2013 (11) TMI 385 - AT - Central Excise

SSI Exemption Clubbing of Clearances of two units - Revenue was of the view that the two appellants were not having independent manufacturing facilities to manufacture the said final products and they had just split the total turnover in the names of the two units and hence they were not eligible independently for exemption under notification 1/93 Held that - Neither of the factories had complete equipment for manufacture the final products - It is not a case of one equipment being shared by two units - It is more of case where one set of equipment is grouped into two premises and exemption claimed in the name of the two units - It is also clear that both the units were in effect operated by the same person. - Decided against the assessee. Extended Period of limitation Held that - Relying upon Quality Steel Industries Vs. CCE 1984 (7) TMI 270 - CEGAT, NEW DELHI - Extended period of time cannot be invoked for demanding duty by clubbing the clearances of the two units when relevant facts are known to the department - the demand invoking extended period cannot be sustained Decided in favour of Petitioner.

Issues Involved:

1. Eligibility for exemption under Notification No. 1/93-CE.
2. Clubbing of clearances of M/s. Indian Spring Company (ISC) and M/s. Bharathi Machine Tools (BMT).
3. Independent existence of ISC and BMT.
4. Financial transactions and shared resources between ISC and BMT.
5. Invocation of extended period for demand.
6. Validity of demand post the proprietor's death.
7. Admissibility of evidence and declarations filed by ISC and BMT.

Issue-Wise Detailed Analysis:

1. Eligibility for Exemption under Notification No. 1/93-CE:

The appellants, ISC and BMT, claimed separate exemptions as small-scale units under Notification No. 1/93-CE. The Revenue argued that the appellants did not have independent manufacturing facilities and had split their turnover to avail the exemption. The Tribunal noted that the exemption was intended for genuine small-scale units and not for entities that artificially split their operations to benefit from the exemption.

2. Clubbing of Clearances of ISC and BMT:

The Revenue contended that ISC and BMT should be treated as a single entity for the purpose of excise duty, as they did not have independent manufacturing capabilities. The Tribunal observed that the machinery and infrastructure of both units collectively constituted a complete manufacturing setup, indicating interdependence. Thus, the clearances of both units were clubbed for determining the duty liability.

3. Independent Existence of ISC and BMT:

The appellants argued that ISC and BMT were independently registered with various government departments and had separate manufacturing facilities, power connections, and workforces. However, the Tribunal found that both units shared common resources, including machinery, labor, and infrastructure, and were managed by the same individual, S. Kumarasamy. This interdependence negated the claim of independent existence.

4. Financial Transactions and Shared Resources:

The Revenue presented evidence of financial transactions between ISC and BMT and shared resources like machinery and labor. The Tribunal noted that the transfer of funds and shared expenses, such as building maintenance, indicated financial and operational interdependence. This supported the Revenue's argument that the units were not operating independently.

5. Invocation of Extended Period for Demand:

The Revenue invoked the extended period under Section 11A(1) of the Central Excise Act, 1944, alleging suppression of facts by the appellants. The Tribunal considered the appellants' argument that they had regularly filed declarations and returns with the Central Excise Department. However, the Tribunal found that the interdependence and shared resources were not disclosed, justifying the invocation of the extended period.

6. Validity of Demand Post Proprietor's Death:

The appellants argued that the demand could not survive after the death of the proprietor, S. Kumarasamy. The Tribunal distinguished this case from others where notices were issued posthumously, noting that the notice and adjudication were completed before the proprietor's death. Therefore, the demand against ISC was upheld.

7. Admissibility of Evidence and Declarations:

The appellants submitted various declarations and registration documents to support their claim of independent existence. The Tribunal acknowledged these documents but emphasized the importance of the actual operational and financial interdependence between ISC and BMT. The Tribunal concluded that the evidence of shared resources and management outweighed the formal registrations and declarations.

Conclusion:

The Tribunal concluded that ISC and BMT did not operate as independent entities and their clearances should be clubbed for the purpose of excise duty. The invocation of the extended period for demand was justified due to the suppression of material facts. The demand was upheld, but the penalty on the deceased proprietor was set aside. The appeals were allowed, setting aside the order of the lower authorities.

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