Brief facts Of the Case :
M/s. Ganesh Enter prise located at Prabhudas Patel Plot No.2,Near Sabar Tiles,
Danilimbda, Ahmedabad, ( hereinafter referred to as "the said unit" for brevity), are
engaged in the manufacture of Cellulose powder falling under Ch.39 o f the Schedule to
Central Excise Tariff Act, 1985. The said unit is not registered with Central Excise
department. Intelligence was gathered that proprietor of said unit Shri Yogesh
Chandradutt Dhariyal is having yet another unit under his proprietorship in the name and
style of Dhariyal Chemicals engaged in the manufacture of identical products and he is
indulging in evasion of duty by resorting to claiming exemption u n d e r N o t i f i c a t i o n
N o . 8 / 2 0 0 3 - C E d a t e d 1 . 3 . 2 0 0 3 s e p a r a t e l y f o r t h e g o o d s manufactured and cleared in
the name of Ganesh Enterprises. Based on the above information, on 29/30.08.2007, a
search was carried out in the factory premises of s a i d D h a r iya l C h e m i c a l s , s i t u a t e d a t
4 , P r a b h u d a s E s t a t e , N e a r S a b a r E s t at e , Danilimda, Ahmedabad in the presence of two
independent panch witnesses and Shri Yogesh Chandradutt Dhariyal, Proprietor of said Dhariyal
Chemicals.
2.
Subsequently, Show Case Notice dated 28.04.2008 was issued from F. N o . I V / 1 3 0 4 / C E / P I - I / 0 7 - 0 8/ c as e b y t h e J o i n t C o m m i s s i o n e r , C e nt r a l E xc i s e , Ahmedabad-I
discussing all the evidences and co - relating Shri Yogesh C. Dhariyal, M/s. Dhariyal
Chemicals and M/s. Ganesh Enterprise.
3.
The demand raised in the above referred SCN dated 28.04.2008 was confirmed
by the Additional Commissioner, Cen tral Excise, Ahmedabad -I vide Order-in-Original No.
48/Addl. Comm./2009 dated 27.02.2009. On the basis of facts, evidences and discussions
in the above OIO, the adjudicating Authority has found that Shri Yogesh C. Dhariyal was
the de facto Proprietor of Ms.Ganesh Enterprise. Further, the Adjudicat ing Author it y, in
Para - 52 & 53 of the above order has held that Shri Yogesh Dhariyal is the real Proprietor
of M/s. Ganesh Enterprise and Shri Yogesh Dhariyal, M/s. Ganesh Enterprise and M/s.
Dhariyal Chemicals all the three are one and same for taxation purpose and they are not
different legal entities. As Shri Yogesh Dhariyal was having two factories under his proprietorship,
both factories were not separately entitled to get exemption from Central Excise duty i n
view of the specific provisions of Para - 2(v) of the notification No. 8/2003 -CE, as amended
Shri Yogesh Dhariyal has to be treated as 'manufacturer' for the purpose of availing
exemption under Notification No. 8/2003 -CE irrespective of the fact that he was running
business / factories in the name of M/s. Dhariyal Chemicals and M/s. Ganesh Enter prise at
dif f erent places. In t his case the f actory Viz. M/s. Dhariyal Chemicals was not availing
exemption under Notification No. 8/2003 -CE and not eligible f or t he said exemption.
Theref ore, M/s. Ganesh Enter prise, which is also u n d e r t h e s a m e p r o p r i et o r s h i p, wa s
n o t e l i g i b l e f o r t h e S S I e xe m p t i o n u n d er Notification No. 8/2003-CE.
4.
During
the course
of
above
proceedings,
M/s.
Ganesh Enterprise
were
requested b y the Superintendent, Central Excise, AR -I I D-IV, Ahmedabad -I vide letter
F. No. AR-I/D-IV/Ganesh/2007-08 dated 19.11.2007 to take Central Excise registration and
clear the goods on payment of Central Excise duties. However, the unit ref used to take
the registration as well as continued to clear goods without payment of duties and
informed this office vide their letter dated 12.12.2007 that their turnover of goods
manufactured did not exceed Rs. 1 Crore in any f inancial year and therefore, with the
exemption limit granted by notification by Central Government to S.S.I. Units. Shri Yogesh Dhariayl,
proprietor of M/s. Dhariyal Chemicals and M/s. Ganesh Enterprise was also requested vide
letter F. No. ARI/Div-IV/ Ganesh/07-08 dated 11.12.2007, to take new reg istration for M/s.
Ganesh Enterprise and clear the goods on payment of duties. However, Shri Yogesh Dhariyal
vide letter dated 13.12.2007 informed that M/s. Ganesh Enterprise is not his proprietary unit and he
do not have any interest in any matter in the said unit. He f ur t her inf orm ed t hat t he ir
r elat ion ar e on l y c om m er cial r elat ions and t he transfers, if at all, are on principal to
principal basis.
5.
