2018 (9) TMI 630 - AT - Central Excise

SSI Exemption - Clubbing of clearances - two units/dummy units - mutuality of Interest - Rule 9(2) of the Rules read with Section 11A of the Central Excise Act, 1944. Held that - All the business affairs of both M/s. HBC and M/s. HCW like purchase of raw material, production, despatch, collection of sale proceeds etc were managed by Sh Montoo and Sh Jai Prakash. They are members of one family running both the units though these units have different family members as their partners. It is also evident that goods were moved in same vehicle under same invoices/kachha slip by the same salesman. Amount collected by the salesman (sometimes in parts) cannot be seggregated between the two units. The Benami accounts maintained with Oriental Bank of Commerce were used for transactions in respect of both the units. Since financial transactions cannot be segregated between the two units mutuality of interest is thus clearly established. The appellant is contesting only that the clearances of M/s.HCW be not clubbed and inclusion of other partners, namely, Ms.Geeta Rani, Sh. Jai Prakash and Sh. Kaushal Kumar. It is contended that attribution to Geeta Rani about private records does not attribute criminality to her as she was only a sleeping partner - It is found that the private records amongst other places were recovered from the residential premises of Smt Geeta Rani and this fact of recovery of the records from her residence was admitted by her in her statement dated 14.10.1996. The adjudicating authority has correctly appreciated the facts and the evidence and therefore uphold the clubbing of clearances of M/s.HBC and M/s.HCW in the impugned order - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Non-registration under Central Excise by M/s. Honey Biscuits Company (M/s. HBC).
2. Seizure of unaccounted goods and incriminating documents.
3. Clubbing of clearances of M/s. HBC with M/s. Honey Confectionary Works (M/s. HCW).
4. Clandestine removal of goods and evasion of Central Excise duty.
5. Use of benami bank accounts for illicit transactions.
6. Imposition of penalties and confiscation of goods.

Issue-wise Detailed Analysis:

1. Non-registration under Central Excise by M/s. Honey Biscuits Company (M/s. HBC):
The appellant, M/s. HBC, a manufacturer of biscuits, did not obtain Central Excise registration. The Central Excise staff conducted a search on 14.10.1996, revealing unaccounted goods and incriminating documents. Investigations disclosed that M/s. HBC and M/s. HCW were engaged in manufacturing without proper registration and compliance with Central Excise laws.

2. Seizure of unaccounted goods and incriminating documents:
During the search, biscuits valued at ?7,31,398 and raw materials/packing material valued at ?3,08,735 were seized. Private records were recovered from the residential premises of the partners, confirming unaccounted transactions. Statements from various employees and partners corroborated the findings of unaccounted raw materials and production.

3. Clubbing of clearances of M/s. HBC with M/s. Honey Confectionary Works (M/s. HCW):
The scrutiny of seized documents revealed mutual interest and control among the partners of M/s. HBC and M/s. HCW, who were family members. The investigation established that the business operations, including raw material procurement, production, and sales, were intertwined. The adjudicating authority upheld the clubbing of clearances, noting that the financial transactions and business operations were not independent.

4. Clandestine removal of goods and evasion of Central Excise duty:
The investigation revealed that M/s. HBC and M/s. HCW removed goods clandestinely without proper documentation and payment of duty. Bogus invoices were used to cover the transportation of goods, and these invoices were manipulated to show additional goods. The sales proceeds were channeled through benami bank accounts, confirming the evasion of Central Excise duty.

5. Use of benami bank accounts for illicit transactions:
The investigation found that the receipts from bogus invoices were deposited in six benami bank accounts maintained at Oriental Bank of Commerce. These accounts were in fake names and operated by the partners, confirming the illicit nature of transactions. Statements from bank officials and partners corroborated the findings.

6. Imposition of penalties and confiscation of goods:
The adjudicating authority confirmed the demand of Central Excise duty amounting to ?1,01,33,896 against M/s. HBC, along with an equivalent penalty. The seized biscuits were ordered to be released unconditionally due to their deteriorated condition. The proceedings regarding the proposed confiscation of land, plant, and machinery were dropped. The Tribunal upheld the adjudicating authority's decision, dismissing the appeal and confirming the penalties imposed.

Conclusion:
The Tribunal found no merit in the appeal and upheld the adjudicating authority's decision to club the clearances of M/s. HBC and M/s. HCW, confirming the demand for Central Excise duty and the imposition of penalties. The appeal was dismissed, and the order was pronounced in the court.