2017 (5) TMI 1013 - AT - Central Excise

SSI exemption - dummy units - use of brand name - It was alleged that appellant were manufacturing and clearing the goods with brand name of DIGI - Held that - investigations did not yield any direct evidence linking the products bearing the brand name of M/s.Digicontrols with the clearances made from LEC or KEC and that the goods cleared by the assessee to DIGI clearly mentioned the brand name as LG 301 Ultra - the adjudication order not sustainable for the allegation that LEC had cleared goods under the brand name of DIGI. Floating of dummy unit - Held that - The investigation has miserably failed to establish any financial flow back among the constituent units in the instant case, in these circumstances, the allegation that M/s.KEC is a dummy unit floated by M/s.LEC is not sustainable - M/s.LEC and K/s/KEC are independent entities eligible for their respective SSI exemption limits - penalties also set aside - exemption of SSI allowed. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Alleged evasion of Central Excise duty by floating a dummy unit.
2. Manufacturing and clearing goods with a brand name not eligible for SSI exemption.

Analysis:

1. The respondent-assessee, a manufacturer of wall mounted coin-operated pay phones availing SSI exemption, faced allegations of evading Central Excise duty by operating a dummy unit named "Kavya Electronics & Communications." The original authority confirmed duty demands and penalties, which were set aside by the Commissioner (Appeals) due to lack of evidence linking the goods to the assessee. The department appealed this decision. During the hearing, the department reiterated its grounds, but no representation was made for the respondent. The Tribunal noted that the investigation was primarily based on a retracted statement by an employee and lacked corroborative evidence. The Commissioner (Appeals) found no direct evidence linking the goods to the assessee, leading to the dismissal of the appeal by the department.

2. Regarding the allegation of operating a dummy unit, the lower appellate authority analyzed the evidence provided by the assessee, including registrations and declarations, to support the existence of a separate legal entity. Despite the department's claims, the authority found that the evidence presented was not a fabrication and that the dummy unit was a legitimate entity. The investigation failed to establish financial connections between the units, leading the Tribunal to agree with the lower authority's findings. Consequently, the appeal filed by the department was dismissed, affirming the independence of the entities and the inapplicability of penalties against the authorized signatories. The judgment was pronounced on 24th February 2017 by the Appellate Tribunal CESTAT Hyderabad.