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Tax or Revenue

Denshaw Maneckjee Petit RE (AIR 1972 Bom 371) Aphthorpe v Peter Schoenhofen Brewing Co. (1899) Bacha F Guzdar v CIT, Bombay, (AIR 1955 SC 74) CIT v. Sree Meenakshi Mills Ltd. (AIR 1967 SC 819; 1966 Indlaw SC 214 Commissionear of Central Excise, New Delhi v. Modi Alkalies & Chemicals Ltd. & Ors, AIR 2005 SC 1468 Parle Bisleri Private Ltd v Commissioner of Customs and Central Excise, Ahmedabad 2010 Indlaw SC 1087; 2010(13) SCALE 364

CIT v. Sree Meenakshi Mills Ltd. 1966 Indlaw SC 214


It is well established that in a matter of this description the income-tax authorities are entitled to pierce the veil of corporate entity & to look at the reality of the transaction. It is true that from the juristic point of view the Co. is a legal personality entirely distinct from its members & the co. is capable of enjoying rights & being subjected to duties which are not the same as those enjoyed or borne by its members. But in certain exceptional cases the court is entitled to lift the veil of corporate entity & to pay regard to the economic realities behind the legal facade. E.g. the court has power to disregard the corporate entity if it is used for tax evasion or to circumvent tax obligation. the court is entitled to lift the mask of corporate entity if (the conception) is used for tax evasion, or to circumvent tax obligation or to perpetrate a fraud. (Juggi Lal Kamlapat v. CIT 1968 Indlaw SC 269, 710 (SC))

Wallersteiner v. Moir (1974) 1 W.L.R. 99) Parle Bisleri Private Ltd v Commissioner of Customs and Central Excise, Ahmedabad 2010 Indlaw SC 1087; 2010(13) SCALE 364 manufactures soft drink flavours (Earlier M/s Limca Flavours & Fragrances Ltd) 89-90 to 93-94 PBPL - Availed of the benefit of Notifications 175/86 & 1/93 as an SSI unit. Holding Co. of M/s. Parle Exports Ltd. (PEL). HC sells its product to PEL, Parle International Ltd. (PIL) & franchise bottlers of M/s. PEL. M/s. PEL uses the products sold by the appellant to manufacture Non-alcoholic Beverages Base (NABB). - also manufactures flavours as the appellant does 89-90 to 93-94 (Same period) PEL enjoyed the benefit of Notification No. 175/86 and 1/93 for the year 92-93 and 93-94. The flavours named above are researched and developed by PEL, but were allowed to be manufactured by the appellant with the code names given by PEL. The flavours are used in the manufacture of beverages like Gold Spot, Limca, Rimzim etc.

on the basis of the information that M/s PEL and their Group Companies were indulged in evasion of Central Excise Duty, various documents were seized and the statement of key personnel recorded. As we have mentioned earlier, the order-in-original passed by the Commissioner of Central Excise and Customs withdrew the demand for differential duty and found no case for imposition of penalty for any of the companies in question.

Notification No. 175/86 and 1/93 - Require that the aggregate value of clearances of all excisable goods from a factory by one or more manufacturer should not exceed Rs. 150 lakhs and Rs. 200 lakhs respectively in the preceding financial year. Allegations before the CESTAT, - Clearances of the PBPL during the period from 1989 to 1993 must be clubbed with that of PEL & PIL as they are effectively one & the same co. Appellant - Not entitled to the benefit of the aforesaid Notifications. PBPL Was sing the brand name belonging to another person (PEL) who was not entitled to the benefit of the said Notifications. Allegation of undervaluation of flavours by the PBPL - which resulted in an inaccurate assessment & hence the differential duty should be extracted.

Commissioner of Central Excise, New Delhi v. Modi Alkalies & Chemicals Ltd. & Ors reported at 2004 (171) E.L.T. 155 2004 Indlaw SC 623 (S.C.)

Ashwin Mehta v Custodian 2006 Indlaw SC 572; (2006) 2 SCC 385 Jyoti Harshad Mehta and Others v Custodian and Others (2009 Indlaw SC 969, (2009) 10 SCC 564) Sudhir S. Mehta and others v Custodian and another. 2008 Indlaw SC 2707; (2008) 12 SCC 84

The Court, however, has made a clear distinction between a family company, a private company and a public limited company. The true character of the company, the business realities of the situation should not be confined to a narrow legalistic view. [See Needle Industries 1981 Indlaw SC 403 (supra)] It is now well-known that principles of quasipartnership is not foreign to the concept of Companies Act. For the purpose of grant of relief the principles of partnership had been applied even in a public limited company. (See Loch and another Vs. John
Blackwood Ltd., 1924 AC 783, Ebrahimi Vs. Westbourne Galleries Ltd. and others, 1972 (2) All ER 492).

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