2018 (5) TMI 779 - AT - Central Excise

SSI exemption - clubbing of clearances - independent entities or not? - Held that - even though the owners are related but there is no mutuality of interest in the working of three firms - clubbing of clearances not sustainable. Benefit of N/N. 75/87 - Suppression of facts - Time limitation - Held that - the appellants had no incentive to evade the duty since whatever duty paid by the appellant is available as Modvat Credit to the buyers of the appellants. Further there was no suppression on the part of the appellants since they have filed declarations at the beginning of their operations with the department. Therefore, there was no suppression with intention to evade the duty, hence the demand is barred by limitation. Appeal allowed on merits as well as on limitation.

Summary

Issues Involved:
Challenging common Order-in-Appeal confirming duty demand and penalties against appellants for manufacturing parts for refrigerators and air conditioners; Denial of exemption under Notification No. 75/87 due to clubbing of turnover of related entities; Mutuality of funds in loan transactions between units; Clubbing clearances of partnership firm with proprietary firms; Limitation period for demand of duty.

Analysis:

Issue 1: Exemption under Notification No. 75/87
The appellants challenged the denial of exemption under Notification No. 75/87 for parts of refrigerators and air conditioners. The Tribunal found that the appellants were entitled to the exemption as they were separate legal entities with independent existence and infrastructure. The clubbing of turnover of related entities was deemed unsustainable, and the appellants were held eligible for the exemption.

Issue 2: Mutuality of Funds
The contention regarding mutuality of funds in the loan transactions between units was analyzed. The Tribunal concluded that the one-time temporary loan transaction did not establish mutuality of interest to club the value of clearances. The relatedness of owners did not imply mutual working of the firms, and the case was supported by relevant legal precedents.

Issue 3: Clubbing of Clearances
The Tribunal considered the clubbing of clearances of the partnership firm with proprietary firms. It was observed that the partnership firm's clearances could not be clubbed with other independent proprietary firms where the partner was not a proprietor. Legal judgments were cited to support this position, and the Tribunal held that the clubbing was not justified.

Issue 4: Limitation Period
Regarding the limitation period for the demand of duty, the Tribunal noted that the appellants had filed declarations at the beginning of their operations with the department. This indicated no intention to suppress facts or evade duty. Citing relevant judgments, the Tribunal held that the demand was barred by limitation due to lack of suppression with the intent to evade duty.

Conclusion:
In conclusion, the Tribunal allowed the appeals filed by the appellants, setting aside the demand of duty on merit and limitation. The penalties against the appellants were also revoked. The judgment emphasized the separate legal status of the entities, lack of mutual interest in operations, and absence of suppression, leading to the decision in favor of the appellants.