2015 (10) TMI 568 - HC - Central Excise

Availment of benefit of Notification dated 01.03.1986 - fraudulent evasion of excise duty - Held that - both the Adjudicating Authority and the CEGAT, have considered the entire evidence, in arriving at a finding that M/s S.N. Wires was the dummy unit of M/s S.N. Industries and the consumption of electricity by unit M/s S.N. Wires, the arrangements of borrowing, work of purchase on raw material and the integrated manufacturing of the products, clearly established that the two units situate in the same premises, are not separate, but are functionally integrated, of which the returns have been filed, to claim exemption, fraudulently, for evading the excise duty. - Decided against assessee.

Summary

Issues:
1. Alleged contravention of Central Excise Rules by removing excisable goods without payment of duty.
2. Functional integrality of two units situated in the same premises.
3. Appeal against findings of the Adjudicating Authority and the CEGAT.

Detailed Analysis:
1. The case involved a show cause notice issued to a company for contravening Central Excise Rules by removing excisable goods without paying the appropriate duty and manipulating records to evade duty payment. The inspection revealed discrepancies in electricity consumption and production quantities between two units, indicating potential fraudulent activities to evade excise duty amounting to a significant sum.

2. The inspection highlighted functional integrality between the two units situated in the same premises, with shared facilities and interdependence in manufacturing processes. The Adjudicating Authority and the CEGAT found that one unit was essentially a dummy of the other, relying on evidence such as shared machinery, production discrepancies, and reliance of one unit on the other for manufacturing activities.

3. The appeal against the findings of the Adjudicating Authority and the CEGAT was dismissed as the Tribunal confirmed the functional integration of the units based on evidence like electricity consumption, manufacturing processes, and shared facilities. The petitioner's arguments regarding defective meters, permissions obtained, and personal circumstances were not found to be sufficient to refute the established functional integrality between the units, leading to the dismissal of the writ petition. The judgment emphasized the importance of clear evidence of mutual business interest or financial integration to establish separate entities in cases of alleged functional integrality.