2014 (4) TMI 298 - AT - Central Excise

SSI Exemption - whether DE is the dummy unit of DEPL - DE was availing SSI exemption - Clandestine removal of goods - Evasion of duty - Held that - boiler licence is in the name of DE and DE did have machinery and the labour required for manufacture. This is admitted by the Commissioner(Appeals) himself since he says machinery and labour to conduct the manufacturing activities were in the name of DE. However, other than observation that there was a door between the two units and labour was common, there is no evidence to show that the manufacture was undertaken by DEPL. If machinery and labour were in the name of DE and they were installed in the premises registered in the name of DE by the Revenue, question arises how could DEPL be considered as manufacturer. Further the boiler licence is in the name of DE and it is also an observation by the Revenue as recorded as part of evidence that DEPL did not own any machinery of their own. How DEPL can become the manufacturer and DE a dummy unit when DE had the labour and machinery and DEPL did not have anything is a question for which no answers are forthcoming - Matter remanded back.

Issues Involved:
Alleged clandestine clearance of excisable goods and evasion of Central Excise duty; Existence of separate entities M/s. DE and DEPL; Manufacturing activities carried out by DEPL but machinery and labor owned by DE; Ownership of machinery and premises; Common operations and transactions between DE and DEPL; Duty liability, CENVAT credit, and quantification of duty; Remand for fresh adjudication.

Analysis:

1. Alleged Clandestine Clearance and Evasion of Duty:
The case involves allegations of clandestine clearance of excisable goods and evasion of Central Excise duty by M/s. Dapson Engineers Pvt. Ltd. (DEPL). The investigation initiated by the Preventive Wing of Central Excise raised concerns regarding the operations and transactions between DEPL and an adjoining unit named Dapson Engineers (DE). Statements and records were seized, leading to the issuance of a show-cause notice.

2. Existence of Separate Entities:
The key issue revolves around the existence of M/s. DE and DEPL as separate entities. The Commissioner (Appeals) concluded that while they existed as separate entities on paper, they were effectively running as one unit. Various factors were considered to support this conclusion, including the lack of machinery at DE's premises, the absence of manufacturing activity at DE, and the fact that all machines used for manufacture belonged to DE but were operated at DEPL's premises.

3. Common Operations and Transactions:
The judgment highlighted numerous instances of intertwined operations and transactions between DE and DEPL. These included the sharing of personnel, machinery, raw materials, and finished goods, as well as the shifting of items between the units without proper documentation. Additionally, financial transactions, payments, and sharing of liabilities indicated a close operational relationship between the two entities.

4. Duty Liability and CENVAT Credit:
The judgment raised questions regarding duty liability, CENVAT credit availability, and the quantification of duty owed by the appellants. The issue of DEPL being considered the manufacturer despite DE owning the machinery and labor required for manufacturing was a point of contention. The potential impact of Notification No.9/2003 on duty payments and SSI exemption availed by DE added complexity to the duty assessment.

5. Remand for Fresh Adjudication:
In light of the complexities and unanswered questions surrounding the case, the Tribunal decided to remand the matter for fresh adjudication by the original authority. The decision to set aside the impugned order was based on the need for a deeper appreciation of facts and a proper quantification of duty liability. The Tribunal clarified that its observations did not constitute final findings but aimed to facilitate a more thorough examination of the case.

6. Conclusion:
The judgment underscores the importance of a detailed assessment of operational, financial, and legal aspects in cases involving intertwined business entities. By remanding the matter for fresh adjudication, the Tribunal sought to ensure a comprehensive review of the facts and a fair determination of duty liability. The complexities surrounding the relationship between DE and DEPL necessitated a deeper analysis to address the issues raised in the case effectively.

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