2011 (9) TMI 774 - HC - Central Excise

SSI Exemption - Clubbing of clearance - Person liable to pay duty - holding company or subsidiary company - held that - since our case concerns Notification No. 175/86 and Notification No. 1/93, by mere fact that assessee was a subsidiary of another company, clubbing of clearances was not permissible. We hasten to add that such clubbing may still be open if the department had established that there was mutuality of interest or flowback of funds. However, in the present case even in show cause notice, no such allegations have been made. From the starting, entire case of department revolves around clubbing on account of assessee being a subsidiary of another company. In absence of any notice to the assessee, it would now not be open for the department to pursue such line of reasonings.

Summary

Issues:
1. Interpretation of SSI exemption Notifications
2. Clubbing of clearances for excise duty calculation
3. Mutuality of interest between subsidiary and holding company

Analysis:
1. The case involved a dispute regarding the interpretation of SSI exemption Notifications. The respondent, a manufacturer, claimed exemption under Notification No. 175/86 and Notification No. 1/93. The department alleged that the respondent, being a subsidiary of another company, was not entitled to the exemption. The Tribunal reversed the orders of the Excise Authorities based on a previous decision and the language differences in the notifications.

2. The issue of clubbing clearances for excise duty calculation was crucial. The Revenue contended that the total production of both the respondent and its holding company exceeded the limits set in the notifications. The Tribunal's decision was challenged based on the concept of clubbing clearances and mutuality of interest between the companies. The Apex Court's interpretation in a previous case was cited to support the Revenue's position.

3. The question of mutuality of interest between the subsidiary and the holding company was raised. The Tribunal's decision in a similar case was highlighted, emphasizing that clubbing clearances may not be permissible solely based on the relationship between the companies. The absence of allegations regarding mutual interest or flowback of funds in the show cause notice was noted, leading to the dismissal of the Tax Appeal due to lack of evidence supporting the Revenue's claims.