[Order per : P.S. Bajaj, Member (J)]. - The above captioned appeals have been preferred by the appellants against the common order-in-original dated 2-2-2001 vide which the Commissioner has affirmed the duty and penalty as detailed therein against the appellants.

2. The firm, appellants no. 1, M/s Electro Mechanical Engg. Corpn. (hereinafter referred to as M/s. ‘EMEC’) is engaged in the manufacture of Iron and Steel Structure etc. On receipt of information that this firm had floated two front units, namely, M/s. Cold Steel Corpn. (hereinafter referred to as ‘M/s. CSC’) [appellants no. 2] and M/s. Super Steel Corpn. (hereinafter referred to as ‘M/s. SSC’) [appellants no. 3] in order to fraudulently avail the benefit of SSI Exemption Notification No. 1/93-C.E., dated 28-2-1993, surprise raid was carried out on the premises of all these firms. During investigation, it revealed that all these firms were situated in the inter-connected premises, had common office, office equipments closely related partners and common employees. It also revealed that appellants no. 4 was proprietor of the firm, appellants no. 1, and partner in the other two firms, appellants no. 2 and 3, and was managing the affairs of all the three firms and fraudulently availed benefit of SSI Exemption Notification resulting in short payment of duty amounting to Rs. 22,36,534/-. Show cause notices were issued to all these firms vide which duty demand was raised from the firm, appellants no. 1, while on other appellants, the penalty was proposed to be imposed.

3. The appellants contested the correctness of the show cause notice and alleged that all the three firms were independent and there was no flow back of money from one firm to another. They were carrying on their business independently and purchasing the raw material also independently. No mutual finance interest was involved between these firms and as such the firms, appellants no. 2 and 3 could not be treated as dummy units of the firm, appellants no. 1. They also averred that the work was being looked after by Shri Rajwansh Bedi, appellants no. 4, as he was partner in the two firms and proprietor of the third but each firm was purchasing the raw material with its own money. The Commissioner, however, did not accept the version of the appellants and confirmed the duty and the penalties against the appellants as detailed in the impugned order.

4. The learned Counsel has contended that there is no material evidence on the record to prove that the firms appellants No. 2 and 3 were dummy units of firm, appellants no. 1. All the firms were having independent Central Excise licences and there was no flow back of money from one firm to another. The correlationship of the partners of all the firms could not be taken as sufficient ground for clubbing their clearances. The counsel has also contended that since the duty has been confirmed on all the three firms, it shows that they all had been acknowledged as independent units by the adjudicating authority. The impugned order of the Commissioner is based on surmises and conjuctures and as such deserves to be set aside.

5. On the other hand, the learned DR, has simply reiterated the correctness of the impugned order.

6. We have heard both sides and gone through the facts on record. The bare perusal of the impugned order shows that the learned Commissioner has ordered the clubbing of the above referred three firms (appellants no. 1 to 3) on the ground that the firm, appellants no. 1 during the Period January, 1997 to March, 1997 borrowed Rs. 13 lakhs from the firm, appellants no. 3 and also lent almost an equal amount to the firm, appellants no. 2 without charging interest; that all the three firms had a common accountant who was drawing salary from the firm, appellants no. 1; that one pressing machine belong to the firm, appellants no. 2 was found installed in the premises of the firm, appellants no. 1; that firm, appellants no. 2, had no facility of shearing machine, press machine and roll forming machine; that few orders were procured by the firm, appellants no. 1 and the same were later on executed by the firm appellants no. 3; that all the three firms were being run by Shri Rajwansh Bedi, appellants no. 4, who was the proprietor of the appellants no. 1 and partner of the firms, appellants no. 2 and 3; that travelling expenses of appellants no. 4 were borne by firm, appellants no. 1 and his telephone bills were also paid by that firm, (appellants no. 1). But from the record, we find that all these firms were established in different years. The firm, appellants no. 1, started production in the year 1985 and firm, appellants no. 2, in November, 1990, while the firm, appellants no. 3, in July, 1996. The appellants no. 1 is a proprietorship concern of appellant no. 4, while the other two firms are partnership concerns in which, appellant no. 4 is one of the partners. All the firms have got separate independent Central Excise Registration, DIC Registration, Sales Tax Registration and Income-tax Registration.

7. There is no tangible evidence on the record to prove the financial flow back from one firm to another which is most essential for clubbing the clearances of the units. In this context, reference may be made to the case of Indian Metal Indus. v. CCE, Bhuvaneshwar, (T), wherein it has been so ruled. Similarly, in the case of CCE, Rajkot v. Amar Plast Indus., (T), it has been held that use of common premises, telephone, common electric generator and cutting/mixing machines are not enough for clubbing the clearances of the units in the absence of evidence of financial flow back from one unit to another.

