Calcium (India) Private Limited v. Customs, Excise, Gold (Control) Appellate Tribunal & Ors.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 30.6.2008CORAM:THE HON'BLE MR. JUSTICE K.CHANDRUW.P. NOS. 7169 AND 7170 OF 1998ANDW.M.P. NOS. 10978 AND 10979 OF 1998 IN RESPECTIVE W.PS. Calcium (India) Private Limited125 SIPCOT Industrial ComplexHosur.. Petitioner in both W.Ps. vs.1.Customs, Excise, Gold (Control) Appellate TribunalSouth Zonal BenchShastri Bhavan, Annexe Building26 Haddows RoadChennai 600 0062.The Commissioner of Central Excise6/7 A.T.D. StreetRace Course RoadCoimbatore.. Respondents in both W.Ps. W.P. No. 7169 of 1998 filed under Article 226 of the Constitutionof India seeking for issuance of writ of Certiorarified Mandamuscalling for the records of the case before the first respondent inOrder Nos. 2938 to 2941 of 1997 dated 10.11.1997 passed by thefirst respondent herein and quash the same and further direct thefirst respondent to rehear the appeal Nos. E/340 to 342 of 1996 andmiscellaneous application No. E.Mis. Appln. No. 1047 of 1997.W.P. No. 7170 of 1998 filed under Article 226 of the Constitutionof India seeking for issuance of writ of Certiorari calling for therecords of the case before the first respondent in Order No. 2426to 2430 of 1997 signed on 23.5.1997 but not dated in the preamblepassed by the first respondent and quash the same.For Petitioner: Mr. Aravind P. Dattar. SC for Mr. C.SaravananFor Respondents: Mr. P. Wilson, Asst. SGI https://hcservices.ecourts.gov.in/hcservices/ C O M M O N O R D E RHeard the arguments of the learned counsel for the parties andhave perused the records.2. In W.P. No. 7169 of 1998, the challenge is to the orderdated 10.11.1997 passed by the Customs, Excise, Gold (Control)Appellate Tribunal [for short,'CEGAT'], South Zonal Bench, Chennai.In W.P. No. 7170 of 1998, the challenge is to the order signed on23.5.1997 and dispatched to the petitioners on 19.9.1997. 3. The petitioner Company is a Private Limited Company and wasincorporated in the year 1977. It commenced manufacture of CalciumGluconate from the year 1977. It had a tie-up with M/s Sandoz IndiaLtd. 4. During the year 1979, the individual Directors of thepetitioner company promoted another company called the GlobalCalcium India (Pvt.) Ltd. for the manufacture of Calcium Gluconateand Calcium Lactobionate with a tie-up with M/s Glaxo India Ltd.During 1991, they also started Calcitech India Pvt. Ltd. Whichstarted manufacture of similar range of products for export.Although the three companies were Private Limited companies and areindependent entities, the second respondent Department issued ashow cause notice dated 06.7.1993 seeking to club the clearance ofall the three units for the period 1992-93. This was under thepremise that the subsequent two companies were dummies of thepetitioner. Even though detailed replies were sent by all the threecompanies, the second respondent confirmed his order dated18.7.1984 by treating all the three units as one and called uponthe petitioner to pay Excise Duty of Rs.9,18,823/-, a redemptionfine of Rs.90,000/- and penalty of Rs.2.5 lakhs. 5. The petitioner and the other two companies preferredappeals (being Appeals 442, 443 and 446 of 1994) before the firstrespondent CEGAT. The appeals were heard from time to time. Whenthe appeals were pending, the second respondent also preferredappeal in E/342 of 1996 against a subsequent order dated01.11.1994. In those proceedings, certain inputs removed from oneunit to the other were not brought under modvat credit. In thatorder, the units were not treated separately. In the grounds ofappeal, it was stated by the Department that they had independentproduction facilities and the latter two units were not dummies ofthe petitioner. 6. Since the petitioners came to know about the subsequentstand of the Department only after receiving notice from the CEGAT,they filed a Miscellaneous Application No. 1047 of 1997 seeking toreopen the hearing of Appeals in Appeal Nos. 442, 443 and 446 of1994. It was the stand of the petitioner that they are willing to https://hcservices.ecourts.gov.in/hcservices/ abide by the order dated 1.11.1994 which is appealed in Appeal No.340 to 342 of 1996. 7. It is the stand of the learned Senior Counsel that he hadmade an oral mentioning before the CEGAT to pass final orders aftertaking into account the Miscellaneous Application filed by him andhe was made to believe that the CEGAT will take into account thesubsequent developments. However, to his shock, he received thefinal order rejecting his contention and holding that the lattertwo units were dummies of the petitioner company and, therefore,they are liable for excise duty by clubbing all the units as asingle unit.8. In the light of the order passed and signed on 23.5.1997,they have confirmed the amount of duty as Rs. 6,53,087.65. In sofar as the demand of duty in respect of electrolytic cells andtheir case was remitted to the adjudicating authority for freshdisposal. The penalty levied was also set aside pending finaladjudication. In the light of the same, the order of theCommissioner in O.I.O. No. 111 of 1994 passed in the other appealfiled by the Department in E/342 of 1996 was set aside. It isagainst these two orders, the present writ petitions have beenfiled. 