2017 (5) TMI 691 - AT - Central Excise

SSI exemption - dummy unit - clubbing of clearances - benefit of N/N. 9/2001-CE dated 01.03.2001 - The department s case is that the value of SCF should be included in the aggregate value of the appellants on the ground that there is common premises, common staff, common directors - Held that - SCF is a partnership firm and the respondents are a private limited company. At the first instance, as per the legal statute of both the units, partnership cannot be a related person of a private limited company - As regards the transaction of the funds between both the units, since they are doing business with each other as the respondent is getting the job work done from SCF the transaction is clearly commercial transaction. Therefore, SCF cannot be treated as a dummy unit of the respondent - SSI exemption allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the value of another partnership firm can be included in the aggregate value of the appellants for the purpose of SSI exemption under notification 9/2001-CE dated 01.03.2001.

Analysis:
The case involved the issue of whether the value of a partnership firm, engaged in manufacturing CI casting and machined casting, should be clubbed with the aggregate value of a private limited company for the purpose of determining eligibility for the Small Scale Industries (SSI) exemption under notification 9/2001-CE. The department contended that due to common premises, common staff, common directors, and financial transactions between the two entities, the value of the partnership firm should be included in the appellant's aggregate value. The appellants had provided a capital amount free of cost to the partnership firm, and there were significant advances between the units without interest. The adjudicating authority initially upheld the demand, but the Commissioner (Appeals) later allowed the appeal, setting aside the original order.

The revenue argued that there was mutual interest between the partnership firm and the private limited company, making the former a "dummy unit" that should have its value clubbed with the latter. On the other hand, the respondent's counsel contended that the Commissioner (Appeals) correctly determined that the two units were separate entities and should not have their values clubbed together. The appellate tribunal examined the legal status of both units, noting that a partnership firm cannot be considered a related person to a private limited company. Additionally, the tribunal found that the transactions between the units were commercial in nature, as the private limited company was outsourcing work to the partnership firm.

After considering the submissions from both parties and reviewing the Commissioner's detailed findings and relevant case law, the tribunal upheld the decision of the Commissioner (Appeals) and dismissed the revenue's appeal. The tribunal found no fault in the impugned order and concluded that the partnership firm's value should not be clubbed with the private limited company for the purpose of determining eligibility for the SSI exemption under notification 9/2001-CE.

In conclusion, the appellate tribunal's judgment clarified that the partnership firm and the private limited company were distinct entities, and the value of the former should not be included in the aggregate value of the latter for the purpose of availing the SSI exemption. The tribunal's decision was based on a thorough analysis of the legal status of the units and the nature of their business transactions, ultimately upholding the Commissioner (Appeals)'s ruling in favor of the respondent.