2018 (2) TMI 11 - AT - Central Excise

SSI exemption - clubbing of clearances - dummy units - Held that - In the present case, the factory premises is found to be common where goods have been manufactured and cleared under the invoices of M/s Electro Industrial Sales Corporation, as well as M/s Numinous Supplies Pvt. Ltd. separately. Even though both the firms have been shown to have separate existence, since the goods have been manufactured from single common factory premises, the values of clearances of both the firms are required to be clubbed in terms of the above provision of the Notification - appeal dismissed - decided against appellant.

Summary

Issues:
Denial of SSI exemption benefit to M/s Electro Industrial Sales Corporation for the period 2011-2013 due to clubbing of clearances with M/s Numinous Systems Pvt. Ltd.

Analysis:
The case involved appeals by the assessee and the Director against the Order-in-Appeal denying the SSI exemption benefit to M/s Electro Industrial Sales Corporation (EISC) for manufacturing activities falling under Chapter 85 of the Central Excise Tariff Act during 2011-2013. The dispute arose when departmental authorities found that EISC was not registered with the Central Excise department and its activities were spread across multiple floors of a building. The officers discovered manufacturing activities in the basement but no capital goods or materials on the upper floors. Additionally, they found invoice books of M/s Numinous Systems Pvt. Ltd. (NSPL) showing clearances of transformers, with Shri Girish Vadhera being the common link between EISC and NSPL. Goods valued at a specific amount were seized, and after investigation, a substantial Central Excise duty was demanded along with penalties. The Commissioner (Appeals) upheld the Order-in-Original, leading to the filing of the present appeals.

The main contention presented by the appellant's counsel was that EISC and NSPL had separate identities despite manufacturing similar products. It was argued that since both units were registered separately for tax purposes, the SSI exemption should be independently available for each unit. On the other hand, the Revenue's representative justified the denial of the exemption, emphasizing that even with separate legal entities, the goods were manufactured in a common premises, warranting the clubbing of clearances for SSI exemption purposes.

Upon review of the facts and arguments, the Tribunal observed that during the search of EISC's premises, it was evident that goods were being manufactured without clear segregation between the two firms. The main person, Shri Girish Vadhera, had significant roles in both entities, and there was a lack of distinct separation in terms of premises, machinery, and workers. The Tribunal referred to Notification No. 8/2003-CI, which specified that the aggregate value of clearances from a single factory applies to all manufacturers. Since goods were manufactured from a common factory premises for both EISC and NSPL, the values of clearances needed to be clubbed as per the notification's provision.

Consequently, the Tribunal found no grounds to interfere with the impugned order, leading to the dismissal of both appeals. The judgment highlighted the importance of the common factory premise and the lack of clear separation between the manufacturing activities of the two entities, ultimately impacting the eligibility for the SSI exemption benefit.