This office vide letter F.No. AR-I/DN-IV/Ganesh/2008-09 dated 07.10.2009
requested to provide the informati on regarding the clearances made from M/s. Ganesh
Enterprise from 01.04.2009 to 30.09.2009. M/s. Ganesh Enterprise vide letter F. No.
GE/GDJ/2009-10/1012/1 dated 12.10.2009 and letter F.No. GE/GDJ/2009 -10/1015/1 dated
15.10.2009 has provided details of rem oval of final product and on the clearances made
duty liability has been calculated and shown below:
Description
of Goods
CE
TH
Total Sales
in Rs.
Basic Excise
Duty
39
Rs.10,68,275/-
Rs. 85,462/-
Cellulose Powder
Edu. Cess
@2%
Higher
Edu. Cess
@1%
Total
Rs. 855/-
Rs. 88,026/-
Rs. 1709/-
1
6.
From the above, it appeared that M/s. Ganesh Enterprise is proprietary concern of
Shri Yogesh Dhariyal, who is also operating his another firm M/s. Dhariyal Chemicals,
Prabhudas Patel Plot No.4, Near Sabar tile s, Danilimada, Ahmedabad is not entitled for the
benefit of SSI exemption as per proviso 2(v) of Notification 8/2003-CE dated 01.03.2003
and is liable to pay duty amounting to Rs. 88,026/- (Rupees Eighty Eight Thousand and
Twenty Six Only), in view of the Show Case Notice date 28.04.2008 already issued and
adjudicated vide Order in Original No. 48/Addl. Comm./2009 dated 27.02.2009, according to
which it is already held by the department that M/s. Ganesh Enterprise is the another firm
of Shri Yogesh Dhariyal and confirmed the demand. The said duty liability is arising
against the clearances of goods for subsequent period from 01.04.2009 to 30.09.2009.
7. From the a bo ve sa id d is cu ss i on s it ap p ear e d t h at M/ s. G a n es h Enterprise has
contravened the provisions of Rule 4, 6, 9, 10,11,12 of Central Excise Rules, 2002 in as
much as they have manufactured and cleared excisable goods without payment of duty;
failed to determine the duty liability on the goods; failed to obtain Central Excise
Registration; failed to maintain Daily Stock Account in the prescribed manner; failed to issue
valid invoice while removing excisable goods; f ailed to subm it periodical returns
indicating therein goods manuf actured and cleared by them.
8. Hence a show cause notice was issed to M/s. Ganesh Enterprises Prabhudas Patel Plot
No.2, Near Sabar Tiles, Danilimbda, Ahmedabad on 06.01.2010 by the Assistant
Commissioner, Central Excise, Divi sion-IV, Ahmedabad –Ifor showing cause as to why:(1) The Central Excise duty amounting to Rs. 88,026/- (Rupees Eig ht y Eig ht
t housand T went y Si x O nl y) ( Dut y 85, 462, Education Cess Rs. 1,709/- and Higher Edu.
Cess Rs. 855/-) involved on the goods manufactured and removed under the invoices of
M/s. Ganesh Enterprise as detailed above, should not be confirm ed and recovered under
Section 11A (i) of CEA, 1944;
(2) Interest at t he r at e a p p l ic ab l e s ho u ld no t b e c har g e d un der t he provisions of
Section 11AB of Central Excise Act, 1944 and recovered from them;
( 3 ) P e n a l t y s h o u l d n o t b e i m p o s e d o n t h e m u n d e r t h e p r o vi s i o n s o f Section 11AC
of CEA, 1944,
Defence Reply:
M/s. Ganesh Enterprises vide their letter No. Nil dated 28.07.2011 submitted the written reply
to SCN as under:
At the outset I deny the charges and allegations levelled in the Show CauseNotice. I say
and submit that Shri Yogesh Dhariyal is not the proprietor of M/s. Ganesh Enterprises and therefore,
turnover of M/s Ganesh Enterprise cannot be included with turn over of M/s Dhariyal Chemicals.
It is submitted that above referred Show Cause Notice dated 28.04.2008 was adjudicated by the
Additional Commissioner, Central Excise vide Order-In-Original No. 48/Addl.Commr/09 dated 27-22009 (hereinafter referred to as "the earlier Order" for short). We had not accepted the Order-inOriginal dated 27.02.09 and filed an Appeal before the Commissioner (Appeal-I) of Central
Excise who upheld Order-in-Original dated 27.02.2009. The said Order-In-Appeal dated
07.01.2010 was further challenged before the Hon'ble Tribunal whereby t h e H o n ' b l e T r i b u n a l
v i d e O r d e r N o . A / 1 9 2 / V V Z B / A H D / 2 0 1 0 & S/158/VVZB/AHD/2010 dated 25.02.2010 in
Appeal No. E/178/2010 allowed the Appeal by way of remand to the Adjudicating authority for
adjudication in terms of the Order passed by the Hon'ble Tribunal. The Joint Commissioner vide
Order-In-Original No. 33/Joint Commissioner/2010 dated 13.12.2010 confirmed the demand
against Shri Yogesh Dhariyal by holding that Shri Yogesh Dhariyal is the proprietor of Ganesh
Enterprise. The said Order-inOriginal dated 13.12.2010 was challenged before the Hon'ble
Commissioner (Appeals) who upheld the Order dated 13.12.2010. We are in process to file an
appeal challenging Order -In-Appeal No. 73 and 74/2011 (Ahd 1)CE/MM/Commr(A)/Ahd
dated 30.05.2011 before the Hon'ble Tribunal. Copies of above O rder-In-Original dated
13.12.2010 and Order-In-Appeal dated 30.05.2011 are enclosed herewith and marked as Annexure A
and B respectively.
