2000 (1) TMI 726 - Commissioner - Central Excise

Issues Involved:
1. Whether the appellants were dummy units floated by M/s. Rexello Castors Pvt. Ltd. to avail exemption under Notification No. 1/93.
2. Whether the clearances of the appellants should be clubbed with M/s. Rexello Castors Pvt. Ltd.
3. Whether the appellants are entitled to the benefit of SSI exemption under Notification No. 1/93.
4. Whether the penalties imposed were justified.

Detailed Analysis:

1. Dummy Units Allegation:
The main charge was that M/s. Rexello Castors Pvt. Ltd. had floated four dummy manufacturers (M/s. Rex Builders & Engineers, M/s. Crown Rollen, M/s. Rex Arts, and M/s. Rex Arts Castors Pvt. Ltd.) to remain within the prescribed exemption limit under Notification No. 1/93. The appellants refuted these allegations, providing documentary and circumstantial evidence to prove their independent existence. They highlighted that each unit had separate registrations for Central Excise, Sales Tax, Income Tax, and other government licenses, and there was no financial flowback between the firms.

2. Clubbing of Clearances:
The adjudicating authority had clubbed the clearances of the four units with M/s. Rexello Castors Pvt. Ltd. The appellants argued that the clubbing was unjustified as there was no evidence of financial flowback or common funding. They cited various judgments to support their claim that the value of clearances of two manufacturers or factories are not clubbable unless there is evidence of financial control or profit sharing. The tribunal agreed with the appellants, stating that the adjudicating authority had not provided sufficient evidence to prove that the units were dummy units or that there was any financial flowback.

3. Entitlement to SSI Exemption:
The tribunal examined whether the appellants were entitled to the benefit of SSI exemption under Notification No. 1/93. It was noted that the appellants had separate registrations with various statutory bodies and were independently assessed by different departments. The tribunal found that the appellants had proved their physical and independent existence and that they were conducting their manufacturing and business activities independently. The tribunal concluded that the appellants were entitled to the benefit of SSI exemption under Notification No. 1/93.

4. Imposition of Penalties:
The tribunal also addressed the issue of penalties imposed on the appellants. It was argued that the presence of mens-rea (guilty mind) is a mandatory requirement for imposing penalties. The tribunal referred to the Supreme Court's decision in the case of M/s. Hindustan Steel Ltd. v. State of Orissa, which stated that penalties are not justified in the absence of mens-rea. The tribunal concluded that the penalties imposed on the appellants were unjustified and set them aside.

Conclusion:
The tribunal set aside the impugned order of the Assistant Commissioner of Central Excise, Div. K-III, Mumbai-IV, and allowed all the appeals. The tribunal found that the appellants were not dummy units, their clearances should not be clubbed with M/s. Rexello Castors Pvt. Ltd., they were entitled to the benefit of SSI exemption under Notification No. 1/93, and the penalties imposed were unjustified. The appeals were accordingly disposed of.

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