1993 (5) TMI 178 - AT - Central Excise

Summary

Issues Involved:
1. Clubbing of clearances for SSI exemption.
2. Financial inter-linking and control of production.
3. Determination of the real manufacturer for duty liability.

Summary:

Issue 1: Clubbing of Clearances for SSI Exemption
The primary issue was whether the value of clearances of the three appellants should be clubbed to deny them the exemption available to small scale units under Notification No. 175/86. The Collector concluded that the appellants, though separate units, were closely interlinked financially and in production control by one family, effectively making them one entity. Consequently, their clearances were clubbed, and they were deemed ineligible for the SSI exemption.

Issue 2: Financial Inter-linking and Control of Production
The Department initiated proceedings based on intelligence suggesting evasion of Central Excise duty by fabricating aggregate turnover and availing SSI exemption separately. The investigation revealed that the units had common directors/partners, shared financial transactions, and had interdependent production and sales. The Collector found that sales among the units were not at arm's length, with prices significantly lower than those to outside parties, indicating non-commercial financial transactions. Evidence showed manipulation of accounts to adjust profits and debts among the units, further supporting the claim of financial inter-linking and common control.

Issue 3: Determination of the Real Manufacturer for Duty Liability
The appellants argued that the units were established at different times and had been recognized as separate entities by the Department in the past. However, the Collector's order, based on substantial evidence, showed that the units acted in tandem with significant financial inter-linking and common control of production. The Tribunal upheld the Collector's decision, citing the case of Shree Gajanan Fabrics Distributors v. Collector of Central Excise, which established that in such cases, duty liability must be fastened jointly and severally on all units functioning as a single entity. The Collector's decision to restrict the demand to the normal period of six months u/s 11A of the Central Excises and Salt Act, 1944, and not impose penalties, was also upheld.

Conclusion:
The Tribunal upheld the Collector's order to club the clearances of the three units and deny them the SSI exemption, based on ample evidence of financial inter-linking and common control of production. The appeals were rejected.