also stated that assessable value for payment of Central Excise duty on staple pins sold by all the four units to appellant No. 1 should be taken as the value at which appellant No. 1 ultimately sold the staple pins to their buyers. While calculating the differential amount of duty admissible discount such as quantity discount, turnover discount, etc. were considered and deducted from the sale value of appellant No. 1. The differential duty was calculated on the basis of net sales realisation of appellant No. 1 on the basis of a certificate from Shri Vinod Kumar Jain, Chartered Accountant.
7. A show cause notice dated 25-3-97 was issued proposing recovery of duty and imposition of penalty on appellant No. 1 as well as the four SSI units; penal action was proposed against appellant Nos. 2 to 4 on the ground that they had knowingly acted in furtherance of evasion of duty by appellant No. 1 and the four SSI units. The extended period of limitation was invoked for the reason that the vital fact that the four SSI units were dummy Units set up by appellant No. 1 for fraudulent availment of SSI benefits was never disclosed to the Department. After receipt of replies to the show cause notice from all the appellants and after grant of personal hearing, the adjudicating authority has confirmed the demand and imposed penalties as set out in the opening paragraph of this order. Hence these appeals.
8. We have heard Shri P.V. Jois, learned Advocate, who contends, inter alia, that the four SSI units are individual companies with independent manufacture registered with the Central Excise Department and complying with other legal formalities under the Sales Tax Act, Income-tax Act, etc.; that neither is there any allegation in the show cause notice nor any finding in the impugned order regarding flow back of profit and hence the charge that the four SSI units have been set up by appellant No. 1 for the purpose of wrong availment of benefit of SSI units by showing that staple pins have been manufactured by the four SSI units when appellant No. 1 was the real manufacturer, cannot be sustained. He submits that appellant No. 1 has no interest in the four SSI units, holds no shares in them and that the four SSI units also do not hold any shares in appellant No. 1. He contends that appellant No. 1 only assisted in the setting up of the four SSI units with a view to obtaining good quality staple pins from the four units and marketing them, and assistance by itself is no ground for holding that the four SSI units were controlled and managed by appellant No. 1. He challenges the adoption of the sustain-able value of appellant No. 1 for determining the price of the staple pins manufactured and sold by the four SSI units to appellant No. 1 and highlights the aspect that the four SSI units have also sold staple pins manufactured by them to buyers other than appellant No. 1 and the Department has accepted the price at which goods were sold by the four SSI units to outside customers. The learned Counsel submits that the adjudicating authority has erred in treating appellant No. 1 and the four SSI units as ‘related persons’ as there is no mutuality of interest between them.
9. On the aspect of limitation, the learned Counsel Dr. P.V. Jois submits that the Department had issued a show cause notice dated 14-12-94 to M/s. Mars Stationery Pvt. Ltd. and on 23-3-95 to M/s. Nandini Stationery Pvt. Ltd. and notices were also issued to M/s. Neha Stationery Pvt. Ltd. and M/s. Neptune Stationery Pvt. Ltd. proposing to deny the benefit of Notification No. 1/93 on the ground that the four SSI units were using the brand name of ‘Pegasus’ and the name of the marketing agent M/s. Kores India Ltd. was prominently displayed on the packing in which the goods were contained; the four SSI units filed detailed replies to the show cause notice wherein they had stated that M/s. Kores India Ltd. had agreed to market their product; and that the above would show that the Department had knowledge of the activity of manufacture of staple pins by the four SSI units right from December, 1994 and therefore, the learned Counsel submits that there was no suppression and hence the extended period of limitation under the proviso to Section 11A cannot be invoked. Lastly he submits that in the above circumstances, the penalty against the appellants is not justified.
