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2017 (3) TMI 413 - AT - Central ExciseSSI Exemption - clubbing of clearances of related persons - extended period of limitation - Whether the clearances made by the respondents M/s.S.k.Sacks Pvt.Ltd. and M/s.A.S.Processors can be clubbed together and the benefit of SSI exemption be denied to them not in the facts and circumstances of the case? - Held that - As both the units are private limited company and registration with the Central Excise and under the Companies Act, therefore, relying on the CBEC circular No.6/92 dated 29.5.1992, we hold that both companies are separate units and clearances of both the units cannot be clubbed together - when the units have separate registration with the Central Excise Department/Income-Tax Authorites, permission to do job work on behalf of other undertaking, factors like one supervisor working for both the units and one unit have certain financial dealings for the other unit cannot be a basis for clubbing of clearances of two units. M/s. S.K. Sacks Pvt. Ltd. and M/s A.S. Processors are two Private Limited companies separately registered with Excise Authorities, Income Tax, State Sales Tax Department and even under Factories Act. Further it is not a case where the allegation of the revenue was that M/s. A.s. Processors is a dummy unit - it emerges that the department has not brought on record sufficient evidence to sustain the charge of financial flow back from one unit to other and whatever the facts the department has brought on record are normal commercial transactions and cannot be termed as a case of financial flow back in any case - clubbing of clearances of two private limited companies i.e. M/s S.K. Sacks Pvt. Ltd., and M/s. A.S. Processors (P) Ltd., Amritsar is not sustainable. Whether the extended period of limitation is invokable or not? - Held that - it is clear that the said is private limited company does not own any other factory in their own name, therefore, there is nothing wrong in the said declaration and the said declaration cannot be the basis for invoking the extended period of limitation. As all the facts were in the knowledge of the department, therefore, the show cause notice cannot be issued by invoking the extended period of limitation - the extended period of limitation is not invokable. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Whether the clearances made by the respondents M/s. S.K. Sacks Pvt. Ltd. and M/s. A.S. Processors can be clubbed together and the benefit of SSI exemption be denied to them. 2. Whether the extended period of limitation is invokable or not. Issue-Wise Detailed Analysis: Issue No. 1: Clubbing of Clearances and SSI Exemption The Revenue argued that both units, M/s. S.K. Sacks Pvt. Ltd. and M/s. A.S. Processors, should have their clearances clubbed as they were owned by the same persons and had mutual financial interests. They highlighted that both units were managed by a common director, Shri Arvinder Pal Singh, and shared financial transactions, including direct payments made by M/s. A.S. Processors to the creditors of M/s. S.K. Sacks Pvt. Ltd. The Revenue contended that these financial interdependencies indicated that the units were not independent and thus should not be eligible for separate SSI exemptions. The respondents countered that having a common director is not sufficient grounds for clubbing clearances. They cited Board Circular No. 6/92, which states that different companies, even with common shareholders, are distinct entities and entitled to separate exemption limits. They emphasized that both companies were separately registered under various statutory authorities, including the Central Excise department, Sales Tax, ESIC, Factory Act, and Income Tax Act, and maintained separate bank accounts. They argued that all financial transactions were commercial and duly recorded in their books of accounts. The Tribunal found that both units had separate registrations and were distinct entities under the Companies Act and Central Excise laws. They noted that the CBEC circular clarified that limited companies are separate entities distinct from their shareholders and are entitled to separate exemption limits. The Tribunal held that the mere fact of having a common director and some financial transactions did not justify clubbing the clearances. They referenced several case laws, including Superior Products and Rollataners Ltd., which supported the notion that separate registration and commercial transactions do not warrant clubbing of clearances. Consequently, the Tribunal concluded that the clearances of M/s. S.K. Sacks Pvt. Ltd. and M/s. A.S. Processors could not be clubbed together, and the benefit of SSI exemption should not be denied. Issue No. 2: Extended Period of Limitation The Revenue argued that the extended period of limitation was applicable as the respondents had filed a declaration stating that they did not own any other factory engaged in the manufacture of excisable goods, which was misleading. They contended that the respondents were aware of the department's regulations and had made false declarations to evade duty. The respondents argued that all relevant facts were within the knowledge of the department. They pointed out that both units were registered with the Central Excise department, had filed classification lists and declarations, and had undergone audits and inspections without any objections from the department. They asserted that the extended period of limitation could not be invoked as there was no suppression of facts or intent to evade duty. The Tribunal agreed with the respondents, noting that the department was fully aware of the operations and management of both units. They highlighted that the units had complied with all regulatory requirements and that the department had conducted audits and inspections without raising any issues. The Tribunal found that the respondents' declaration was not misleading and that there was no basis for invoking the extended period of limitation. They concluded that the show cause notice was barred by limitation and could not be sustained. Conclusion: The Tribunal upheld the impugned order, ruling in favor of the respondents on both issues. They held that the clearances of M/s. S.K. Sacks Pvt. Ltd. and M/s. A.S. Processors could not be clubbed together, and the benefit of SSI exemption should not be denied. Additionally, they determined that the extended period of limitation was not invokable, rendering the show cause notice invalid. The appeals filed by the Revenue were dismissed.
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