The Hindu Business Line : HC says ‘no’ to CEGAT order to club clearances of 3 factories for assessment

Chennai, Aug. 14 The Madras High Court has set aside a show-cause notice issued to a Hosur (Tamil Nadu)-based private company by the Customs, Excise, Gold (Control) Appellate Tribunal (CEGAT), South Zonal Bench, Chennai, to club the clearances of that company and two other units, for purposes of assessment of excise duty for the period 1992-93.

The show-cause notice was under the premise that two other companies floated by Calcium (India) Pvt Ltd — Global Calcium (India) Pvt Ltd and Calcitech India Pvt Ltd — to produce calcium gluconate and similar range of products for export, were dummies of Calcium (India) Pvt Ltd.

Hearing a writ petition by Calcium (India) Pvt Ltd, challenging the order dated May 23, 1997 (and despatched to petitioners on September 19, 1997) of CEGAT, Mr Justice K. Chandru held that CEGAT had not taken into account, while issuing the order, two decisions of the apex court as well as the directions issued under Section 37-B of the Central Excise Act, 1944 so as to ensure uniformity of levy of duty of excise.

Boundary issue

In their judgment in Rollatainers Ltd v. Commissioner of Central Excise, Delhi – III (2005 (11) SCC 203), the Supreme Court had said, inter alia, that simply because two factories might have common boundaries, that would not make them one factory.

Both were separate establishments run by separate managers, though at the apex level, they were maintained by the appellant company. The view taken by the Tribunal in that case did not appear to be well-founded, the apex court held.

The petitioner submitted that when the companies’ appeals were pending before CEGAT, the Tribunal had also preferred an appeal before the second respondent (Commissioner of Central Excise, Coimbatore). The petitioners had requested CEGAT to take into account the subsequent developments before passing its final orders. But they received the final order rejecting their contention and holding that the latter two units were dummies of the petitioner company.

Law and facts

The judge ruled that any omission to take into account the relevant factors to arrive at a factual finding would be an error apparent on the face of the record and it was also held to be a mixed question of law and facts.

Since CEGAT had not taken into account the decisions of the apex court as well as the directions under Section 37-B of the Central Excise Act, the order of CEGAT confirming the order of the second respondent must be set aside. Hence, the writ petition stood allowed.

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