10. Opposing the contention of the appellants, the learned DR Shri R.K. Sharma draws our attention to the detailed investigation which brings out that appellant No. 1 conceived the idea of staple pin project, procured raw materials, deployed its employee Lt. Col. Harbhajan Singh to look after the production in the four SSI units and provided funds for making the employees of the appellant No. 1 the Directors of the four SSI units. He highlights the fact that gate passes of all the five units (appellant No. 1 and 4 SSI units) were mingled; that there was a consolidated profit and loss account of appellant No. 1 showing the profit and loss of the four SSI units also; that the Wire Division of Appellant No. 1 was set up solely for the purpose of supply of good quality wire to the four SSI units for conversion into staple pins; that appellant No. 1 opened letters of credit for import of raw materials for the staple pins project; that appellant No. 1 stood guarantee for hire purchase loan taken by M/s. Neptune Stationery Pvt. Ltd. from M/s. Birla Global Finance. He states that appellant No. 1 helped the four SSI units to produce and install staple pin manufacturing machinery and also represented to the raw material supplier in Germany that the appellant No. 1 is the largest manufacturer of staple pins in India; that the supply requirement of the four SSI units were looked after by appellant No. 1; that the consolidated profit and loss account was prepared by Shri Sanjay Gupta who is the Commercial Manager of appellant No. 1; the cheques issued by all the four SSI units were signed by Shri Sanjay Gupta and Lt. Col. Harbhajan Singh; that Internal Audit reports of the SSI units were sent to the Chairman of appellant No. 1. He submits that complete involvement of appellant No. 1 in the affairs of the four SSI units is clearly brought out by the above facts and therefore, supports the Commissioner’s findings that the four SSI units are dummy units set up by appellant No. 1 for duty evasion by fraudulent availment of SSI exemption through the four SSI units.
11. Regarding valuation, the learned DR reiterates the finding contained in paragraph 72 of the impugned order and states that sale of staple pins by the four SSI units to outsiders was of a small percentage of production and the suppliers were themselves customers of appellant No. 1 and therefore, the price at which the four SSI units sold the goods to them, does not reflect the normal price and that the price at which appellant No. 1 sold the pins to their customers, is the correct one.
12. Rebutting the argument of the learned Counsel on time-bar, the learned DR Shri R.K. Sharma states that a perusal of the show cause notice issued in December, 1994 and March, 1995 to M/s. Mars Stationery Pvt. Ltd. and M/s. Nandini Stationery Pvt. Ltd. clearly shows that the issue raised in those notices is clearly different from the issue in the present case and, therefore, knowledge regarding setting up of the four SSI units by appellant No. 1 cannot be attributed to the Department and since this material fact was suppressed, the extended period of limitation is available in this case. He supports the penal action taken against the appellant.
13. We have carefully considered the above submissions. Our findings are recorded herein below :
Clubbing of clearances : M/s. Kores India Ltd. staple pin project was set up by establishing four SSI units on the premises owned by appellant No. 1 along with its Wire Division. Shri D.K. Bardhan, Shri A.K. Garg, M/s. Saroj Sodhani and Shri B.D. Mehrotra, Directors of the four SSI units have categorically admitted in their submissions recorded during the investigation that they became Directors of the Units at the instance of Shri S.S. Bhandari, Commercial Officer of Appellant No. 1. Initial funding for the four units was also provided by appellant No. 1. They were merely Directors on paper with no responsibility whatsoever towards the four units as Lt. Col. Harbhajan Singh, Chief Executive Officer of appellant No. 1, was looking after production and administration while Shri Anthony, Commercial Officer of appellant No. 1 was attending to the commercial matters of the four units. Shri D.K. Bardhan became Director of M/s. Nandini Stationery Pvt. Ltd. on payment was made available by Shri Bhandari while amount was paid by Shri Mehrotra to become Director of M/s. Neha Stationery Pvt. Ltd., which was refunded by appellant No. 1. Infrastructure such as machinery for the four units, electrification, arrangements