2000 (1) TMI 728 - Commissioner - Central Excise

Summary

Issues Involved:
1. Whether the four units (M/s. Crown Rollen, M/s. Rex Builders & Engineers, M/s. Rex Arts, and M/s. Rex Arts Castors Pvt. Ltd.) are dummy units of M/s. Rexello Castors Pvt. Ltd.
2. Whether the clearances of these units should be clubbed for the purpose of availing the exemption under Notification No. 1/93.
3. Whether the penalties imposed under Rule 173Q of Central Excise Rules, 1944, are justified.

Issue-wise Detailed Analysis:

1. Dummy Units Allegation:
The main charge against the appellants was that M/s. Rexello Castors Pvt. Ltd. floated four dummy manufacturers (M/s. Crown Rollen, M/s. Rex Builders & Engineers, 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 contended that they are independent entities with separate registrations for Central Excise, Sales Tax, Income Tax, and other government departments. They argued that there was no financial flowback between the firms, and their records were not maintained at one place. The Assistant Commissioner relied on collateral evidence and past orders without providing direct evidence to support the dummy unit allegation. The adjudicating authority's reliance on common premises, partners, and technical assistance was not sufficient to prove that the units were dummies of M/s. Rexello Castors Pvt. Ltd.

2. Clubbing of Clearances:
The appellants argued that they maintained separate accounts, made separate purchases, and received sales payments in individual bank accounts. They also had different partners/directors and were independently assessed by various government departments. The Tribunal and Supreme Court precedents were cited, which held that common premises, partners, or technical assistance do not justify clubbing of clearances unless there is evidence of financial flowback or common funding. The adjudicating authority failed to provide evidence of financial control or profit sharing between the units and M/s. Rexello Castors Pvt. Ltd. The units were found to have separate legal entities and were independently registered with various authorities, thus making the clubbing of clearances unjustified.

3. Imposition of Penalties:
The penalties were imposed based on the assumption that the units were dummies and had mis-stated facts to claim exemptions. The appellants argued that there was no mens rea (guilty mind) involved, and the units were operating independently. The Supreme Court and Tribunal rulings were cited, which held that penalties require the presence of mens rea and cannot be imposed for technical or venial breaches. The adjudicating authority's decision to impose penalties was found to be harsh and not supported by evidence of intentional wrongdoing.

Conclusion:
The judgment set aside the impugned order, stating that the four units were not dummy units of M/s. Rexello Castors Pvt. Ltd. and their clearances should not be clubbed. The penalties imposed were also revoked due to the lack of evidence of mens rea. The appeals were allowed, and the units were granted the benefit of the exemption under Notification No. 1/93.