Case Law Details
Asha Industries Vs C.C.E. & S.T. (CESTAT Ahmedabad)
Partnership Firm and proprietorship concern having one common partner as individual could not be defined as relative u/s 2(41) of Companies Act
Conclusion: A proprietorship firm and the partnership firm even though the said proprietor was one of the partner in the partnership firm, both could not be a related person under section 2(41) of the Companies Act,1956. Moreover, the department was kept informed about the partners and proprietor of manufacturer assessee as well as the dealer, however, department had not taken any action and subsequently the demand was raised by invoking extended period of limitation based only on presumption and assumption, which could not be accepted in law.
Held: Appellant-Asha Industries was a partnership firm engaged in the manufacture of IPCO creamy snuff falling under chapter sub heading 240399.40 of the schedule to the Central Excise Tariff Act, 1985 in their factory Nadiad since 2001. Names of three persons as partners were endorsed on the reverse of the Registration Certificate. The goods manufactured by the appellant firm were sold in the local market through M/s. IPCO Sales Agency, which was a proprietor concern of one of the partner in the partnership firm The case of the department was that since the manufacturing firm and the trading firms were run by one family members they were related in terms of Section 4 of Central Excise Act 1944. Accordingly the value at which the trading firm M/s. IPCO Sales Agency sold the goods the same should be treated as transaction value and excise duty was required to be paid on such value. Accordingly, the show cause notice was issued, whereby the differential duty was demanded. The Adjudicating Authority confirmed the entire demand proposed in the show cause notice and imposed the penalty on the appellant manufacturer under Section 11AC and also imposed penalties on other two appellants under Rule 26 of the Central Excise Rules, 2002. Therefore being aggrieved by the order-in-original, the appellant filed the present appeals. It was held that in prima facie view a proprietorship firm and the partnership firm even though the said proprietor was one of the partner in the partnership firm, both could not be a related person. However, this was a highly debatable issue. It was noted that the department was kept informed about the partners and proprietor of manufacturer assessee as well as the dealer. With these information if at all the department was of the view that both were related persons the issue could have been raised within the normal period of limitation i.e. one year. However, department has not taken any action and subsequently the demand was raised by invoking extended period of limitation. There was no dispute that all the correspondences had been acknowledged by the department by putting a rubber stamp and in some of the letters there were signature of the receiving officer. Despite having these letters on record which bears the rubber stamp as well as the signature, the department had not taken pain to carry out the investigation about the genuineness of the rubber stamp and the signature put thereon. Therefore, in absence of carrying out such investigation or inquiry, the observation of the Adjudicating authority to doubt the above letters was based only on presumption and assumption, which could not be accepted in law. In the present case the demand was raised for the period 2002-06 to 2007-08 by issuing the show cause notice dated 30.09.2013 therefore, the entire demand was covered under the extended period of limitation. The department was kept informed from time to time about the constitution of the manufacturer’s partnership firm as well as the buyer’s proprietorship firm. Therefore there was no suppression of fact on the part of the appellant.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
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