2)
It is stated that since the present protective Show Cause Notice has been issued based upon
Show Cause Notice dated 28.04.2008. The said Notice has been culminated into Order-In-Appeal
dated 30.05.2011. As time limit for filing appeal has not been expired and we are going to file appeal
challenging 0IA, it is requested that the hearing of the captioned Show Cause Notice may kindly be kept
in abeyance till appeal is decided by the Hon'ble Tribunal for avoiding multiplicity of proceedings.
3)
Without prejudice to the aforesaid, I say and submit that Shri Yogesh Dhariyal
has not deployed any fund for setting up M/s. Ganesh Enterprises. He had not invested money for
formation of M/s. Ganesh Enterprises. There is no evidence to show that he had deployed
funds for setting up Ganesh Enterprises.
2
4)
I say and submit that machinery for carrying on the manufacturing activity of Ganesh Enterprises was
not purchased out of Shri Yogesh Dhariyal's money. The Adjudication Authority and the first
Appellate Authority erred in relying upon his statement in earlier Show Cause Notice dated 28.04.08,
in which he had inter alia stated that he had made entire investment for starting M/s. Ganesh
Enterprises. I say and submit that the said statement was retracted at the earliest available
opportunity. It is settled law that when statement is contrary to the documentary evidence,
evidence would prevail over statements particularly when the same are retracted.
5)
The Department having accepted the legal position in the earlier Order that retraction of a
confessional statement reduces its evidentiary value and there must be independent corroboration,
the Hon'ble Additional Commissioner and the Hon'ble Commissioner (Appeals) should have held that
such corroborative evidence was lacking.
The Hon'ble Additional Commissioner and the Hon'ble Commissioner (Appeals) erred in
observing that Shri Yogesh Dhariyal was the proprietor of M/s. Ganesh Enterprises since he was managing all
the activities of Ganesh Enterprises. I say and submit that the above orders had not cited a single piece of
evidence to show that he made any initial investment for incorporation of the firm or to show that he
was managing all activities of Ganesh Enterprises as proprietor thereof. As the undersigned had invested
the amount in plant and machinery from my own funds, the allegation that Shri Yogesh Dhariyal is the proprietor
and had invested money, is incorrect and contrary to the facts of the case.
6)
It is wrongly alleged that Shri Yogesh Dhariyal was operating saving account of the undersigned
held with Bank of Baroda, Bhariavnath Branch on the premise that his photograph was affixed on the
opening form of saving account. The Show Cause Notice wrongly rely upon the account opening form alleged
to have been obtained from the Bank under Bank's letter dated 5-9- 07. Even otherwise, the same did not
relate to Ganesh Enterprises and none of the business transactions of the firm were transacted in the said
account. In fact, transactions in the said account are of few thousand rupees only and assuming while
denying that the said account belonged to and was operated by Shri Yogesh Dhariyal, it cannot be said on
the basis thereof that he was the proprietor of Ganesh Enterprises for the simple reason that the said
account was neither in the name of Ganesh Enterprises nor did it relate to the business transactions/
manufacturing activity of Ganesh Enterprises.
7)
I say and submit that the Central Excise officers seized a passbook of the
savings bank account with Bank of Baroda in dispute at the time of search from my premises. I am a real bank
account holder and therefore, I was having possession of passbook at the time of search. Had Shri Yogesh
Dhariyal operated the said account, the Central excise Officers would have found passbook from Shri
Yogesh Dhariyal, possession which is not the case.
8)
I say and submit that bank statement of the said savings account with Bank of Baroda in dispute shows
that I had not made single transaction in Shri Yogesh Dhariyal's favour. Had the beneficial or real owner of
the said bank account been Shri Yogesh Dhariyal, there would have been transactions in his name. All
these circumstantial evidences show that Shri Yogesh Dhariyal was not real account holder of savings
account with Bank of Baroda.
9)
I say and submit that Shri Yogesh Dhariyal used to look after the business of the Ganesh Enterprise as
Power of Attorney holder in my absence. Since he is my cousin brother and his factory is situated near to my
factory, I had given Power of Attorney. It is for this reason that in some of the purchase bills/delivery
challans, the suppliers have referred to him. This, by itself, cannot and does not mean that he was real
proprietor of Ganesh Enterprise.
