ORDER
V.K. Ashtana, Member (T)
1. These 9 appeals arise out of the common Order-in-Original No. 29/97, dated 8-11-1997 passed by Commissioner of Central Excise wherein it has been held that M/s. Hirusah Cosmetics is the real manufacturer of Lavanya Talcunt Powder and that 9 other units namely :-
(1) Navin Cosmetics
(2) Vignesh Cosmetics
(3) Rasi Cosmetics
(4) Rakhi Cosmetics
(5) Srilata Cosmetics
(6) Savitha Cosmetics
(7) Prakash Cosmetics
(8) Annam Enterprises and
(9) Subbu Products
were dummy units of M/s. Hirusah Cosmetics which were created to evade duty by illegally exploiting the SSI exemption under Notification No. 140/83-C.E., dated 5-5-1983. It has also been held that the assessable value shall be the price adopted by Hirusah Cosmetics for sale of the said Talcum Powder. Value of clearances of 9 units have been clubbed with that of M/s. Hirusah Cosmetics and a demand of duty of Rs. 1,49,48,15s/- has been confirmed invoking the extended period under proviso to Sub-Section 1 of Section HA of the Central Excise Act. Penalty of Rs. 20,00,000/- has been imposed on M/s. Hirusah Cosmetics and penalty of Rs. 25,000/- each on the 9 units noted above under Rule 209A.
2. Heard ld. Advocate Shri V. Lakshmi Kumaran assisted by Shri G. Sivadas and J. Shankar Raman, ld. Advocates for the appellants and Mrs. Aruna Gupta, ld. DR.
3. Ld. Advocate submits that the appellants contest the order impugned both on merits as well as on limitation. We were taken through the history from the constitution of M/s. Hirusah Cosmetics on 25-4-1991 and a declaration filed with the Central Excise authorities on 22-8-1991 regarding their business and claiming exemption under the said Notification. Thereafter, the various units filed declarations with the respective Central Excise offices from time to time as they commenced their business. This continued for each financial year and the last set of declarations were filed on 12-4-1993 for the year 1993-94. The period of demand is from October, 1991 to March, 1995 and the show cause notice was issued on 4-11-1996 invoking suppression and hence the extended period.
4. Ld. Advocate submits that on limitation his arguments can be summarised as follows :-
(a) M/s. Hirusah as well as all the other 9 manufacturers filed yearly declarations as required by law fully disclosing all relevant facts including the agreement of the 9 manufacturers with Hirusah Cosmetics for manufacture and supply of Lavanya brand Talcum Powder which brand name was owned by M/s Hirusah Cosmetics.
(b) On 5-9-1991, i.e. before the commencement of the disputed period, the Superintendent of Central Excise wrote a letter to Hirusah Cosmetics calling for detailed information which was replied to on 19-10-1991 and is available at page No. 58 of the paper book. On 20-1-1992, the Assistant Collector concerned wrote to M/s Hirusah Cosmetics and two other units and enquired various details including statement of production clearance and values of cosmetics, etc. as well as invoices, marketing pattern, list of machinery, sales tax returns, etc. All these details were supplied by Hirusah Cosmetics on 17-2-1992.
(c) Each manufacturing unit in their declaration filed and clearly mentioned that they would be manufacturing Lavanya brand Talcum Powder, a brand name owned by Hirusah Cosmetics and supplying the entire quantity manufactured to them as per an agreement between the two parties. In April 1994, all these 9 units closed their operations and the officers thereafter visited and conducted investigations almost after the said closure leading to the issue of the show cause notice after another two years had lapsed.
(d) Assistant Collector had also visited the unit and verified the facts.
(e) The declarations given by each unit were accepted for the year 1991-92 onwards upto 1992-93.
(f) In this matter, the department had also conducted enquiries with the banks of various units and nothing adverse was noticed.
