2015 (5) TMI 96 - AT - Central Excise

SSI Exemption - mutual interest - Clubbing of clearances of two companies - Held that - MBPL for the purpose of determining their eligibility for SSI exemption, and the quantum of SSI exemption, the show cause notice should have been issued to MBPL also, whose clearances are sought to be clubbed with the clearances of the appellant company. But we find that no SCN has been issued to MBPL. In our view on this ground alone the department s case against the appellant company would not be sustainable. Clearances of two or more units can be clubbed for determining their eligibility of the exemption only if those units are owned by the same person. In this case, the evidence relied upon by the Department, at the most indicates the mutuality of interest, but it does not prove that the appellant company and MBPL. are owned by the same person. Moreover, since there is no shareholding of the appellant company in MBPL, on the basis of individual shareholding of the Directors of the appellant company in MBPL, the latter cannot be treated as subsidiary company of appellant company. Similarly, the registered offices of both the companies being at the same address or that plant and machinery of one company having been pledged to the Bank as a security for the loan sanctioned by the bank to the another, by themselves cannot be treated as the evidence that both the units are owned by the same person or that the appellant have all purvasive financial operational and management control over MBPL or vise versa. - even on merits also, there is no justification for clubbing the clearance of the appellant company with the clearance of MBPL for determining the eligibility for SSI exemption of the appellant company. - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant company is eligible for SSI exemption when its clearances are sought to be clubbed with another company, MBPL?
2. Whether the Department's case against the appellant company is sustainable based on the ownership and control relationship with MBPL?
3. Whether the duty demand, interest, and penalty imposed on the appellant company are justified?

Analysis:

Issue 1: Eligibility for SSI Exemption
The appellant company manufactured ash handling equipment and rented a part of its premises to MBPL, which manufactured a different product. Both companies availed SSI exemption independently. The Department sought to club their clearances, alleging the appellant was the holding company of MBPL. The appellant argued that the Companies Act conditions for being a holding company were not met, as individual shareholdings of directors in MBPL did not constitute ownership by the appellant. The Tribunal found no justification to club clearances, as the evidence did not prove common ownership.

Issue 2: Department's Case and Relationship with MBPL
The Department alleged the appellant fully owned and controlled MBPL, citing shared directors, registered office, and mortgaged assets. The Tribunal noted that no show cause notice was issued to MBPL, rendering the Department's case unsustainable. The evidence showed mutual interest but not common ownership, leading the Tribunal to reject the Department's argument of pervasive control over MBPL.

Issue 3: Justification of Duty Demand, Interest, and Penalty
The duty demand, interest, and penalty were imposed on the appellant based on the alleged relationship with MBPL. The appellant contended that the duty demand was time-barred and unjustified, as the Department had the necessary information earlier. The Tribunal agreed, setting aside the impugned order and allowing the appeal, emphasizing that the Department failed to establish ownership for clubbing clearances and that no SCN was issued to MBPL.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, and the Tribunal's reasoning in deciding the case.