10)
I say and submit that the power of attorney authorized Shri Yogesh Dhariyal to represent in
the business dealings of Ganesh Enterprise with various persons, corporations, organizations and
companies. Accordingly, in my absence, he used to interact with various persons in connection
with the business of Ganesh Enterprise. The fact that such interaction did not involve signing as power
of attorney holder cannot mean that he was not working as power of attorney holder. Nowhere, he had
signed as proprietor of Ganesh Enterprise.
11)
It is wrongly alleged that there was a financial flow back from M/s. Ganesh Enterprises to
account of Shri Yogesh Dhariyal. The Show Cause Notice relied upon small payments made
towards personal expenses of his family and LICs from my account. Since payments were
marginal/nominal compared to the turn over of my firm and I had made these payments out of natural
love and affection for his family, the same can by no stretch of imagination be called flow back of
money of M/s. Ganesh Enterprises to them. The amount spent by me for his family, would not be more
than Rs. 1.5 lacs. Since these payments were made out of love and affection and such payment was
of personal nature and not related to business, and therefore does not lead to the conclusion that
there was financial flow back from M/S Ganesh.Enterprises to Shri Yogesh Dhariyal. It is
3
settled law that such transactions between relatives are normal and do not constitute financial flow
back.
12)
The Hon'ble Authorities erred in holding in the orders that since my firm paid electricity bill of Shri
Vijay Dhariyal, there was a financial flow back from my firm. This is irrelevant to the question whether
Shri Yogesh Dhariyal is the proprietor of M/s. Ganesh Enterprise and whether clearances of M/s.
Ganesh Enterprises are liable to be clubbed with those of Dhariyal Chemical.
13)
It is wrongly alleged of financial flow back from M/s. Ganesh Enterprises to
M/s. Dhariyal Chemicals on the ground that electricity bill in respect of one meter of his firm was
being paid by my firm. The Revenue failed to appreciate the fact that under an agreement
between my firm and M/s Dhariyal Chemicals, in consideration of drawing steam and water by my
firm from M/s. Dhariyal Chemicals, my firm had to pay a certain sum of money to his firm and also
the electricity charges in respect of one meter. Since my firm had not paid the said sum of money, my
firm continued to pay for the electricity charges so as to set off the said sum of money which was
payable by him. I crave leave to refer to and rely upon Agreement dated 14-10-1996 entered between
my firm and M/s. Dhariyal Chemicals as well as a statement showing payment of electricity charges to
set off of the amount payable under the agreement. It is erred in proceeding on the basis that
during the period covered by the Notice, my firm was not drawing steam and electricity from the Dhariyal
Chemical's factory and hence question of payment for electricity meter of his factory by my firm
did not arise. The Authorities erred in not appreciating the fact that the payment for electricity
during the period in question was continued to be made to set off the outstanding sum which was
payable for the earlier period.
14)
I say and submit that financial flow back can be said to take place between two persons/firms
when the finances of one come from the other and the profits/income of the first mentioned person/firm
flow back to the other. In the present case, there is no evidence at all to show that finances in my firm
came from Shri Yogesh Dhariyal or M/s. Dhariyal Chemicals and that the income/profit of my firm
flowed back his firm. It is clear from the evidence that finance of my firm was not generated /invested by
Shri Yogesh Dhariyal and the income/ profit of my firm remained with me and the same has not been
withdrawn by or paid to Shri Yogesh Dhariyal or his firm.
15)
I say and submit that clearances of two units can be clubbed only when there is evidence of
financial flowback which would show that one unit is a dummy of the other and exists only on paper. As
discussed in aforesaid paragraphs, there is no financial flow back from my firm to Dhariyal Chemicals
and therefore, turn over of my firm should not be clubbed with Dhariyal Chemicals. Even otherwise, it is
stated that my firm is having independent existence as well as having separate machineries, income tax
PAN, separate Sales Tax registration and separate electricity meter and separate registration under the
Factory Act. In the following cases, it is held that clearance of two units can be clubbed only when there is
evidence to show financial flow back or evidence to show that one unit is a dummy of the other.
a)
CCE V/s Arbuda Industries -2008 (230) E.L.T. 159
b)
CCE V/s Auto India -2007 (213) E.L.T. 436
c)
Studioline Interior Systems Pvt. Ltd. V/s. CCE - 2006 (201) E.L.T. 250
No such evidence exists in the present case.
18)
16)
I say and submit that the no single evidence has been adduced showing that Shri
Yogesh Dhariyal is having control over my firm. The department had made a picture
showing that Shri Yogesh Dhariyal is a real owner, to that effect the Department had relied
on statements which were retracted from time to time. In the absence of corroborative
evidence, it cannot be said that Shri Yogesh Dhariyal had control over my firm and it is
submitted that the clearance of my firm should not be clubbed with M/s. Dhariyal Chemicals.