of funds, etc. were undertaken by appellant No. 1. Circulars regarding capital expenditure in respect of the four SSI units were issued by appellant No. 1. The list of 21 indirect workers of the four SSI units whose salary and wages have been taken into account while calculating cost of staple pins shows that they are employees of staple pin project of appellant No. 1. All decisions regarding quality of raw materials to be used by the four units and modifications to be carried out in the machines installed in the four units were taken by Shri S.K. Thirani and the decisions were implemented by Lt. Col. Harbhajan Singh. Installation of machines, arrangement of spares and training of the staff in the SSI units were undertaken by appellant No. 1, as is clearly reflected in the correspondence between appellant No. 1 and M/s. Rudolf Grauer A.G. Switzerland who deputed an Engineer to train the staff and supply the spares. All administrative and financial control over the four units was in the hands of appellant No. 1 who also got insurance cover for the four SSI units. The Appellant No. 1 was also analysing the cost of the staple pins and while determining the cost, they considered the cost of wire, glue and interest cost, including the interest on the term loan of the Wire Division, interest on the amount invested for purchase of the different machines installed in the four SSI units, depreciation on the machines, wages paid to workers on the pay rolls of the four SSI units of the Kores India Ltd., Staple pin Division. Cost of various sizes of the staple pins had been determined by considering all the four units as one unit. Incurring of expenses by appellant No. 1 for the four SSI units shows that there is flow of funds from appellant No. 1 to those units and in turn, the appellant No. 1 has benefitted through the units by establishing themselves as manufacturers of quality staple pins comparable to MAX brand; they are fixing the selling price of all the four units without taking into consideration the expenses incurred by M/s. Kores India Ltd. thereby saving excise duty on two counts (i) undervaluation, and (ii) concessional rate applicable to SSI units vide Notification No. 1/93. Hence mutuality of interest and also flow back from appellant No. 1 to the four SSI units in the form of funds for their activities is established. The funds requirement statement for the month of January, 1995 shows that Lt. Col. Harbhajan Singh was submitting the requisition for funds required for operation of the units on monthly basis along with funds required for M/s. Kores India Ltd., Wire Division and M/s. Kores India Ltd., OPD. This requirement was exclusively of capital expenditure. The statement shows that appellant No. 1 was arranging funds for raw materials, salaries, power and fuel, excise duty etc. and this clearly shows that the four units are nothing but Divisions of appellant No. 1, known as M/s. Kores India Ltd. staple pin project. Correspondence by the Internal Auditors with appellant No. 1 of the four SSI units also brings out the total control of four units by appellant No. 1.
14. The case law relied upon by the learned Counsel against clubbing of clearances is distinguishable. In the case of Santha Industrials v. CCE, Coimbatore -1995 (78) E.L.T. 556, the Tribunal set aside the clubbing of clearances of M/s. Plastic Craft Industries and ABB Plastic and Others with the clearances of M/s. Santha Industrials holding that all units had independent stature, existence performing individual business by virtue of independent sales and hence were independent units and not dummy units created by M/s. Santha Industrials in order to circumvent the provisions of SSI notification. This finding was rendered on the basis of detailed evidence to show independent transactions of sales, independent payments for purchase of inputs to M/s. Plastic Craft Industries and M/s. ABB Plastic Ltd.
15. In the case of Gabriel John and Ors. v. CCE reported in 2000 (37) RLT 546, the Tribunal had set aside the finding that the clearances of M/s. Mercury Fire Industries, M/s. Saraswathi Fire Works, M/s. Bannari Amman Fire Works and M/s. Universal Fire Works, were to be clubbed together resulting in denial of the benefit of exemption in terms of Notification No. 175/86 on the ground that one person held 99% profit in all units and other partners had 1% profit only, for the reason that the units Were in existence and were independently registered and were not dummy units on paper.
