2017 (3) TMI 919 - AT - Central Excise

SSI exemption - dummy units versus related persons - Held that - financial and management control, as discussed in the impugned order has also not been categorically established. The original order also did not assert under which provision such clubbing is called for either in terms of N/N. 01/1993-CE or the provisions of CEA or rules made thereunder. The concept of related person is relevant for valuation of excisable goods. The turnover of related persons cannot be perse clubbed together for arriving at the threshold limit of SSI exemption. For this the legal existence of SSI unit has to be disproved and it should be established that the SSI unit is a mere dummy creation. We find that no such evidence exist in the present case to accept such proposition. Appeal dismissed - decided against appellant.

Summary

Issues:
Common issue of Central Excise duty liability based on small scale industry exemption and clubbing of turnover for multiple units.

Analysis:
The judgment involves a series of appeals by the Revenue against an order dated 30/08/2012 of the Commissioner of Central Excise, Indore. The core issue revolves around the alleged non-discharge of Central Excise duty liability by M/s Kores (India) Ltd. and other respondents by wrongly availing the small scale industry exemption based on turnover. The Revenue contends that certain units, apart from M/s Kores, were dummy units, and their clearances should be clubbed to determine tax liability. The case has a long history, including investigations, show cause notices, and legal proceedings dating back to 1996. The Tribunal, in its final order dated 10/09/2015, set aside the original order and allowed the appeal of the parties. However, the subsequent appeal cases were decided by the impugned order dated 30/08/2012, where the Commissioner dropped all proceedings against the respondents, rejecting the Revenue's claim of dummy units and turnover clubbing.

The Revenue's grounds of appeal include contentions that the units were not independent entities, the dealings were not on a principal-to-principal basis, and there was financial control by M/s Kores. The Revenue argued that the units were only created on paper to avoid Central Excise duty. The learned AR further emphasized the financial transactions and mutual interests between the units and M/s Kores. However, the Counsel for the respondents challenged the validity of the grounds, highlighting procedural aspects and changes in circumstances, such as the appointment of new Directors and cessation of certain business practices.

Upon examination, the Tribunal noted that the independent existence and legal identity of the SSI units were not disputed, and the financial and management control was not conclusively established. The Tribunal observed that the Revenue failed to provide additional facts or changed circumstances that would impact the earlier findings. The Tribunal also emphasized that the Revenue's arguments were mostly repetitive and lacked substantial evidence to prove the units were dummy entities. The Tribunal rejected the Revenue's contentions of turnover clubbing based on commonality of interest, emphasizing the legal existence and independent operation of the SSI units.

In the final analysis, the Tribunal upheld its earlier decision from 2015, finding no merit in the Revenue's appeals and dismissing them. The judgment underscores the importance of establishing the legal existence of SSI units as independent entities and the necessity of concrete evidence to prove allegations of dummy units for tax avoidance purposes.