R SURESH JAYASEELAN Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS is an appeal against the order of the Collector of Central Excise, Madras, dated 7-10-1987. Brief facts of the case are that the appellant is the proprietor of M/s Scientific Compounds & Processes Pvt. Ltd. (hereinafter referred to as M/s SCP) and manufactures Scouring powder and also Acid Slurry. Another unit belonging to his relation under the name and style of M/s. S.N. Synthesis (hereinafter referred to as M/s. SNS) was also manufacturing Acid Slurry. The issue before the lower autority was regarding the classification of the Acid Slurry and Scouring Powder. The learned representative of the appellant, however, pleaded that so far as the classification of Acid Slurry and Scouring Powder is concerned, they accept the same and the issue that survives is regarding the demand of duty as a result of clubbing the production of Acid Slurry by the two units. Scouring Powder has been accepted as exempted from payment of duty by lower authority. The lower authority took note of the fact that the appellant and the proprietrix of M/s. SNS unit are son and mother. The findings of the lower authority in this regard are as under :-

(2.) The learned representative of the appellant, Shri T.G. Raghunath, who is the father of the appellant, pleaded that the learned Collector in his order has recognised that M/s. SNS is a different proprietory concern from the appellant and after so recognising the two units, he has proceeded to club the clearances of the two units. He pleaded that there was no warrant for clubbing the production and clearances of Acid Slurry as that of one unit.

(3.) WE observe that the issues that fall for consideration before us are whether the production of Acid Slurry in the two units could be taken to be as that of one unit and, if so, which of the two units i.e., M/s. SCP or M/s. SNS has to be taken to be that unit. WE observe that the lower authority, while taking note of the fact that the two units are separate proprietory concerns with separate registration etc. as a small scale industry, has clubbed the clearances of the two units by holding that the production was by one contractor. It is observed that M/s. SCP have their premises in 9 & 10 of G.K. Industrial Estate and they were manufacturing Sabena cleaning powder as also Acid Slurry and that they had entrusted the engagement of labour for production of Acid Slurry in their unit as also in the M/s. SNS unit to one contractor, Mr. B. Narayanan and the contractor was paid separately by the two units. It is seen from the narration of the facts in the show cause notice that the two sulphonation plants purchased by the two companies are supplied by common electric mains in the same premises at 9 & 10, G.K. Industrial Estate and the production of the Slurry by both the units was used in the manufacture of cleaning powder in the brand name of 'Sabena', which belonged to Shri T.G. Raghunath. While in the show cause notice it has been stated that M/s. SNS unit is a dummy concern created to evade Central Excise duty, the learned Collector has not held so but has ordered the clubbing of the clearances of Acid Slurry by the two units for the reason that the same was being manufactured by a common contractor. It is, however, seen from the record that the contractor only engaged the work force in both the units and would appear to be only the supplier of the labour or in other words the said contractor was only a labour contractor. It is nowhere on record that the said contractor was put incharge of the working of the two sulphonation plants and was responsible for the production of Acid Slurry in the two plants. No statement also has been recorded from the contractor about the nature of his functions. The lower authority has stated that the factory was operating at No. 1 & 2, G.K. Industrial Estate. It is observed that the two units have been registered separately as small scale industries and also separately for sales tax purposes. The learned Collector has not given any finding to show, as pointed out earlier, that the proprietrix of M/s. SNS unit was only a name-lender and in fact all the operations were being carried out by the appellant. In a case where the clearances of one unit are sought to be clubbed with that of another unit it is essential that evidence should be brought on record to show that all the manufacturing operations and other business transactions in regard to the product were being managed in fact by persons belonging to one particular unit while showing the owners of the other unit were merely name-lenders. In the case before us we do not find any evidence to this effect having been brought on record. In a similar case, where a number of partnership concerns had been set up with a view to take the benefit of exemption notification for each individual unit, this Tribunal in the case of Mehta Dye-Chem. Industries and Ors. v. Collector of Central Excise, Bombay, reported in 1987 (13) ECR 787 (Cegat SB-C), has held based on the evidence in that case that all the operations were being carried out by one set of partners of one concern while the others were not at all concerned with any one of such operations and in that case the Tribunal has held that the clearances of all the units will have to be clubbed as if that of one unit. No evidence of that nature has been placed before us in the present case. In a similar case this Bench, while giving the benefit of doubt in the case of Annapoorna Mills v. C.C.E., Coimbatore, in Excise Appeal No. E/157/88/MAS decided on 23-10-1989, has held as under :