17)
I say and submit that the statement retracted by me was not after thought. In the facts
and circumstances of the case, it shows that Shri Yogesh Dhariyal is not a real owner of my
firm and therefore, I had retracted a statement since a statement was recorded under coercion
and threat.
Without prejudice to the aforesaid submissions, in any event it is submitted that the
goods Cellulose Powder manufactured are not liable to duty at all. The Show Cause Notice
demanded duty under Chapter 39 of the Central Excise Tariff without indicating the particular
Heading/ sub-heading of Chapter39. It is submitted that the said goods are not classifiable
under Chapter 39. It is submitted that as held by the Tribunal in the case of CCE v Reliance
4
Cellulose Products Ltd-2000 (117) ELT 366 (upheld in 2001 (134) ELT A241, Cellulose Powder is
not classifiable under Chapter 39 but is classifiable under Chapter 47 where the rate of duty is NIL.
19)
It is submitted that Cellulose and its Chemical derivatives are classified under Chapter
Heading no. 39.12 if the products are not elsewhere specified or included in other Chapter
Headings. In the present case, M/s Ganesh Enterprise manufactured Cellulose powder out
of raw materials viz. Micro Crystalline Cellulose Powder (cellulose fibres) and Maize Starch
Powder. Both these products are covered under Chapter Heading No.47 as the pulp of this
chapter consists essentially of cellulose fibres obtained from various vegetables materials or
from waste textiles of vegetable origin. In terms of Chapter Heading 47, pulp is generally
presented in baled sheets (whether or nor perforated), wet or dry, but may sometimes be in
slabs, in rolls or in the form of powder or flakes. In the present case, Micro Crystalline
Cellulose powder is a primary source of cellulose fibres. Micro Crystalline Cellulose powder
has been defined under various dictionary which are as under : "As per Wikipedia Meaning and
Definition on Microcrystalline'Microcrystalline cellulose: Microcrystalline cellulose is a term for
refined wood pulp and is used as a texturi zer, a ant i -caking agent, a fat s u b s t i t ut e ,
a n e m u l s i f i e r 1 7 Source : www.fao.org/docrep/w6355e/w6355e01.htm (Food and Agriculture
Organization of the United Nations)
20)
"Microcrystalline cellulose is a purified, partially depolymerized cellulose prepared by treating
alpha-cellulose, obtained as a pulp from fibrous plant material, with mineral acids. The degree of
polymerization is typically less than 400. Not more than 10% of the material has a particle size of less
than 5 MM.
21)
In view of the above published literatures, Microcrystalline Cellulose is a source of Cellulose
fibres which is derived from fibrous plant materials (Vegetable origin) and the same has been specified
in the HSN Notes under Chapter 47.
22)
It is submitted that cellulose powder under dispute was not prepared by treating Cellulose with
acetic anhydride, acetic acid, sulphuric acid or nitric acid. And it was not Cellulose Acetate butyrate and
cellulose propionate as well as cellulose ethers and therefore, the goods in dispute cannot be
classified under Chapter Heading 39 in terms of HSN notes.
23)
We place reliance upon decision of C.C.Ex Vs Reliance Cellulose Products Ltd (supra) whereby
the Hon'ble Tribunal held that end product being in powder form which is recognized by Notes under
Chapter 47 of the HSN, the end product will fall under Chapter 47 and the same will automatically
excluded from the ambit of Chapter 39. The Hon'ble Tribunal further held that
since the product in that case did not fall under Chapter Heading 39, the Note 6(b) was of
no use.
24)
We say and submit that Circular No. 32/88 dated 15.12.88 and 6/90 CX dated 19.02.1990 will
not be applied in the present case as we did not mix raw materials with hydrochloric acid which can
be seen from panchnama dated 28/09.08.2007.
25)
Penalty under Section 11AC can be imposed when liability of the duty subsist. In view of
the facts and circumstances of the case, Shri Yogesh Dhariyal is not real owner of my firm and
therefore, my firm is not required to pay duty on goods manufactured and cleared by my firm. My firm is
owned by me and is manufacturing goods independently of M/s. Dhariyal Chemicals and hence the
clearances of my firm cannot be clubbed with those of M/s Dhariyal Chemicals for demanding
duty. Since there is no liability of duty, penalty under Section 11AC cannot be imposed.
26)
I say and submit that Ganesh Enterprise is not liable for payment of interest under
Section 11AB as there is no liability of duty in term of the above facts.
27)
It is requested that an opportunity of hearing may kindly be given before the case is
adjudicated.
Personal Hearing:
Personal Hearing in the matter was held on 29.07.11. Shri Hardik Modh, Advocate
appeared for the same on behalf of the assessee. He reiterated the submission made in
reply dated 28.07.2011 and stated that their appeal was pending before Hon’ble
CESTAT against order passed in main SCN and therefore they have requested to keep
the matter in abeyance till the direction of Tribunal and that they have nothing more to
add.
5
Discussion and Findings:
I have gone through the records of the case and the written submission dated
28.07.2011 f iled by the assessee.