Ld. Advocate submitted that since during the relevant period, all information required was given to the department and since for many years the benefit of the exemption have been extended to the appellants and also because of the Assistant Collector did not even order provisional assessment, all these are proof of the fact that no doubts on the eligibility of exemption after consideration of all these informations available with the department was entertained by the officers. In fact, though this information was given from 1991 upto 1993 as detailed above, the department for the first time started harbouring a doubt on the eligibility for exemption only on the basis of investigations in September, 1994. Yet, the order impugned has invoked the extended period right from October, 1991. The show cause notice dated 4-11-1996 has been issued even more than 2 years after the investigations started. The sum total of the picture emerging there from is that there was no suppression and the demand is hit by limitation of time bar.
5. On merits, ld. Advocate submitted as follows :-
(a) Each of the manufacturing unit of Talcum Powder and supplying the same to M/s Hirusah Cosmetics have entered into agreements with the latter which is on a principal to principal basis because M/s Hirusah Cosmetics has neither financed these units in any way nor is there any evidence of any flow back of profits.
(b) Each of the units have submitted their independent declaration to the Central Excise Authorities claiming SSI exemption under the said Notification.
(c) Each of the units have got their own separate premises, their own machinery and staff. During enquiries as far back as 1991, some of these units have given all details regarding their premises, number and names of employees, bank accounts, sales-tax registration and other relevant details to the Central Excise authorities.
(d) During the relevant period under the said Notification the brand name of another SSI can be used by other SSI units as there was no bar for denial of exemption on this count alone.
(e) It is also not disputed that none of the proprietors/partners of the manufacturing units are in any way related to M/s Hirusah Cosmetics.
Ld. Advocate, therefore, submits that these units were not dummy units floated on paper by M/s Hirusah Cosmetics. Also the units were not in the nature of hired labour. Since the agreements were on principal-to-principal basis and there is no financial flow back on record, therefore the production of these units cannot be clubbed with that of M/s. Hirusah Cosmetics. Ld. Advocate cites the decision in the case of Alpha Toyo Ltd. v. C.C.E. as in 1994 (71) E.L.T. 689 (T) where it has been held that an unit can be regarded as dummy unit if it is not in existence in reality, i.e. the physical existence is not there. He also cited the decision in the case of Siuastik Engineering Works and Ors. v. C.C.E. as in 1992 (62) E.L.T. 313 (T) and pointed out that even if the units manufactured same products on that ground alone the clearances cannot be clubbed. He further submitted that in the above-mentioned case it was held that common brand name by itself does not lead to clubbing. He also submitted that it was held that when there is separate income tax, sates-tax, etc. held by different units, the same cannot be regarded as dummy units and clearances clubbed. The case laws cited are (1) Shakti Engineering Works v. C.C.E. as reported in 1989 (40) E.L.T. 95 (Tribunal), (2) Shree Packaging Corporation v. C.C.E. as in 1987 (32) E.L.T. 94 (Tribunal) and the case of Alpha Toyo Ltd, v. C.C.E. as in 1994 (71) E.L.T. 689 (Tribunal). He also submitted that unless it is shown that there is a flow back of profits which are shared between the manufacturing units and M/s. Hirusah Cosmetics, the clearances thereof cannot be clubbed together as was held in the case of Shree Packaging Corpn. v. C.C.E. as in 1987 (32) E.L.T. 94 (Tribunal), Alpha Toyo Ltd. v. C.C.E. as in 1994 (71) E.L.T. 689 (Tribunal) and Swastik Engineering Works and Ors. v. C.C.E. as in 1992 (62) E.L.T. 313 (Tribunal).
6. Ld. DR Mrs. Aruna Gupta submitted that the order impugned is a detailed order and she reiterated the findings thereof. She submits that the overall picture emerging from the facts of the case is that M/s. Hirusah Cosmetics encouraged the manufacturing units, supplied them with technical know-how for the manufacture of the said Lavanya brand Talcum powder merely to evade duty by fragmentation of the total talcum powder produced. She further submits that the question of clubbing was considered by the Tribunal in detail in the case of Sanjay Steel Co. v. C.C.E. as in 1996 (84) E.L.T. 307 and the facts of the present case are on all force as that contained in the said decision. She also submitted that in the case of J.N. Marshall Pvt. Ltd. v. C.C.E. as in 1997 (96) E.L.T. 149 (Tribunal) it has been held that separate registration of Sales Tax, separate income-tax assessment do not have much relevance with respect to clubbing of clearances under the SSI Notification. With respect to limitation, she reiterates the findings of the ld. Collector in para 8 of the order impugned.
