2007 (8) TMI 544 - AT - Central Excise

Summary

Issues Involved:
1. Clubbing of clearances for SSI exemption.
2. Existence of manufacturing activity at the premises of M/s. Rasayan Udyog Marketing.
3. Invocation of extended period of limitation.
4. Imposition of penalties on the entities and individuals involved.

Summary:

1. Clubbing of Clearances for SSI Exemption:
The Revenue contended that the clearance value of M/s. Rasayan Udyog Marketing should be clubbed with M/s. Rasayan Udyog for computing the SSI exemption limit and payment of Central Excise duty. The Commissioner (Appeals) initially accepted the appellants' argument that both units were independent legal entities, separately registered under various tax laws, and set aside the order of the Adjudicating Authority. However, the Tribunal found that M/s. Rasayan Udyog Marketing was a dummy unit with no manufacturing activity, and all activities were conducted by M/s. Rasayan Udyog. The Tribunal concluded that the clearances should be clubbed as the second firm was created only on paper to avail the SSI exemption.

2. Existence of Manufacturing Activity at M/s. Rasayan Udyog Marketing:
The Tribunal noted that no machinery or manufacturing activity was found at the premises of M/s. Rasayan Udyog Marketing. Statements from the proprietor, Smt. Pritiben Desai, confirmed that the goods were manufactured by M/s. Rasayan Udyog. The Tribunal emphasized that mere registration under tax laws does not establish the existence of a manufacturing unit. The absence of essential manufacturing records and machinery further corroborated that M/s. Rasayan Udyog Marketing was not a genuine manufacturing entity.

3. Invocation of Extended Period of Limitation:
The Tribunal rejected the appellants' argument that the demand was barred by limitation. It held that the entire activities were clandestine and unearthed only through investigation, justifying the invocation of the extended period of limitation of 5 years.

4. Imposition of Penalties:
The Adjudicating Authority had imposed penalties on the entities and individuals involved. The Tribunal upheld the penalties on M/s. Rasayan Udyog and the individuals but remanded the matter to the original Adjudicating Authority for re-calculation of duty, considering the benefit of cum-duty price. The Tribunal also directed the Adjudicating Authority to verify the payment of duty, interest, and penalty by the respondents and pass fresh orders accordingly. It agreed that no penalty was warranted on M/s. Rasayan Udyog Marketing, as it was held to be a dummy unit.

Conclusion:
The Tribunal allowed the appeals filed by the Revenue, set aside the findings of the Commissioner (Appeals), and remanded the matter for re-calculation of duty and verification of payments. The penalties on M/s. Rasayan Udyog Marketing were not upheld, considering it a dummy unit.