I f ind that a show cause notice was issued to the assessee demanding Central Excise
Duty amount to Rs. 88,026/- involved on the goods manufactured and removed by them
during the period 01.04.2009 to 30.09.2009 by claiming exempt ion under Notfn. No.
8/2003-CE dated 01.03.2003 for which they were not eligible. It has been observed in
the Show Cause Notice that Shri Yogesh C. Dhariyal, the proprietor of M/s. Dhariyal
Chemicals was de -facto proprietor of M/s. Ganesh Enterprise, both the f actories were
not separately entitled to get exemptionf rom Central Excise Duty under Notfn. No.
8/2003-CE dated 01.03.2003 and clearance value to both has to be clubbed f or
determining their duty liability in terms of Para2(V) of Nof n. No. 8/2003 -CE dated
01.03.2003, as amended.
The assessee vide their letter dated 28.07.2011 submitted the reply to show cause
notice denying the charges and allegations leveled in the show cause notice. He has
stated that Shri Yogesh Dhariyal is not the proprietor of M/s. Ganesh Enterprises and
therefore turnover of M/s. Ganesh Enterprise can not be included with the turn over of
M/s. Dhariyal Chemicals. I find that a demand in the same issue was conf irmed vide OIO
No. 48/Addl Commr/09 dated 27.02.2009 which was upheld by Commr.(Appeal) vide OIA
dated 07.01.2010. On being challenged by the assessee before the Hon’ble CESTAT,
The CESTAT vide order no. A/192/W ZB/AHD/2010 & S/158/W ZB/AHD/2010 dated
25.02.10 had remanded the order to the Adjudicating Authority f or reconside ration of the
submission made by the assessee after giving them another opportunity to present their
case. Accordingly the Joint Commissioner of Central Excise, Ahmedabad vide OIO No.
33/Jt. Commr/2010 dated 13.12.10 adjudicated the case conf irming the demand of duty
with interest, conf iscating the goods and imposing penalty upon the assessee under
Section 11AC of Central Excise Act, 1944, holding Shri Yogesh C. Dhariyal the real
proprietor of M/s. Ganesh Enterprise and denying the benef it of exemption unde r Notf n.
No. 8/2003-CE dated 01.03.03 to the assessee.
The assessee in their submission dated 28.07.11 have requested that since the
present SCN has been issued based upon the SCN dated 24.08.08 which has been
culminated into OIA dated 30.05.11 and they are going to file appeal challenging the
OIA, the hearing may be kept in abeyance till the decision of their appeal before the
Hon’ble Tribunal.
I f ind that the present SCN is pending for more than one year and denovo case in
the same issue has already been decided by the Joint Commissioner vide OIO No.
33/Jt. Commr/2010 dated 13.12.10, the matter can not be kept pending further and as
such the same is taken up f or f inalizing adjudication proceedings.
I f ind that the Hon'ble CESTAT in the case of Trea dwell Rubbers
Vs CCE, Mangalore [2007 (212) ELT 551 (Tri. -Bang.)], relying upon the case of Quality
Steel Industries Vs Collector [1989 (43) ELT 775 (Tn.), which was also upheld in Apex
Court as reported in 1999 (107) ELT A61 (SC)], has interalia held at P ara 7 of the order
as under:
"W e find that the Adjudicating Authority has rightly decided the issues in accordance
with the remand order dated 21 -1- 2002 of the Tribunal. After examining the Board's
guidelines and several case law, he has come to the concl usion that the clearances of
M/s. Tradewell Rubbers and M/s. Excel Tyres & Rubber Products should be clubbed.
Shri George Kurian is the proprietor of one unit and Smt Annie George is the propriet or
of another unit. They are husband and wif e. Smt. Annie Geo rge has also given General
Power of Attorney to Shri George Kurian. For all intense and purpose, the whole show
was being run by George Kurian."
In the af oresaid case, the Tribunal has ordered f or clubbing of clearance of
both units. In this case, Shri. Y ogesh Dhariyal and Shri Ganesh Josh i are cousins. Shri
Ganesh Joshi has claimed to given a Power of Attorney to Shri. Yogesh Dhariyal f or
doing all the work of his proprietorship f irm. But, it is established beyond doubt that the
entire show was being run by Shri. Yogesh Dhariyal. So, I am of the view that the
clearance values of M/s. Dhariyal Chemicals and M/s. Ganesh Enterprise are liable to be
clubbed in view of the aforesaid case law also.
In view of the aforesaid f acts, evidences and discussion I f ind that Shri.
Yogesh C. Dhariyal was the def acto Proprietor of M/s. Ganesh Enterprise and not Shri
Ganesh Joshi. As M/s. Ganesh Enterpr ise locat ed at Pr abhudas Pat el Plot No. 2, Near
Sabar Tiles, Danilimbda, Ahmedabad Shri Yogesh Dhariyal was having two facto ries
6
under his proprietorship; both f actories were not separately entitled to get exemption
from central excise duty in view of the specif ic provisions of Para 2(v) of the Notif ication
No. 8/2003-CE, as amended. Further, I hold that Shri. Yogesh Dhariyal h as to be t reated
as a 'manufacturer' for the purpose of availing exemption under Notif ication No. 8/2003 CE irrespective of the f act that he was running business/f actories in the name of M/s.