7. We have carefully considered the rival submissions and records of the case. On the question of limitation, the order impugned has held that the extended period is applicable for the reasons dealt with in para 8 of the order impugned which reads as follows : –
” The contention regarding the show cause notice being barred by time as issued more than six months subsequent to the period of demand is not sustainable since HCPL was clearly guilty of deliberate evasion of payment of duty and as such the large period of five years under proviso to Section 11A(1) of the Central Excise Act, 1944. HCPL established different units with the deliberate design of artificially distributing the clearances in the names of others with a view to remain under exemption limit and to evade payment of duty. This is clearly brought out in para 40 of the show cause notice. I therefore hold that the entire demand is within time limit. HCPL is also liable for penal action under Rule 73 Q (1) of the Central Excise Rules, 1944. Similarly all the nine units namely : –
(1) Navin Cosmetics
(2) Vignesh Cosmetics
(3) Rasi Cosmetics
(4) Rakhi Cosmetics
(5) Srilata Cosmetics
(6) Savita Cosmetics
(7) Prakash Cosmetics
(8) Annam Enterprises and
(9) Subbu Products
are also liable for penal action under Rule 209A of the Central Excise Rules 1944 for having concerned themselves with evasion of duty in permitting themselves to be used as dummies of HCPL”.
8. A perusal of the above order shows that apart from this consideration of the applicability of extended period, no other evidences have been examined on this issue though detailed submissions on the time bar were made available for the original authority. We have therefore now to take note of the similar submissions on limitation made before us and find that the entire show cause notice is hit by time bar in view of the following reasons :-
(a) While there is no discussions in the order impugned regarding the yearly declarations filed by both M/s. Hirusah Cosmetics as well as the other fob workers from time to time, a perusal of the said declarations which are on record shows that it had been clearly declared by them to the Central Excise authorities that they were making Lavanya brand Talcum Powder and selling the entire quantity to M/s. Hirusah Cosmetics. Therefore, there has been no suppression as far as the manufacture of Talcum Powder bearing the brand name of Hirusah Cosmetics is concerned.
(b) Perusal of the records also shows that these declarations were accepted by various jurisdictional Range Superintendents for the year 1991-92 and 1992-93. Obviously, enquiries must have been made prior to acceptance of such declarations. Having accepted these declarations, unless the Revenue is in a position to show that something more needed to be declared in these declarations, the extended period on charge of suppression cannot be invoked.
(c) The order impugned is totally silent on the correspondences exchanged between the department and M/s. Hirusah Cosmetics, which is available on page 58 onwards of the paperbook. A perusal of that shows that on the basis of declarations received by the Range Superintendent from M/s. Hirusah Cosmetics, vide his letter dated 5-9-1991 which is well before the commencement of the disputed period, detailed information was called for on all aspects considered necessary to be examined by the department. Reply on each of these subjects was sent by M/s. Hirusah Cosmetics on 19-10-1991. The Range Superintendent was apparently satisfied with the reply because no other queries were raised. Further, almost three months later on 20-1-1992, the Assistant Collector concerned wrote to M/s. Hirusah Cosmetics as well as to two other manufacturing units and again enquired various details including their statement of production and clearance, values of Cosmetics and copies of invoices, marketing pattern, list of machinery, sales-tax returns, etc. All these details were supplied by M/s. Hirusah Cosmetics on 17-2-1992. Thereafter, though the various declarations were accepted even for the subsequent financial year 1992-93 by the Range Superintendent concerned, no further queries were made by the department in this respect and neither were any investigations conducted for over one year. The only logical conclusion that these facts can show is that even the Assistant Collector after consideration of the information received, was satisfied with the exemption Notification was being rightly claimed.
(d) It cannot also be said that the Assistant Collector had information only from M/s. Hirusah Cosmetics. He had written to at least two of the major manufacturing units who are now parties to this dispute, but the fact that neither of them were proceeded against shows that whatever replies were received they were found satisfactory. Since the marketing pattern and the financial details regarding bank, Sales Tax Registration, etc. were also sought for and supplied, therefore it cannot be said that the appellants deliberately suppressed any information with intent to evade duty.