16. In the case of PCO Processors v. Additional Commissioner, 2000 (116) E.L.T. 32 (Raj.), which is heavily relied upon by the learned Counsel for the appellants, the issue involved was whether the Department could refuse to allow the petitioner before the Court to clear the goods as independent processor of fabrics under Notification No. 36/98, dated 10-12-98. The contention of the petitioner was that they are covered by Notification issued by the Central Government in exercise of the power conferred on it by Section 3A of the Act and therefore, they are liable to pay duty in terms of above notification and not in terms of Section 3 of the Act. The moot point was whether Central Excise Rules framed for levy and collection of duty would be applicable to levy and recovery of duty in exercise of powers under Section 3A of the Act which deals with the power to charge duty on the basis of capacity of production in respect of notified goods and Rules known as the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998 were framed under Section 3A(2) of the Central Excise Act. The court held that the assessee was granted an Excise certificate as a manufacturer/processor of fabric and being a company duly registered with the Companies Act and thereby having a legal personality of its own, the Commissioner of Central Excise was not competent to refuse it the facility of payment of duty under Section 3A of the Act on the basis of annual capacity of production, without hearing it first on the allegation that it was a front or fasade for a spinning and weaving company and thus was not an independent processor. The Commissioner was directed to, allow the facility under Section 3A of the Central Excise Act, pending decision on the status of the petitioner and question of suspension/revocation of its Excise Registration.
17. A careful reading of the above judgment would show that the issue before the Hon’ble Rajasthan High Court was entirely different from that involved in the present case. Hence we cannot bring ourselves to agree with the learned Counsel that this supports the proposition that non-cancellation of the registration granted to the four SSI units tentamounts to acceptance of their independent status and that the cancellation of registration should precede any action on the charge that the four SSI units are dummies set up by appellant No. 1. The Tribunal remanded the matter to the Commissioner for the reason that there was no citation of evidence to lead to the conclusion that the other units were dummy units or were in existence but solely floated and created by one person.
18. In the present case, as the earlier discussion would show, there is voluminous evidence to show that the four SSI units were floated and controlled by M/s. Kores India Ltd. for the purpose of circumventing the restriction regarding value of clearances in the SSI notification.
19. In the case of U.K. Machine Tools Pvt. Ltd. v. Commissioner of Central Excise reported in 1999 (114) E.L.T. 1009, the Tribunal held that units floated by proprietor of main unit with its employees shown as Directors, common procurement of raw materials, centralised payment to employees, common operation of bank accounts and other financial arrangements between the units clearly establish financial interdependence and therefore, the value of clearances of all units was required to be clubbed for the purpose of determining the eligibility of the main unit to SSI notification benefit. The facts of the appellants before us are very similar to the facts of the U.K. Machine Tools case.
20. In the light of the above discussion and following the U.K. Machine Tools case, we hold that the clearances of four SSI units are required to be clubbed with the clearance of appellant No. 1. Upon such clubbing, the clearance value exceeds the ceiling limit prescribed in the SSI notification and hence the benefit of concessional rate of duty under the SSI notification is not available and differential duty is payable by appellant No. 1.
21. Valuation : There is no dispute that staple pins manufactured in the four SSI units were transferred to M/s. Kores, OPD Section where neutral packing in which the pins were received, was removed and the pins were packed in the packages bearing the name of M/s. Kores India Ltd. and the goods were transferred from there to different depots for sale to independent buyers. The price at which the goods were cleared from the SSI units was in fact controlled by appellant No. 1 as is evident from the letter dated 23-8-95 of Lt. Col. Harbhajan Singh, Chief Executive Officer of appellant No. 1 who was controlling and supervising at the staple pins manufacturing unit at Pithampur addressed to Shri S.K. Thirani, Chairman of appellant No. 1 which reads as under :
“By changing rate of 10 from 40 to 36, we will save Rs. 76,000/- in excise duty in this financial year 1995-96. But you will notice that the ultimate cost of Kores does not change even if the rate of duty changes.”
In respect of clearances of the Kores India, OPD Section by the four SSI units, no sales at arms length is involved since the four SSI units are to be treated as depots of appellant No. 1. A sale in the normal course of wholesale trade as required under Section 4 of the Central Excise Act, 1944 comes into existence for the first time when the staple pins are sold to customers either from Kores, OPD Section or branches of Kores India Ltd. Further a small percentage of sales from the four SSI units to other customers is of staple pins in neutral packing whereas the sales from the depots/branches of appellant No. 1 is of staple pins bearing the name Kores India Ltd. and sales from factory gate to independent buyers is not comparable with the sales from depots/branches of appellant No. 1. Further it is relevant to note that customers to whom a small quantity of sales have taken place directly from the SSI units are either stockists/dealers of appellant No. 1. We therefore, agree with the adjudicating authority that the price at which the goods were sold by appellant No. 1 from sales depot is the correct basis for assessment and determination of duty and that the prices at which the goods were sold from the depots after granting admissible deductions, have been correctly adopted as the basis of duty liability.
