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2012 (10) TMI 454 - AT - Central ExciseSSI exemption - extended period on limitation clubbing of clearance Dummy unit - Held that - case against them has not been proved by the authorities with requisite evidence - clubbing of two units cannot be made on the premise that the assessee sold/cleared their entire production to other units - mere fact of management, control or grant of interest free loan is not sufficient to hold the units as a dummy unit in the absence of any money flow back and/or profit sharing and total control on another unit - Allegation of wilful mis-statement and suppression of facts justifying the extended period of limitation for making the duty demand cannot be sustained
Issues Involved:
1. Whether differential duty can be demanded from M/s. BHPL by clubbing the value of clearances made by M/s. BC and M/s. BL. 2. Whether benefit of exemption Notification No. 175/86 can be denied to M/s. BC & M/s. BL and consequently, whether differential duty can be demanded from M/s. BHPL, M/s. BC & M/s. BL. Detailed Analysis: Issue 1: Whether differential duty can be demanded from M/s. BHPL by clubbing the value of clearances made by M/s. BC and M/s. BL. The adjudicating authority concluded that M/s. BC and M/s. BL were not eligible for the benefit of Notification No. 175/86, claiming they were dummy units of M/s. BHPL. This conclusion was based on financial transactions recorded in the Order-in-Original. The authority noted that M/s. BHPL had invested in M/s. BC in 1977 and 1978, and these investments were later returned. The transactions between M/s. BHPL and M/s. BC were considered ordinary business transactions. The adjudicating authority also observed that loans given by M/s. BC to various companies did not prove that M/s. BHPL had control over M/s. BC or M/s. BL. The findings that M/s. BC and M/s. BL operated from the same premises as M/s. BHPL were insufficient to establish administrative control. The Tribunal found that the adjudicating authority's findings lacked evidence of M/s. BHPL's control over M/s. BC and M/s. BL. The Tribunal noted that M/s. BC and M/s. BL existed before Notification No. 175/86, and their existence prior to the notification negated the claim that they were created to avail SSI exemption. The Tribunal referenced the decisions in Process Plant (India) Ltd. and Annapoorna Mills, which supported the view that pre-existing units cannot be considered dummy units created for availing exemptions. Issue 2: Whether benefit of exemption Notification No. 175/86 can be denied to M/s. BC & M/s. BL and consequently, whether differential duty can be demanded from M/s. BHPL, M/s. BC & M/s. BL. The adjudicating authority confirmed the demands based on the assertion that M/s. BC and M/s. BL sold their entire production to M/s. BHPL. However, the Tribunal referenced several decisions, including C.C.E., Surat v. Besta Cosmetic Ltd. and Kanchan Industries, which established that selling entire production to another unit does not justify clubbing clearances. The adjudicating authority also argued that management control or interest-free loans indicated that the units should be considered as one. The Tribunal found these arguments insufficient, referencing cases like Alpha Toyo Ltd., Techno Device, and Kemtrode Pvt. Ltd., which held that management control or interest-free loans alone do not establish a unit as a dummy without evidence of financial flow back or profit sharing. Conclusion: The Tribunal set aside the impugned order, stating that the adjudicating authority's findings were unsupported by substantial evidence. The appeals were allowed with consequential relief, emphasizing that mere financial transactions or management control do not justify clubbing units for duty demands without clear evidence of mutual financial interest or control. The Tribunal did not address other arguments due to the resolution of the appeals on the merits.
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