[Order per : S.L. Peeran, Member (J)]. - In these set of appeals, a common question of law and facts arises, hence they are taken up together for disposal as per law. The short question that arises for our consideration in these appeals is as to whether the clearances of all the five units can be clubbed on the basis of interest free loan granted by the M/s. Alpha Toyo Ltd. to other four units and also in view of similar financial assistance among the other four units, notwithstanding the fact that all the five units are independently incorporated with separate licences viz. L-4 licence, ST and IT registration and having independent functioning in all respects of setting up of machinery, manufacture, labour, telephone, sales, purchase and other aspects of the managements. The show cause notice dt. 25-9-1991 issued for all the units is on the basis of 4th Annual Report of the year 1986-87, 5th Annual Report for the year 1987-88, 6th Annual Report for the year 1988-89 and 7th Annual Report for the year 1989-90 in respect of M/s. Alpha Toyo Ltd. in which there was references for advance of money without interest given to the other four units. On the basis of all these extracts made from the said annual report, it is alleged that M/s. Alpha Asahi Ltd., M/s. Toyo Mirrors Pvt. Ltd., M/s. Nikko Auto Ltd., and M/s Imasen Alpha Pvt. Ltd. were dummies of M/s. Alpha Ltd. and all the above dummies were under the management and control of M/s. Alpha Ltd. which is the main company and which floated these dummy units in order to avail irregular exemption under Notification No. 175/86-C.E. dt. 1-3-1986. It is alleged that M/s. Alpha Toyo Ltd.. were fully aware that they had advanced loans and financially accommodated them. They rendered financial and managerial assistance to all these units. They, therefore, created these dummy units with the sole purpose of evading duty and thereby availed irregular exemption under Notification No. 175/86-C.E., dated 1-3-1986 . It is alleged that since all these units were the dummies and under the same management and control of M/s. Alpha Toyo Ltd., the value of all above five units are required to be clubbed for the purpose of determining their eligibility to exemption under Notification No. 175/86-C.E. In that event of the matter, they were asked to explain as to why duty amount of Rs. 36,04,662.00 should not be covered under proviso (2) sub-section 11A and Central Excises and Salt Act, 1944 by invoking larger period, as they had wilfully mis-stated and suppressed the facts. They were also asked to explain as to why penalty should not be imposed under Rule 173Q of Central Excise Rules. All the assessees filed their independent detailed replies denying the charges. The summary of replies is that mere management of funds by itself is not a sufficient to hold the other four units as dummy units, in the light of each unit being independently incorporated and having their independent functioning. In support of their plea, the appellants relied on a large catena of citations, which according to them settled the issue. The ld. Collector after going through their replies and giving them opportunity of hearing held that units were related persons and as all the units were under the same management and control in as much as M/s. Alpha Toyo Ltd. had been advancing loans without interest or withholding their payment so as to accommodated them financially. He has held that as there was much transfer of funds from one unit to another without charging any interest and without fixing any time schedule for recovery, therefore, it was sufficient to hold that all the four units were dummies and related persons and hence the clearances are required to be clubbed. He has also held that there has been mis-statement of facts and hence larger period was invokable.

2. We have heard ld. Senior advocate, Shri M. Chandrasekharan for the appellants and Sh. S.K. Sharma, ld. JDR, for the Revenue. Ld. senior advocate very ably and succinctly argued the matter and pointed out that ld. Collector had totally mis-directed and mis-applied the law pertaining to clubbing of clearances. The ld. advocate very lucidly argued the matter and brought to our notice large catena of judgments, which has puts to rest the controversy on this issue. He pointed out that the aspect of related persons and dummy units are totally different and therefore, the ld. Collector had confused between these two independent aspects of the matter. A dummy unit is a non-existing one and although it is not defined anywhere as to what a dummy unit is but it is not general understood that a dummy unit is non-existing unit set up by an existing unit on paper only with a sole view of evading taxes. He pointed out from the facts in question that all the four units were in existence and they were having independent businesses without any relationship among themselves and were having independent licences and without sharing of profits. As the units were having independent existence and there had been no occasion for any one to give any mis-statement or suppress any facts. The department had merely proceeded on the basis of annual report of the first unit namely : M/s. Alpha Toyo Ltd. There had been reference of interest free loan given to the other four units in the annual reports. The ld. senior advocate pointed out that this is not a ground at all to hold that a financial management would be a cause for clubbing the clearances. He pointed out that financial management is a different concept than financial control. In this case there is no allegation that M/s. Alpha Toyo Ltd. had financial control or that there was financial flow back in terms of profit sharing and that the first unit M/s. Alpha Toyo Ltd. had gained control of entire business. Therefore, in the absence of any evidence or charge on this aspect of the matter, the question of clubbing of clearances does not arise. The ld. senior advocate pointed out that the ld. Collector had mis-applied the law on the basis of a wrong understanding. Mere financial management or financial assistance from one company to another in terms of interest free loans cannot be a cause to consider the other units as a dummy unit or a related persons. In support of his contention the ld. advocate has relied on the following rulings :

