1999 (9) TMI 953 - AT - Central Excise

Issues Involved:

1. Confiscation of goods and duty on shortages.
2. Control of units by Shri R.K. Luther and eligibility for small scale exemption.
3. Suppression of production and under billing.
4. Clearance of screws under the garb of rivets.

Detailed Analysis:

1. Confiscation of Goods and Duty on Shortages:

The Adjudicating authority did not confiscate the excess goods but ordered that duty as applicable was required to be paid at the time of clearances of those goods. For the shortages, it was held that the goods found short had been clandestinely cleared, and the duty was liable to be paid thereon, along with penalties.

2. Control of Units by Shri R.K. Luther and Eligibility for Small Scale Exemption:

The Adjudicating authority concluded that while Kirti Wire Products was an independent unit, K.P. Fasteners and U.K. Machine Tools were created by Atul Fasteners as a camouflage to avail of the excise duty concession. It was determined that Shri R.K. Luther was controlling all the units, which were not independent, separate, and distinct entities. Consequently, the clearances of K.P. Fasteners and U.K. Machine Tools were to be clubbed with Atul Fasteners to determine eligibility for exemption under Notification 175/86-C.E. The authority found suppression of production and facts, and the Directors were appointed from Luther's employees to create new units.

3. Suppression of Production and Under Billing:

The Adjudicating authority found the charge of under billing of self-tapping screws to be established, rejecting the appellants' plea that standard packing was introduced from December 1988. The evidence showed that the units billed less quantity than actually dispatched. The allegation of shortages and under billing was substantiated by detailed findings and admissions from the concerned parties.

4. Clearance of Screws Under the Garb of Rivets:

The fourth issue was decided in favor of the appellants, with the charge of clearing screws under the garb of rivets not being sustained.

Main Consideration:

The main issue was whether K.P. Fasteners and U.K. Machine Tools were separately eligible for small scale exemption under Notification 175/86-C.E. The exemption was designed to help small scale units and was subject to various conditions. The evidence showed that K.P. Fasteners and U.K. Machine Tools were floated by Shri R.K. Luther with his employees as dummy Directors. The units shared common production facilities, labor force, and financial arrangements, indicating they were not independent entities but part of a single manufacturing entity controlled by Luther.

Retraction of Statements:

The retraction of statements by the Directors of K.P. Fasteners and U.K. Machine Tools was found to be very late, with no satisfactory explanation provided for the delay. The original statements indicated the interconnected operations and control by Shri R.K. Luther.

Limitation:

The Adjudicating authority found that there was suppression of production and facts, and the Directors were appointed from Luther's employees to create new units. The argument of time bar was not accepted, as the suppression was evident.

Penalties:

Separate penalties of Rs. 10,000 each were imposed on Shri R.K. Luther and M/s. Atul Fasteners. The penalty on Shri R.K. Luther was set aside, but penalties on M/s. Atul Fasteners and M/s. Kirti Wire Products were confirmed, along with the demand for Central Excise duty.

Conclusion:

The appeals were rejected except for setting aside the penalty imposed on Shri R.K. Luther. The findings confirmed that K.P. Fasteners and U.K. Machine Tools were not eligible for small scale exemption and their clearances were rightly clubbed with Atul Fasteners.

← Previous Next →