2017 (3) TMI 598 - AT - Central Excise

SSI exemption - clubbing of clearances - mutuality of interest - whether the units were, by subterfuge, splitting the clearances on record to avail the benefits of N/N. 175/86-CE, and its successor N/N. 1/93-CE, to evade duty? - Held that - That the units are set up by members of a family will not suffice to establish common control for if were to proceed with that approach to incentivise family aggregation, we would be doing great disservice to the spirit of entrepreneurship which is the driving force of economic growth of any community or state - the grounds of appeal do not suffice to overcome the detailed findings on fact and law in the impugned order - appeal dismissed - decided against appellant.

Summary

Issues:
Determining duty liability based on clubbing of clearances of multiple undertakings under common control for availing exemption notifications.

Analysis:
The appeal was filed by Revenue against the order-in-appeal that set aside duty liability amounting to ?22,51,509 for the period from April 1991 to September 1997. The dispute revolved around whether the units, including a proprietorship undertaking and two partnerships, were effectively under the control of a common individual, thereby splitting clearances to evade duty. Revenue argued that the inter-relationship among the units was evident, as they relied on each other's facilities without maintaining proper records or making payments. They contended that the first appellate authority failed to consider the circular mandating the ascertainment of inter-relationships. However, the Tribunal noted that the units were separate entities with different facilities and registrations, and the mere family connection did not establish common control.

The Tribunal emphasized that family aggregation alone cannot prove common control, as it could discourage entrepreneurship. While acknowledging the complementary nature of the units' activities, the Tribunal highlighted the importance of specialization in business. It was observed that the units were not structured to exploit exemption notifications but were established at different times and operated from different premises within the same industrial estate. The Tribunal found that Revenue failed to provide concrete evidence to support their claims, and the units had produced auditors' certificates regarding payments for job-works undertaken for each other.

Regarding the Supreme Court's decision in Supreme Washers (P) Ltd, the Tribunal noted that the existence of inter-relationship was considered in the context of the specific notification and circular issued by the Central Board of Excise & Customs. The Tribunal concluded that the grounds of appeal by Revenue did not sufficiently challenge the factual and legal findings of the impugned order. Therefore, the appeal was dismissed, and the cross-objection was also disposed of accordingly.