22. Confirmation of duty demand : The adjudicating authority has held as under :
“An amount of Rs. 38,11,587/- is confirmed for recovery from M/s. Mars Stationery Pvt. Ltd., Pithampur. Noticee No. 1 along with their principal M/s. Kores India Ltd. Noticee No. 5 under Rule 9(2) of Central Excise Rules, 1944 read with proviso to Section 11A(1) of Central Excise Act, 1944 being duty short-paid on the goods manufactured and cleared by them. An amount of Rs. 15,00,000/- already paid by noticee is appropriated against above recovery. Balance amount noticee shall pay forthwith.
(ii) An amount of Rs. 23,06,961/- is confirmed for recovery from M/s. Neha Stationery Pvt. Ltd., Pithampur. Noticee No. 2 along with their principal M/s. Kores India Ltd. Noticee No. 5 under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A(1) of the Central Excise Act, 1944 being Central Excise duty short paid on the goods manufactured and cleared by them. An amount of Rs. 15,00,000/- already deposited by noticee is appropriated against above recovery. Balance amount noticee shall pay forthwith.
(iii) An amount of Rs. 29,24,105/- is confirmed for recovery from M/s. Nandini Stationery Pvt. Ltd., Pithampur. Noticee No. 3 along with their principal M/s. Kores India Ltd. Noticee No. 5 under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A(1) of the Central Excise Act, 1944 being Central Excise duty short-paid on the goods manufactured and cleared by them. An amount of Rs. 15,00,000/- already paid by them is appropriated against above recovery. Balance noticee shall pay forthwith.
(iv) An amount of Rs. 7,72,061/- is confirmed for recovery from M/s. Neptune Stationery Pvt. Ltd., Pithampur. Noticee No. 3 along with their principal M/s. Kores India Ltd. Noticee No. 5 under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A(1) of the Central Excise Act, 1944 being Central Excise duty short-paid on the goods manufactured and cleared by them. An amount of Rs. 5,00,000/- already paid by them is appropriated against above recovery. Balance noticee shall pay forthwith,”
He has clearly treated appellant No. 1 as the real manufacturer. There is no hesitation or doubt in his mind that it is M/s. Kores India Ltd. who is the manufacturer of staple pins and that Kores India Ltd. created four SSI units and got goods manufactured through them with the sole ulterior motive of evasion of duty by clearance of goods at concessional rate of duty which was not available to M/s. Kores India Ltd. (large scale manufacturer) since manufacture of staple pins was reserved for the small-scale sector only. The learned Counsel for the appellants raised the contention that once the Commissioner held that the four SSI units were in fact a mere fasade to avail of exemption which was otherwise inadmissible to appellant No. 1, he ought to have confirmed the duty demand only against appellant No. 1 and that confirmation of demand upon four SSI units amounts to recognition of their independent existence. In this connection, he relies upon the Supreme Court judgment in the case of Gajanan Fabrics Distributors v. CCE, 1997 (92) E.L.T. 451 (S.C.) which has been followed by the Tribunal in the cases of Rupani Textiles, 1991 (113) E.L.T. 946, Universal Industries, 2000 (115) E.L.T. 704 and Maniyar Plastic Containers, 2000 (115) E.L.T. 717.
23. We have perused the Apex Court judgment cited supra. The Supreme Court has remanded the cases for reconsideration of the question as to whether it was only Gajanan Fabrics Distributors which was liable to satisfy the duty demand. In the present case, the Commissioner has found that M/s. Kores India Ltd. is the only manufacturer of the staple pins and that the other four units were an integral part of M/s. Kores India Ltd. He has held the duty demand to be payable by appellant No. 1 by treating it as the principal.