(e) The 9 units closed their operation in early 1994 and investigations were again launched by the department thereafter. From the facts of the records, even the Assistant Collector had visited M/s. Hirusah Cosmetics. The show cause notice leading to the order impugned was issued even 2 years after the commencement of the said investigation. No reason has been adduced as to why this delay in issue of the show cause notice and more particularly that the delay was caused because the assessee was either hindering the investigations or that they were successfully evading to supply the required information. No such evidence has been recorded in the order and none considered.
(f) As against this, a perusal of the para 8 of the order dealing with this question of limitation as extracted above would show that none of the issues discussed in sub-paras above were considered therein and that the only reason for invoking extended period is that it has been clearly brought out in para 40 of the show cause notice that M/s. Hirusah Cosmetics were guilty of deliberate evasion of payment of duty.
(g) The earlier findings in the order impugned are to the effect that the 9 units were dummy units and were more in the nature of hired labour hired by M/s. Hirusah Cosmetics, and since this aspect was not disclosed correctly, therefore the extended period is applicable. In the first place, we find that since these units had separate physical premises, machineries, they were registered with Sales Tax authorities, they have their own bank accounts and they filed separate declarations to this effect to the departmental officers, therefore in view of the Tribunal’s decision in the case of Swastik Engineering Works and Ors. (supra) and the decision in the case of Alpha Toyo Ltd. (supra), just because all were manufacturing common branded item, it cannot be held that they were dummy units. We find that each unit physically existed, had its own premises, personnel, financial accounts and even sales tax registration etc. These were therefore legally clearly defined business entities under law and cannot be said to be dummies. Secondly, we find that all payments made by M/s. Hirusah Cosmetics to these units were on the basis of invoices raised by them for supply of goods manufactured at mutually agreed upon prices and therefore since these payments represented cost of goods manufactured, it cannot be said that these 9 units were acting as hired labour for M/s. Hirusah Cosmetics. Thirdly, it is also significant to note that there is nothing on record to show that M/s. Hirusah Cosmetics either funded the creation of these units or in any way gave them financial assistance on non-commercial grounds. There is nothing on record also to show that the proprietors/partners of these 9 units were in any way related to M/s. Hirusah Cosmetics. Therefore, on this count also we cannot but find that these units were independent units.
(h) It is now well-established law that even issues like common telephones, common business, few common employees, mere relationship of the proprietors/partners by themselves would not justify clubbing of clearances. In this case even these are absent. As against this, declarations were filed, scrutinised and accepted for two consecutive financial years. Before they were accepted, certain queries were raised by both the Range Superintendent as well as by the Assistant Collector, these queries required detailed information with respect to the accounting and marketing patterns, volume of sales and relationship between M/s. Hirusah and some of the manufacturing units. All these information was supplied within about one month from the date of query. Thereafter, no action was taken for almost two years. After this period, in 1994 the investigations were restarted but show cause notice was issued only in the year 1996. There is nothing on record to that the appellants hindered or resisted these investigations.
9. On a consideration of all the evidences analysed in the foregoing sub-paras, the totality of the picture which emerges before us is that there is nothing positive in terms of facts or evidence or acts of commission which was done by the appellants to suppress information on this issue from the department with a clear intention to evade duty. As against this, the order impugned has not considered any of the aforesaid facts but has merely relied upon para 40 of the show cause notice and has concluded that because the 9 units were dummies, therefore the extended period was invokable. For the reasons analysed above in detail, we are unable to accept this conclusion. Therefore, we find that the demand is hit by time bar as the proviso to Section 11 A(1) of the Central Excise Act cannot be invoked in this case.
10. Since we have already found that the entire demand is hit by limitation, there is no further need to go into other merits of the case, particularly in view of the fact that we have not found these nine units to be either dummies or hired labour. Therefore, without going into further merits, on the grounds of limitations alone we set aside the order impugned and allow the appeals with consequential relief, if any. Ordered accordingly.