9. With reference to the objection about the conduct of theCEGAT in not entertaining the Miscellaneous Application and passingorders without reopening the case as contended by the learnedSenior Counsel, Mr. P. Wilson, the learned ASGI took seriousobjection to take note of those submissions. He submitted that inso far as the proceedings of the Courts are concerned, they arefinal and this Court cannot go behind the order passed by theauthorities. 10.Thereafter, the learned Senior Counsel referred to theorder passed by the CEGAT, more particularly, paragraph No. 8wherein the investigation by the Department was referred to as thebasis for clubbing. The following eight points were noted fromthe investigation report as the basis for clubbing the units.i)Mutual Financial assistance;ii)Transfer of machinery from one unit to anotheriii)Common effluent treatment plant;iv)Common analytical labv)Diversion of orders for supply goodsvi)Common sales promotion and follow upvii)Common Chairman for all the three unitsviii)Common staff for all the three units11.The learned Senior Counsel submitted that none of thesecriteria can either singly or collectively be a foolproof test for https://hcservices.ecourts.gov.in/hcservices/ deciding the clubbing question. In this context, he referred to thejudgment of the Supreme Court in Arca Controls Pvt. Ltd. v.Commissioner of Central Excise [2003 (158) E.L.T. 272]. Thefollowing passage found in the said judgment may be referred to:-"The Tribunal found that seven companies namely JNM,SPIREX, CAMBRIDGE,JNMSS, KROHNE, FORBESONS and ARCAare carrying on activities together at the differentunits by supplying material to each other and thecosting department of one Company attends to all theunits; that the price structure of one Company isbased on norms fixed by the costing department andseveral such features were noticed by the Tribunalincluding common funding and financial flow back toa substantial extent though on paper the unitsappear to be distinct, separate and independent;that these different companies have been establishedto avail of exemption under Central Excise Act and,therefore, clearances made by these units have beenclubbed to hold that these Companies cannot avail ofsuch benefit. A somewhat similar matter came upfor consideration before this Court in M/s. SupremeWashers (P) Ltd. v. The Commissioner of CentralExcise, Pune – Civil Appeal No. 6161 of 1999 andconnected matters. In one of the Civil appeals itwas brought to the notice of this Court that thereare two circulars on dated 1.3.1956 and anotherCircular No. 6/82, dated 29.5.1992 issued by theCentral Board of Excise and Customs, New Delhi tothe effect that a limited company should be treatedas a separate entity for the purpose of exemptionlimit and the effect thereof had not been consideredin those cases as in the present cases also. Thisaspect of the matter, as to the applicability ofthe circulars, has not been examined inasmuch as thesame had not been brought to the notice of theTribunal. Therefore, we think it appropriate toset aside the order made by the Tribunal and remitthe matter to the Tribunal for fresh considerationin accordance with law."12.He also referred to the direction issued under Section37-B of the Central Excise Act, 1944 so as to ensure uniformity oflevy of duty of excise and the following passages found in theNotification may be extracted below:-(i)The question whether different partnershipshaving common partners are treatable asseparate manufacturers or the samemanufacturer, would be a question of fact in https://hcservices.ecourts.gov.in/hcservices/ each case to be determined on the basis of suchfactors among other, like composition of thepartnership, existence of the factory, licence,nature of goods manufactured etc.(ii)Different firms will be treated as differentmanufacturers for the purpose of exemptionlimit. But if a firm consisting of certainpartners say A, B & C, has got more than onefactory, all these factories should of coursebe combined. Limited companies whetherpublic or private are separate entitiesdistinct from the shareholders composing it.Hence each limited company is a manufacturer byitself and will be entitled to a separateexemption limit.(iii)If there are two firms with only some of thepartners in common, each firm is entitled toseparate exemption limit and hence the questionof distributing the exemption may not arise.If one firm or individual owns severalfactories, he or it gets exemption only inrespect of one lot and the manufacturer beingonly one entity there will be no question ofdistributing the exemption.