24. Viewed in this context, it appears to us that the confirmation of different amounts to duty from each of the four SSI units along with their principal M/s. Kores India Ltd. does not vitiate the demand. We hold that the duty demand is sustainable against appellant No. 1.
25. Time-bar : The finding on the applicability of the extended period of limitation is contained in Para 73.1 of the impugned order wherein the Commissioner has held that suppression of material facts namely administrative and financial control, by appellant No. 1 over the four SSI units, operation of bank accounts of the four SSI units through the employees of appellant No. 1, mutuality of interest between appellant Nos. 1 and 4 SSI units, and projection/declaration of the four units as independent units justifies the invocation of the proviso to Section 11A(1). The contention of the appellants’ Counsel that issue of show cause notice in 1994 and 1995 to M/s. Nandini Stationery Pvt. Ltd. and M/s. Mars Stationery Pvt. Ltd., clearly shows that the Department had knowledge of all material facts and hence the charge of suppression is not maintainable, has no force – the show cause notices issued to M/s. Nandini Stationery Pvt. Ltd. and M/s. Mars Stationery Pvt. Ltd. propose denial of benefit of Notification 175/86, dated 1-3-86 and No. 1/93, dated 28-2-93 on the ground that the name of M/s. Kores India Ltd., Bombay, marketing agent of both noticees, was prominently displayed on the packages and therefore, embargo in the SSI notifications which provides that “exemption shall not apply to specified goods where a manufacturer affixes the said specified goods with a brand name or trade name (registered or not) of another person who is not eligible for the grant of exemption under the Notification”, operates against both the noticees. In other words, the benefit of SSI notification was sought to be denied on the ground that the name of the marketing agent was the brand name or trade name of M/s. Kores India Ltd. who was a large scale manufacturer not eligible to SSI exemption. The issue raised in these two noticees is different from the issue in the present case and knowledge of use of brand name of M/s. Kores India Ltd., M/s. Neptune Stationery Ltd., M/s. Mars Stationery Pvt. Ltd. cannot be equated with knowledge of the Department that the four SSI units were an integral part of M/s. Kores India Ltd. and had been set up by M/s. Kores India Ltd. and controlled by it, so as to fragment the value of clearances of staple pins and thus fraudulently avail of the exemption available to genuine SSI units. Material facts necessary to enable the department to determine the eligibility of the four units to exemption under Notification Nos. 175/86 and No. 1/93 were deliberately not disclosed to the Department. Hence we hold that the extended period of limitation is available to the Department and that the demand is not barred by limitation.
26. Penalty : In view of the contravention of law by the four SSI units, the penalty imposed upon them under the provisions of Rule 173Q is upheld. However, we hold that the provisions of Section 11AC under which penalty has been imposed, are not attracted since this section was enacted and brought into force only on 28-9-96 while the period in dispute is September, 1992 to December, 1996. As for the period from September, 1996 to December, 1996, demand is within normal period of limitation and hence Section 11AC is not attracted. We hence set aside the penalty imposed on the four SSI units under Section 11AC. For the same reason, we set aside the demand for interest under Section 11AB of the Central Excise Act. Penalty under Section 209A has been imposed on appellant Nos. 1 and 3 of its officers. The Commissioner has discussed the liability of these appellants to penalty under Rule 209A in Paras 73.03, 73.04 and 73.05 of the adjudication order. The learned Counsel has not rebutted these findings. Since the ingredients of Rule 209A are applicable to the three employees of M/s. Kores India Ltd., we uphold penalty, imposed under this Rule subject to reduction as under :
1. Shri S.K. Thirani Rs. 3 lakhs 2. Lt. Col. Harbhajan Singh Rs. 1 lakh 3. Shri S.S. Bhandari Rs. 1 lakh The penalty imposed under this Rule on appellant No. 1 is set aside in view of our finding that it is this appellant who is the manufacturer of the staple pins on which the duty demand has been confirmed against this appellant while Rule 209A is not applicable to a manufacturer. 27. The appeals are disposed of in the above terms.