2018 (3) TMI 174 - AT - Central Excise

SSI exemption - dummy units - clubbing of clearances - allegation is that M/s. SG is a dummy unit of M/s. SPP created on paper for the purpose of fragmentation of value of clearances of both the units so as to wrongly avail SSI exemption - Held that - it can be seen that M/s. SG for all practical purposes was functioning as dummy unit of M/s. SPP so as to keep the clearances within the limit of SSI exemption - the value of clearances of the impugned goods cleared by M/s. SG during the relevant period has been rightly clubbed with the clearances of M/s. SPP and the demand raised is legal and proper - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Whether M/s. Sri Vari Graphics Pvt. Ltd. (M/s. SG) is a dummy unit of M/s. Sri Vari Print Pack Pvt. Ltd. (M/s. SPP).
2. Whether the clearances of M/s. SG should be clubbed with M/s. SPP for the purpose of availing SSI exemption.
3. Validity of the demand for duty, interest, and penalties imposed.

Issue-wise Detailed Analysis:

1. Dummy Unit Allegation:
The core allegation by the department was that M/s. SG is a dummy unit created by M/s. SPP to fragment the value of clearances and wrongly avail the SSI exemption. The investigation revealed that M/s. SG had only a punching machine and a dismantled stitching machine, with no evidence of significant manufacturing activity. The electricity consumption was minimal, suggesting no substantial operations. The appellant's claim of using a generator was not substantiated by any evidence and was deemed an afterthought. The mutuality of interest and financial transactions between M/s. SG and M/s. SPP further supported the conclusion that M/s. SG was a facade for M/s. SPP.

2. Clubbing of Clearances:
The department argued that the clearances of M/s. SG should be clubbed with those of M/s. SPP, as M/s. SG was not genuinely operational and was used to suppress the value of clearances of M/s. SPP. Evidence showed that M/s. SG did not maintain proper records of job work, and the job charges reflected in the ledgers were disproportionate to the value of clearances. The lack of documentation for job work transactions and the mutual financial interests between the two entities led to the conclusion that the clearances should be clubbed.

3. Demand for Duty, Interest, and Penalties:
The original authority confirmed the demand for duty, interest, and imposed penalties on both entities. The Commissioner (Appeals) upheld this decision, finding that the allegations were supported by substantial evidence. The tribunal concurred, noting that the arguments presented by the appellants were unconvincing and lacked factual basis. The tribunal found no grounds to interfere with the impugned order, thereby dismissing the appeals filed by the appellants.

Conclusion:
The tribunal concluded that M/s. SG was a dummy unit of M/s. SPP, created to fragment the value of clearances and wrongly avail SSI exemption. The clearances of M/s. SG were rightly clubbed with those of M/s. SPP. The demand for duty, interest, and penalties was upheld as legal and proper. The appeals were dismissed, affirming the findings of the original authority and the Commissioner (Appeals).