2013 (6) TMI 525 - AT - Central Excise

SSI Exemption - clubbing of turnover - interconnected undertakings as per Rule 2(g) MRTP Act - related companies as per Section 40A(2)(B) of Income Tax Act, 1961 - notification No. 8/2003-C.E., dated 1-3-2003 - Held that - Tribunal in a number of decisions, namely, Kiran Biscuits & Foods Ltd. 2004 (11) TMI 352 - CESTAT, BANGALORE , Poly Printers 2001 (11) TMI 109 - CEGAT, NEW DELHI , Universal Industries 2005 (7) TMI 388 - CESTAT, MUMBAI , had, time and again, held that private companies and partnership firms are independent entities and merely because they have mutual interest in the business of each other, their turnover cannot be clubbed for determining their eligibility to small scale exemption. In other words, the criteria adopted in Section 4 of the Act for determining interconnected undertaking cannot be applied for determination of the fact as who is the manufacturer. - applicants herein have made out a strong prima facie case in their favour on merits. - stay granted.

Summary

Issues:
- Clubbing of clearances of separate manufacturers for determining eligibility for excise duty exemption under Notification No. 8/2003-C.E.

Analysis:
The judgment involves five stay applications and appeals concerning four separate manufacturing units facing duty demands under the Central Excise Act, 1944. The issue revolves around the clubbing of clearances of these units to ascertain eligibility for excise duty exemption under Notification No. 8/2003-C.E. The show-cause notices alleged that the units were interconnected undertakings and related companies, hence not eligible for the exemption. The Commissioner upheld the duty demands, interest, and penalties, prompting the appellants to challenge the order.

The appellants argued that the units were independent entities with separate registrations and manufacturing facilities, not dummy companies for each other. They contended that the concept of related persons under the Central Excise Act should not lead to clubbing the turnover of distinct manufacturers for exemption purposes. Citing various judicial precedents, they emphasized the independence of private companies and partnership firms, advocating against clubbing turnovers for exemption determination.

The Tribunal, considering past decisions and a CBEC Circular, concurred with the appellants. It noted that private companies and partnership firms should be treated as separate manufacturers, and mutual business interests should not warrant clubbing of turnovers for exemption assessment. Relying on the CBEC Circular's principles, the Tribunal found a strong prima facie case in favor of the appellants on merit. Consequently, the stay applications were allowed, with a complete waiver of pre-deposit of duty, interest, and penalties during the appeal's pendency.

The judgment underscores the importance of recognizing the distinct legal identities of separate manufacturing units, emphasizing that mutual interests or relationships should not automatically lead to the aggregation of turnovers for excise duty exemption eligibility. The Tribunal's decision aligns with established legal principles and precedents, ensuring fair treatment of independent entities under excise laws.