Dhariyal Chemicals and M/s. Ganesh Enterprise at different plac es. As per Para 2(i) of
the Notif ication No. 8/2003 -CE, a manufacturer has option not to avail the exemption
contained in this notif ication and instead pay the normal rate of duty on the goods
cleared by them; such option shall be exercised before effectin g f irst clearances at the
normal rate of duty and such option shall not be withdrawn during the remaining part of
the f inancial year. In this case the factory viz. M/s. Dhariyal Chemicals was not availing
exemption under Notif ication No. 8/2003 -CE and not eligible f or the said exemption.
Therefore, M/s. Ganesh Enterprise, which is also under the same proprietorship, was not
eligible for the SSI exemption under Notification No. 8/2003 -CE.
It is a very clear position of the law that the Proprietor and Propr ietary f irm are
one and the same for taxation purpose. The name given to the Proprietary f irm is just a
name given to the business, but, the legal entity remains the Proprietor only. Theref ore,
I hold that Shri. Yogesh Dhariyal, M/s. Ganesh Enterprise and M/s. Dhariyal Chemicals
all the three are one and same for taxation purpose and they are not different legal
entities. I find no force in the contention of Shri. Yogesh Dhariyal to the effect that
demand of duty should be made to M/s. Ganesh Enterprise and not to him.
In view of the above, I hold that Shri. Yogesh Chandradutt Dhariyal was the real
Proprietor of M/s. Ganesh Enterprise and he was not eligible f or SSI exemption under
Notif ication No. 8/2003 -CE, as amended, f or M/s. Ganesh Enterprise. Therefo re, he was
required to pay Central Excise duty of normal rate, which was not paid by him.
Therefore, I f ind the demand of Central Excise duty made to Shri. Yogesh Dhariyal,
Proprietor of M/s. Ganesh Enterprise is to be conf irmed under the provisions of Sub
Section (2) of Section 11A of the Central Excise Act, 1944.
The said unit in their written submission dated 28.07.2011 has contended that the goods
cellulose powder manuf acture by them are not liable to duty at all as the same is not
classif iable under C hapter 39 but is classif iable under Chapter 47 where the rate of duty
is nil.
It is not disputed that they are engaged in manufacturing of Cellulose Powder,as far as the
classification is concerned. I Have categorically held that it is correctly class ifiable under CTH
3912 and not under4704 as claimed by them,as the Cellulose Powder is specifically covered
under CTH 3912, Whereas the CTH 4704 Covers only Pulp of Wood or of other Cellulosic
Material and does not cover the exclusively cellulose.
Apart from the above, I find that Central Board of Excise & Customs (Board) had
occasion to deliberate on the issue of classification of Cellulose Powder. In this regard, the relevant
portion of Board's Circular No. 6/90-CX.3, dated 19-2-1990 issued from F. No. 93/5/90-CX.3 is
reproduced below:
"Doubts have been expressed regarding the correct classification of Cellulose Powder/microcrystalline Cellulose Powder, and bleached cotton linters/bleached cotton linter pulp, whether under
Chapter 14 or 39 or 47 of CET. It also appears that there is a divergence in practice in the field
formation
2. The matter has been examined. The main raw materials for the manufacture of Cellulose
Powder/microcrystalline cellulose powder are reported to be bleached cotton lin ters or hosiery rags or
cotton waste or wood pulp- etc. The raw material is mixed with hydrochloric acid and boiled for
about 1 to 2 hours and thereafter the material is washed with plain water. It is later semi-dried in a drier,
pulverized to fine powder and again dried, The resultant material is Cellulose Powder/micro-crystalline
Cellulose Powder. The classification of this product under Chapter 14 is not appropriate inasmuch as it
only covers vegetable plaiting materials; vegetable products, not elsewhere specified or included. The
classification of the product under Heading 29.42 as "other organic compounds" is not correct. The
Heading covers separate chemically defined organic compounds not classified elsewhere.
The Cellulose Powder is not a separate chemically defined organic compound as well. It is
merely cellulose obtained from out of bleached cotton linters, hosiery rags, wood pulp etc. The
classification of the product under Chapter 47 (Heading 47.01) also does not appear to be correct. As
per the Chapter Notes under Chapter 47 of HSN, the pulp covered by that Chapter consists essentially
of cellulose fibers. Therefore, it is clear that the product which is covered by Chapter 47 is not
exclusively cellulose. On the other hand, Heading 39.12 specifically covers "cellulose and its chemical
derivatives". As per Explanatory Note under Heading 39.12 of HSN, cellulose, not elsewhere specified
or included, in primary forms, is covered under the Heading 39.12. The Cellulose Powder/
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microcrystalline Cellulose Powder, which is reported to be in Powder form, would also be covered
by the expression "primary form", as per Note 6(b) of Chapter 39 of CET. Therefore, the
appropriate classification of Cellulose Powder under Central Excise Tariff would be under Sub-heading
3912.90. In this connection your attentions is also invited to the instructions contained in Board's
letter F. No. 93/51/88-CX.3 (Circular No. 32/88), dated 15-12-1988 on the same issue in the
context of the old Tariff."