8. On the strength of proximity of relationship or the situation of the units or because there were some common employees, the value of clearance of two units cannot be clubbed unless there is evidence to prove that there was mutuality of the business interest and the units were having financial flow back. In this context, reference may be made to the case of Renu Tandon v. UOI, (Raj.), wherein it has been so ruled by the Rajasthan High Court. The Tribunal has also in the case of SKN Gas Appliances v. CCE, New Delhi, (T), has taken the view that sale of plant and machinery by one unit to another, use of telephone of one unit by another, the situation of Head Office of both the units in the same premises, some of the employees being common, were insufficient to hold that one unit was merely fecade of the other. Similarly, in the case of Rang Udyog v. CCE, Ahmedabad, (T), it has been observed that the allegations that the partners in the two partnership firms were related to each other or common, that there were common workers, common machineries, and that the same person was looking after the affairs of both the firms, were not sufficient for ordering the clubbing of the clearances of both the firms in the absence of the evidence that the firms were funding the expenses of each other or that there was flow back of the profit or money from one firm to another. This judgment of the Tribunal had been even upheld by the Apex Court as reported in 1999 (106) E.L.T. A-66. This very view has been reiterated in the case of CCE, Ahmedabad v. Ambica Scale Mfg. Works, (T) and Binod Kumar Maheswari v. CCE, Calcutta, (T).

9. In the case of Prabhat Dyes & Chemicals v. CCE, (T), it has been held by the Tribunal that relationship between the persons of one firm and proprietor of another firm, combined purchase of raw material, interest free loan by one to the other were insufficient to club the value of the clearances of both the firms, when they both were separately registered as SSI units and also with the Income-tax and Sales Tax authorities. This very view has been taken by the Tribunal in the case of G.D. Indus. Engineers, Faridabad v. CCE, Chandigarh, (Tribunal).

10. Therefore, keeping in view the ratio of the law laid down in the above referred cases the circumstances relied upon by the Commissioner, could not be said to be conclusive for clubbing the value of the clearances of three firms (appellants no. 1 to 3). Moreover, even the Commissioner himself has confirmed the duty demand against all the three firms and this fact itself is enough to hold that the Commissioner accepted all the firms as independent units. The learned Commissioner has even travelled beyond the show cause notice in so doing as in the show cause notice duty had been demanded only from firm, appellants no. 1. The confirmation of duty against all the three firms itself is enough to belie the allegations of the Department that the firms, appellants no. 2 and 3, were dummy of the firm, appellants no. 1. Therefore, the impugned order of the Commissioner cannot be sustained.

11. Besides this, the duty demand is also hit by bar of limitation. The duty period involved is from 1-5-1995 to 31-3-2000 whereas show cause notice was served on the appellants only on 1-6-2000. The extended period has been invoked on the ground that the appellants deliberately and wilfully suppressed the facts regarding relationship with the firms of their partners and functioning of all the three units a single entity in inter-connected premises, with having common office, etc. But it is evident from the record that all the three firms started production in different years. The firm, appellants no. 1, came into existence in the year 1985 and firm, appellants no. 2 in November, 1990 while appellants no. 3, in the year July, 1996. They all got themselves registered with the Central Excise Department. At the time of getting registration, they all disclosed their constitution, place of work, goods to be manufactured by them, etc. The Excise Department, therefore, very well knew from the date of their registration, all the material facts regarding the constitution and functioning of the firms. Therefore, it could not be said that any material facts were suppressed by them from the Excise Department. That being so, extended period of limitation could not be invoked. In the case of CCE v. Champhar Drugs & Liniments, (S.C.), the Apex Court has observed that in order to make a demand under section 11A of the Central Excise Act for beyond a period of six months and upto a period of five years, something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information is required to be established. Where Department had full knowledge about the facts, the extended period of limitation could not be made applicable. Similar view has been taken by the Tribunal in the case of Asoka Wafers v. CCE, (T).

12. Regarding imposition of penalty under Section 11-AC of the Act, the impugned order of the Commissioner also cannot be sustained. The provisions of this Section had been held to be prospective in operation and not retrospective, by the Apex Court in the case of CCE, Coimbatore v. Elgi Equipments Ltd., (S.C.). Therefore, no penalty under this Section could be imposed for the period prior to the insertion of this Section in the Excise Act. This Section was brought on the Statute on 28-9-1996.

Therefore, no penalty under this Section for the period prior to this date could be legally imposed on the appellants.

13. In view of the discussion made above, the impugned order of the Commissioner against all the appellants is set aside. All the appeals of the appellants are allowed with consequential relief, permissible under the law.