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2016 (10) TMI 570 - AT - Central ExciseSSI Exemption - Clubbing of clearances - dummy units - benefit of exemption under N/N. 8/2003 - Held that - evidence found that there is a financial flow back between the two units and both the units are controlled by the same person. There is a specific evidence of financial flow from one entity to another entity and both the entities are being controlled by two Directors viz., S/Shri V.S. Manohar and V.U. Thambi. If the corporate veil is lifted then it can be revealed that both the entities are one and the same and therefore there is nothing wrong in clubbing the clearances of both the units for the purpose of computation of aggregate value of clearances for SSI exemption. The decision in the case of Parle Bisleri (P) Ltd. Versus CCCE 2010 (12) TMI 26 - Supreme Court of India relied upon where it was held that where the companies are indeed interdependent and possibly even related through financial control and management, the value of clearances has to be clubbed together in the interests of justice. Invocation of extended period of limitation - Held that - extended period has been rightly invoked by the Department as the Director has concealed the true facts from the Department with intent to evade payment of duty and the said Director whose statement was recorded and he has admitted the factum of flow of funds between the two units is personally responsible and the penalty has rightly been imposed on him. Demand of duty, interest and penalty confirmed - appeal rejected - decided against assessee.
Issues:
1. Clubbing of clearances of two units for duty demand and penalty imposition. 2. Whether the two entities are to be considered as one for the purpose of computation of aggregate value of clearances for SSI exemption. 3. Validity of the impugned order based on evidence and investigation reports. Analysis: Issue 1: Clubbing of clearances and duty demand The appellants contested the clubbing of clearances and duty demand imposed by the Additional Commissioner, arguing that there was no independent investigation conducted, and the reliance on the statement of one of the Directors for fund transfers was unjust. The appellant emphasized the separate legal entities of the partnership firm and the private limited company. However, the AR defended the order, citing evidence of common management, control, and financial flow between the units. The Commissioner (Appeals) upheld the order, pointing out various factors indicating the lack of independence between the units, such as common directors, premises, product manufacturing, and fund transfers. The Tribunal agreed with the Commissioner's findings, emphasizing the evidence of financial flow and common control, leading to the conclusion that the units were not independent entities, justifying the clubbing of clearances. Issue 2: Consideration for SSI exemption Regarding the consideration of the two entities as one for SSI exemption, the Tribunal examined the evidence of financial flow and common control by the same directors. By referencing legal precedents like Parle Bisleri Pvt. Ltd. and Modi Alkalies & Chemicals Ltd., the Tribunal justified the clubbing of clearances for the purpose of SSI exemption. The Tribunal concluded that lifting the corporate veil revealed the interdependence of the entities, making them eligible for clubbing clearances, as the purported separation was deemed a strategy to avail SSI exemption. Issue 3: Validity of the impugned order The Tribunal reviewed the arguments presented by both parties and found that the show-cause notice was based on evidence of financial flow between the units controlled by the same individuals. The Commissioner's observations highlighted the lack of independence between the units, leading to the confirmation of the duty demand. Citing relevant case laws and the extended period invoked by the Department due to concealment of facts, the Tribunal upheld the impugned order, emphasizing the responsibility of the Director for fund transfers and the imposition of penalties. The Tribunal concluded that there was no illegality in the order, warranting no interference, and confirmed the impugned order while rejecting all appeals. This detailed analysis covers the issues of clubbing clearances, SSI exemption eligibility, and the validity of the impugned order based on evidence and legal considerations present in the judgment delivered by the Appellate Tribunal CESTAT Bangalore.
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