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2013 (12) TMI 573 - AT - Central ExciseSSI exemption Notification No. 1/93-CE Cotton yarn manufactured and cleared without payment of duty Clubbing of the value of clearances Held that - It is evident from the profit and loss account that the appellant paid the conversion charge and a lease rent for use of the machineries - there are three different sheds with machineries available and various authorities had given the registration for both the units - Merely because one partner is common in both the units and the other partners of both the units are in the same family, it cannot be held that the units are one - There is no material to show that there was any financial flow back among the two units Relying upon CCE Vs. Electro Mechanical Engg. Corporation 2008 (7) TMI 77 - SUPREME COURT - when a show-cause notice proposed for clubbing the value of clearances for two units and notice was issued only one unit and not to the other, when the separate existence of both the units are projected, the notice is bad in law and the proceeding is liable to be set aside - the demand of duty, interest and penalty are not sustainable Decided in favour of Assessee.
Issues Involved:
1. Clubbing of clearances of two units for the purpose of SSI exemption. 2. Validity of show-cause notice issued to only one unit. 3. Financial and operational independence of the two units. 4. Compliance with registration and statutory requirements. Issue-wise Detailed Analysis: 1. Clubbing of Clearances of Two Units for the Purpose of SSI Exemption: The appellant contended that both units, Sree Nirmal Spinners and Sree Narayana Spinners, are independent entities with separate registrations and operations. The adjudicating authority clubbed the clearances on the grounds that there was no clear demarcation of labor, raw materials, and machinery usage, and that the units operated as a single entity to avail SSI exemption. However, the Tribunal found that the appellant paid conversion charges and lease rent, which were reflected in the profit and loss accounts, and both units cleared goods under their own invoices. The Tribunal concluded that mere commonality of one partner and family ownership does not justify clubbing without evidence of financial flowback or mutuality of interest. 2. Validity of Show-Cause Notice Issued to Only One Unit: The appellant argued that the show-cause notice issued only to one unit (Sree Nirmal Spinners) for clubbing clearances of both units is legally unsustainable. The Tribunal agreed, referencing several decisions where clubbing of clearances requires notices to both units involved. The Tribunal emphasized that separate existence and operations of both units were evident, making the notice to only one unit improper and the proceedings liable to be set aside. 3. Financial and Operational Independence of the Two Units: The Tribunal examined the operational independence of the two units, noting separate registrations under various statutory bodies, separate power connections, and distinct partnership deeds and lease agreements. The Tribunal found no material evidence of financial flowback or mutuality of interest that would justify treating the units as a single entity. The Tribunal cited Supreme Court and Tribunal decisions affirming that common management or shared resources do not automatically lead to clubbing unless there is evidence of financial interdependence. 4. Compliance with Registration and Statutory Requirements: The appellant provided evidence of compliance with statutory requirements, including SSI registration, income tax registration, power connections, and partnership deeds. The Tribunal noted that the documents were prepared on non-judicial stamp paper well before the investigation, countering the adjudicating authority's claim of afterthought. The Tribunal found that both units operated with their own machinery in separate premises and maintained separate financial records, further supporting their independent status. Conclusion: The Tribunal set aside the demand of duty, interest, and penalty, concluding that the clubbing of clearances was unjustified and the show-cause notice issued to only one unit was legally unsustainable. The appeal was allowed with consequential benefits, if any.
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