(i) Jagjivandas & Co., Thane v. Collector of Central Excise, Bombay-II, []

(ii) Meteor Satellite Ltd. & Telstar Electronics, Ahmedabad v. Collector of Central Excise, Baroda, []

(iii) Assistant Collector of Central Excise & Customs at Surat & Others v. Sh. J.C. Shah, M/s Jayantilal Balubhai and Others & Sh. Mani Shanker Magtram & Others, [1978 (2) E.L.T. (J 317)]

(iv) Bapalal & Co. v. Government of India & Others, []

(v) Bhagwan Das Kanodia & Others, Bombay v. Collector of Central Excise, Bombay, []

(vi) Kinjal Electricals (P) Ltd. v. Collector of Central Excise, []

(vii) Spring Fresh Drinks v. Collector of Central Excise, []

(viii) Vivomed Labs. (P) Ltd. & Others v. Collector of Central Excise, Aurangabad, [1991 (53) E.L.T 152 (Tri.) = 1991 (37) E.C.R. 729]

(ix) Prabhat Dyes & Chemicals v. Collector of Central Excise, []

On the aspect of the time bar ld. advocate relied on the rulings rendered in the case of Padmini Products v. Collector of Central Excise as reported in (SC) and Collector of Central Excise v. Chemphar Drugs and Liniments  as reported in 1989 (40) E.L.T. 267 (SC).

3. Ld. JDR pointed out that the interest free loans were being given without time schedule for repayment. That clearly showed that the other four units were totally dependent on the main unit and, therefore, the finding given by the ld. Collector cannot be faulted. He also pointed out that some of the directors were common and that there was a common managerial control. He relied on the ruling rendered in the case of Balamuragan & Balamurli v. Collector of Central Excise, Madras,  reported in .

4. We have carefully considered the submissions made by both the sides, and have perused the record, and the findings and citations relied before us. The department had proceeded on the basis of the annual report of M/s. Alpha Toyo Ltd. It is noted therefrom about the interest free loans given by them to other four units and have come to the conclusion that they are related persons and that the four units are dummy ones, and as there is a common managerial control, hence the benefit of exemption under Notification No. 175/86-C.E., dt. 1-3-1986 is denied to them. Therefore, the clearances at all the five units have been clubbed. We have considered the grounds and the finding given by the ld. Collector. We are not satisfied with the said findings as Managerial control is different from money flow back, management control and profit sharing. A dummy unit is a unit, which is not in existence in reality, but it is merely created on paper only. In other words, the physical existence of such a unit is not to be found in terms of investment of capital, machinery and labour. The unit which creates such a dummy unit, utilise the dummy unit for the purpose of tax evasion. Therefore, the courts have clearly distinguished on facts each of the cases and have now settled the issue by holding that mere evidence of Directors being common or utilisation of telephone, labour or machinery by itself is not a ground to consider an unit as a dummy unit of the other. It has been held that even if a unit is in existence, but if it is totally controlled in terms of money flow back, profit sharing, management control, and it had been created with a view to evade taxes by a series of acts of omission and commission, by manipulation of accounts and records then in such an eventuality, the clearances of a dummy unit can be clubbed. As rightly pointed out by the ld. senior advocate there is no definition of the term “dummy unit”, but what flows from the judgments cited by him is that a dummy unit is a unit, created by the main unit with a view to evade taxes and that the first main unit totally controls its activity in terms of profit sharing, management control, decision making, and acts of such nature. The dummy unit would be a mere facade one and in reality it is one and the same with the main unit. In this particular case, there is no such evidence at all, to show that such an arrangement is in existence. The mere fact of management control and a few directors being common and also by the fact that interest free loans are being given to the other units by the first unit, these factors, by itself, is no ground for holding them as dummy units and for ordering clubbing of all their clearances, and to deny the benefit of the exemption Notification. There is no dispute in all these cases that all the four units are independent in existence, with independent transactions, without any profit sharing, management control or money flow back to the main unit. Each unit is having independent bank transactions, loans, sales, purchase & tax registrations. Therefore, on the facts and circumstances of this case, the ground taken by the department is not sustainable. The concept of related persons, as envisaged under Section 4 of the Central Excises and Salt Act, 1944, is for the purpose of valuation. This is a independent concept by itself. It has no relationship with the concept of dummy units and units set up as a facade to evade taxes. As pointed out by the ld. senior advocate, the ld. Collector has confused this aspect of the matter with the aspect of creation of dummy units. The ground taken by the Revenue in this case is already answered against them in the case of Jagjivan Das & Co., Bhagwan Das Kanodia and Others, Prabhat Dyes and Chemicals, Bapalal & Co. and Prima Control referred before us. The other judgments cited before us also deals on the same aspect of the matter. Applying the ratio of these rulings, we have to hold that the mere fact of management control or of grant of interest free loans is not sufficient to hold the four units as dummy units of M/s. Alpha Toyo Ltd., in the absence of any money flow back, profit sharing and total control on other four units by M/s. Alpha Toyo Ltd. In the result the appellants succeed in all these appeals. The impugned order is set aside and appeals allowed.