In view of the position stated hereinabove, I do not find any merit in the argument put
forwarded by Shri Yogesh Dhariyal and the Cellulose Powder manufactured by him in the factory of
M/s. Ganesh Enterprise will fall under Ch.47 and therefore the same is exempted.
In view of the a bove fact and discussion, I hold that the said unit has contravened
the provisions of Central Excise Rules, 2002 as under:
Rule 4: By not paying duty of excise on excisable goods manufactured and cleared by them
in the prescribed manner.
Rule 6: By not assessing correct amount of duty at the time of removal.
Rule 9: By not obtaining separate central excise registration of M/s. Ganesh Enterprise in as
much as it was situated away f rom M/s. Dhariyal Chemicals and separate registration is
required for each factory even though the Proprietor is same.
Rule 10: By not maintaining Daily Stock Account records in properManner.
Rule 11: By removing excisable goods without prescribed invoices.
Rule 12: By not filing monthly return in the prescribed form.
Further, I hold that the said unit has wrongly availed the benef it of the scheme
of SSI exemption under Notif ication No. 8/2003 - CE, as amended.
Further, the said unit has contravened these provisions on account of fraud,
suppression of facts and contravention o f rules with intent to evade payment of duty,
therefore the said unit is liable to penalty under the provisions of Section 11AC of the
Central Excise Act, 1944. In the case of UOI Vs. Dharmendra Textile Processors [2008
(231) ELT 3 (SC) - 2008-TIOL-192-SC-CX- LB], the Larger Bench of Hon'ble Supreme
Court has held that there is no discretion to reduce penalty under Section 11AC and
means rea is not essential ingredient to impose penalty there under. So, penalty equal
to duty is imposable in this case.
.
In view of the above facts and discussion, I pass the f ollowing order:
:ORDER:
1
Ihold thatCellulose Powder manufactured by M/S Ganesh Enterprise is
correctly clas sif iable under Chapter 39 of the Schedule to the Central Excise Tarif f
Act.1985 and not under Ch 47 as contended by the said unit .
2
I conf irm the demand of Central Excise duty payable by Shri Yogesh C.
Dhariyal, Proprietor of M/s. Ganesh Enterprise amounting to Rs. 85,462/-/-, Education
Cess of Rs. 1,709/-/- and Secondary & Higher Education Cess of Rs. 855/-/-, totaling to
Rs. 88,026/-/- (Rupees Eighty eight thousand and Twenty Six only) under the provisions
of Sub-Section (2) of Section 11A o f the Central Excise Act, 1944.
3.
I conf irm the demand of interest at the rates prescribed under the
provisions of Section 11AB of the Central Excise Act, 1944.
4
I impose a penalty of Rs.88,026/ - ( Rupees Eighty eig ht thousand and
Twenty Six only ) under the provisions of Section 11AC o f the Central Excise Act, 1944 .
5
In terms of the provisions of Sec.11AC OF Central Excise Act, 1944,where such duty, as
determined under sub-sec. (2) of sec. 11A And the interest payable thereon under sec. 11AB of C. E.
Act,1944.is paid within 30 days from the date of receipt of this order determinig such duty, the Amt. of
penalty liable to be paid by such person under this sec., shall be twenty five per cent of the duty so
determined.
8
Accordingly, Sri Yogesh C Dhariyal, Proprieter of the said unit are given an option to avail the payment
of reduced penalty under sec. 11AC of CE Act 1944, subject to the condition that the entire Amt. of duty
so determined and confirmed hereinabove alongwith interest at appropriate rate and 25% of duty as
penaltyim posed U/S. 11AC of CEA,1944. If the same is not paid within 30 days of receipt of the order the
said option will not be available to them and they will be liable to pay the entire amount of penalty,U/S. 11
AC Of the C E Act,1944.
(U. B. SINGH)
DEPUTY COMMISSIONER,
CENTRAL EXCISE, DIV-IV,
AHMEDABAD-I
Ahmedabad
Date: 29/08/2011
F.No. V.39/03-21/09-10/Div-IV/DA
BY R.P.A.D.
To,
M/s. Ganesh Enterpr ise,
Prabhudas Patel Plot No.2,
Near Sabar Tiles, Danilimbda,
Ahmedabad-
Copy to:
1. The Assistant Commissioner (RRA), Central Excise, Ahmedabad -I
2. The Superintendent, AR -I, DIV-IV, Ahmedabad-I.
3. Guard File.
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