2017 (5) TMI 277 - AT - Central Excise

SSI exemption - dummy units - mutuality of interest - it appeared that M/s NVIS is a dummy unit and part of the goods manufactured by M/s STPL were being shown as manufacture of M/s NVIS so that both the units can avail SSI exemption - Held that - While M/s STPL is a Private Limited Company with Shri Amrish Kela as its Director M/s NVIS is a proprietary concern of Sh. Amrish Kela as its proprietor. While M/s STPL is manufacturing Oscilloscopes and Mirco wave components, while M/s NVIS claims to have been manufacturing Micro wave components - however, the impugned order is silent regarding the mutuality of interest or flow back of funds. When it is so, then the impugned order is set aside and matter remanded to the adjudicating authority to decide the issue denovo - appeal allowed by way of remand.

Summary

Issues:
- Clubbing of clearances of two entities for SSI exemption eligibility
- Confiscation of seized goods
- Imposition of penalties under Section 11AC and Rule 26 of Central Excise Rules, 2002

Clubbing of Clearances for SSI Exemption Eligibility:
The case involved M/s STPL and M/s NVIS, with allegations that M/s NVIS was a dummy unit and part of the goods manufactured by M/s STPL were shown as manufactured by M/s NVIS to avail SSI exemption. The central excise officers found common employees handling operations, sales, accounts, and procurement for both entities. The tribunal noted the lack of satisfactory explanation and observed similarities in operations, leading to the conclusion that M/s NVIS was controlled by M/s STPL. The tribunal referred to precedents emphasizing the need for independent machinery and infrastructure for clubbing clearances. Ultimately, the tribunal remanded the matter for a denovo decision, highlighting the absence of evidence on mutuality of interest or flow back of funds.

Confiscation of Seized Goods:
Seized goods valued at ?8,66,829/- were confiscated with an option to redeem on payment of a fine of ?50,000/-. The tribunal's decision on clubbing clearances also impacted the confiscation issue, as it was intertwined with the alleged misrepresentation of manufacturing activities between M/s STPL and M/s NVIS.

Imposition of Penalties:
Penalties were imposed on M/s STPL under Section 11AC and on M/s NVIS under Rule 26 of the Central Excise Rules, 2002. The tribunal's decision to remand the case for a fresh adjudication also affected the penalties imposed, as it directed a reevaluation of the entire case considering the lack of evidence on mutuality of interest or flow back of funds. The tribunal allowed both appeals by way of remand, providing an opportunity for additional evidence and a fresh decision while ensuring a fair hearing for the appellant.