(iv)Whether or not in the expression' by or onbehalf of a manufacturer' the expression 'fromone or more factories' is added, the effectwould be the same if the manufacturer is alsothe same. The expression 'one or morefactories' only further clarifies that whetherthe factory is one or more, it is theclearances by or on behalf of the samemanufacturer which is to be taken intoconsideration for purposes of interpreting theexemption notification'.13.Further, he also relied upon the judgment of the SupremeCourt in Rollatainers Limited v. Commissioner of Central Excise,Delhi – III [2005 (11) SCC 203] and more particularly, relied uponthe following passage found in paragraphs 7 and 8:-Para 7:"There are no two opinions that both the factoriesare near to each other and they are owned by thesame owner and the common balance sheet ismaintained. But, by this can it be said that boththe factories are one and the same? The definition https://hcservices.ecourts.gov.in/hcservices/ of “factory” as defined in Section 2(e) of theCentral Excise Act, 1944, reads as under:“2. (e) ‘factory’ means any premises,including the precincts thereof, wherein or in anypart of which excisable goods other than salt aremanufactured, or wherein or in any part of which anymanufacturing process connected with the productionof these goods is being carried on or is ordinarilycarried on;”Para 8:Simply because both the factories are in the samepremises, that does not lead to the inference thatboth the factories are one and the same. In thepresent case, from the facts it is apparent thatthere is no commonality of purpose, both thefactories have a separate entrance, there is apassage in between and they are not complementary toeach other nor are they subsidiary to each other.The end product is also different, one manufacturesduplex board and the other manufactures paper. Theyare separately registered with the Central ExciseDepartment. The staff is separate, their managementis separate. It is also not the case of the Revenuethat the end product of one factory is raw materialfor the other factory. From the above facts it isapparent that there is no commonality between thetwo factories, both are separate establishments runby separate managers though at the apex level theyare maintained by the appellant Company. There areseparate staff, separate finished goods. Simplybecause both the factories may have commonboundaries, that will not make them one factory.Accordingly, we are of the opinion that the viewtaken by the Tribunal does not appear to be wellfounded and likewise, the view taken by theCommissioner, Central Excise. Accordingly, we allowboth these appeals, set aside the order of theTribunal passed on 7-6-2002 as well as the orderpassed by the Commissioner, Central Excise, NewDelhi III on 28-9-2001 in both the appeals.In the light of the above, he prayed for setting aside the order ofthe CEGAT.14.Per contra, Mr. P. Wilson, the learned ASGI submittedthat the writ petition is not maintainable under Article 226 of theConstitution against the order of the CEGAT and the petitionershould have approached the Tribunal for making a reference to this https://hcservices.ecourts.gov.in/hcservices/ Court. Apart from the preliminary objection, he took this Courtthrough the order passed by the CEGAT and contended that theclubbing was done based upon a factual finding and such a findingof fact cannot be interfered lightly and, therefore, the writpetitions should be dismissed. He also placed reliance upon theaverments made in the counter affidavit filed in both the writpetitions.15.With reference to the preliminary objection, it must bestated that even in case of Tribunals constituted under Articles323 A and 323 B of the Constitution, the Supreme Court inL.Chandrakumar v. Union of India [1994 (5) SCC 539] has held thatthe power under Article 226 of the Constitution cannot be takenaway and parties are allowed to move the High Court inspite of abar created under the Tribunals Act. It is admitted that the CEGATis not a Tribunal constituted under the above provisions of theConstitution and, therefore, the preliminary objection must fail.16.With reference to the second objection made by thelearned ASGI, it must be stated that even a finding of fact musttake into account relevant factors. Any omission to take intoaccount the relevant factors to arrive at a factual finding will bean error apparent on the face of the record and it was also held tobe mixed question of law and facts. In such circumstances, thisCourt can set aside those findings even in a writ petition underArticle 226 of the Constitution.17.In the present case, the CEGAT had not taken into accountthe two decisions referred to above as well as the directionsissued under Section 47-B of the Central Excise Act. Since theCEGAT had largely went by the Investigation Report and relied uponirrelevant considerations, the order of the CEGAT confirming theorder of the second respondent must be set aside.18.It is also stated by the learned Senior Counsel that eachunit has crossed from the exemption under Excise duty and all thethree units are levied excise duty and the present case covers onlythe impugned order. 19.In the light of the above, W.P. No. 7170 of 1998 willstand allowed. In view of the decision in that writ petition, thereis no necessity to pass any separate order in W.P. No. 7169 of 1998and that writ petition will stand allowed. However, there will beno order as to costs. Connected Miscellaneous Petitions are closed.Sd/-Assistant Registrar/true copy/Sub Assistant Registrar https://hcservices.ecourts.gov.in/hcservices/ griTo1.Customs, Excise, Gold (Control) Appellate TribunalSouth Zonal BenchShastri BhavanAnnexe Building26 Haddows RoadChennai2.The Commissioner of Central Excise6/7 A.T.D. StreetRace Course RoadCoimbatore+ 1 cc to Mr.C.Saravanan Advocate SR No.33318Delivery Common Order in W.P. Nos. 7169 and 7170 of 1998JSV(CO)JJM(14.07.08)