2014 (12) TMI 79 - AT - Central Excise

SSI Exemption - Clubbing of turnover of other two units for the Central Excise taxation purpose - allegation that controlling person of all three units is only one person - dubious nature of financial statements - Held that - Prime requirement of clubbing of clearance of two units is not having complete independent machinery and infrastructure to manufacture the goods. If both the units are complete by itself, capable of manufacturing the goods without any help from the other unit, and are independently, registered with the sales tax, industries registration, Income-Tax Registration and having separate Electricity Connection, telephone connection etc., it has to be held that they are independent units. In the present case, it is not even the Revenue s case that all three units are working from the same premises or have any common facility. Infact we really find it strange that clearances of the unit which came into existence in 1981 are being clubbed with the clearance of two units which is admittedly came into existence in 1973 onwards. We really fail to understand and if we accept the Revenue s case, there would be no explanation as to what the unit which was working from 1973 onwards, was actually doing. M/s. Tirupati Alloy and Steel Pvt. Ltd. was independent private limited company engaged in the manufacture of final product from 1973 onwards and its clearance cannot be clubbed with subsequently incorporated limited company after of a period of 8 to 9 years. We are also informed that Mrs Neha Beri Mhase was a child when the said unit were formed and became Director of the same subsequently on the death of her father. In such a scenario, the finding of the adjudicating authority that Mrs. Neha Beri Mhase was controlling the affairs of the manufacturing units, in which case their clearance has to be clubbed cannot be appreciated and upheld. We find no merits in the Revenue s stand - Following decision of CCE, Kanpur vs. Sharad Industries 2013 (9) TMI 213 - CESTAT NEW DELHI - Decided in favour of assessee.

Summary

Issues:
1. Clubbing of clearances of multiple manufacturing units for duty confirmation.
2. Application of small scale exemption notification.
3. Financial transactions and control by a common director across units.
4. Independence of separate manufacturing units.

Analysis:
1. The judgment revolves around the clubbing of clearances of three manufacturing units for duty confirmation. The Commissioner confirmed duty against one unit based on the common directorship but failed to establish a lack of independence among the units. The Tribunal emphasized that unless there is evidence of units not functioning independently, clubbing clearances of private limited companies is impermissible.

2. The issue of small scale exemption notification was raised concerning the applicability to the units in question. The Tribunal highlighted that the exemption is linked to units belonging to the same manufacturer. Since the units were standalone entities with separate machinery and infrastructure, they were entitled to individual consideration for the exemption.

3. The judgment delved into the financial transactions and control exercised by the common director across the units. The adjudicating authority alleged financial impropriety based on withdrawals and deposits by the director. However, the Tribunal clarified that such transactions were legitimate business activities and did not warrant clubbing clearances unless the units were created to avoid taxation.

4. Lastly, the independence of the manufacturing units was a crucial aspect of the judgment. The Tribunal emphasized that each unit was a complete entity with its own machinery and operational setup. The absence of common facilities or shared resources indicated the units operated autonomously. The Tribunal rejected the Revenue's argument of clubbing clearances, citing the units' individual registrations and operational histories.

In conclusion, the Tribunal set aside the impugned order, allowing both appeals and providing consequential relief to the appellants based on the lack of merit in the Revenue's contentions regarding clubbing clearances of the manufacturing units.