2017 (4) TMI 546 - AT - Central Excise

SSI exemption - interconnected units - Department s case is that all units were being run and controlled by the members of the same family; that the same were being run as one unit and as such units had no independent existence - N/N. 8/2003 dated 1.3.2003 - whether sales made by DMGP to DDIL are entitled to the SSI benefit? - Held that - It is not in dispute that both these entities have separate registered manufacturing premises. It is nobody s case that there are no equipments in either of the premises and it is also not the view taken by the Revenue that the entire manufacturing happened at one of the two premises and the other is a dummy one. Inasmuch as both the units have separate manufacturing premises with equipments and the fact that they are manufacturing different automobile parts, leads us to conclude that both are separate manufacturing units - The constitution of the two firms are different. DMGP is a Private Limited Company whereas DDIL is a Limited Company and hence they have separate legal existence and separate registrations not only for Central Excise but also for Sales Tax and other government departments. Under the circumstances, DMGP as well as DDIL are to be considered as separate manufacturing premises and each one will be eligible for the benefit of SSI exemption under N/N. 8/2003-CE dated 01.3.2003. Brand Names of DMGP and DDIL - Held that - the two brand names are not identical and are being applied on different products manufactured by DMGP and DDIL. There is also nothing on record to suggest that there is any dispute regarding use of brand names. Consequently, the brand names are different and separate for the two units. Whether DMGP and DDIL are interconnected undertakings ? - Held that - it is evident that all the three entities are to be considered as interconnected undertakings. Once these three are considered as interconnected undertakings then the valuation of goods manufactured by DMGP and / or DDIL and sold exclusively through DDSC, cannot follow transaction value, it will be necessary to take recourse to Central Excise Valuation Rules. It is found that entire goods manufactured by DMGP as well as DDIL are sold only through DDSC after which the goods are sold to dealers. The eligibility of various discounts/ abatements need to be determined in the light of legal position settled by various case laws of Apex Court, including in recent case of Purolator India Limited vs. CCE Delhi 2015 (8) TMI 1014 - SUPREME COURT - For re-determination of value as well as duty liability the case is remanded to Original Adjudicating Authority. Appeal allowed by way of remand.

Summary

Issues:
1. Clubbing of clearances of two interconnected units for SSI exemption.
2. Denial of SSI exemption and imposition of penalties.
3. Determination of interconnected undertakings and valuation of goods.

Analysis:
1. The case involved the clubbing of clearances of two units, DMGP and DDIL, for SSI exemption under Notification No. 8/2003. The appellant argued that both companies were separate entities with different products, brand names, and legal registrations. The Commissioner (Appeals) found evidence suggesting that the companies were run as a single unit, sharing office space and having common employees. The judgment upheld the clubbing of clearances, denying SSI exemption, and ordering duty payment based on DDSC's sales to independent buyers.

2. The issue of denial of SSI exemption and penalties was addressed. The appellant contended that DMGP and DDIL should be considered separate entities eligible for SSI exemption. The Revenue argued that evidence showed DDIL was a dummy company controlled by DMGP. The judgment concluded that DMGP and DDIL were separate manufacturing units eligible for SSI exemption. It also noted differences in brand names and lack of evidence supporting the Revenue's claim of DDIL being a dummy company.

3. The judgment analyzed the concept of interconnected undertakings under the Central Excise Act. It found that the Gambhir family members had significant shareholdings in DMGP and DDIL, making them interconnected undertakings. The valuation of goods sold through DDSC was re-determined, considering discounts and abatements claimed by the appellant. The case was remanded to the Original Adjudicating Authority for re-determination of value and duty liability, with directions to extend an opportunity for additional evidence.

In conclusion, the appeal was allowed for remand to the adjudicating authority for a de-novo order based on the findings related to clubbing clearances, SSI exemption, interconnected undertakings, and valuation of goods.