2018 (9) TMI 1197 - AT - Central Excise

SSI Exemption - clubbing of clearances - it is alleged that both DSD and DSW are the same, therefore their sales are to be clubbed together - Clandestine removal - fake trading shown in the balance sheet - actual sales - under valuation of final goods. Clubbing of clearances - Held that - Both the units were manufacturing the same product and are Private Limited Companies. The Limited Company cannot be held to be a one Company. Moreover, both the units are situated at the distance of more than 20Kms. from each other and from time to time obtained Central Excise registration. As their clearances were below the SSI exemption limit, therefore, surrendered their Central Excise registration from time to time. The said registration was granted to them after ascertaining their correctness that the both the units are separate. In that circumstance, it cannot be said that the appellants are one unit merely on the basis of certain statements - It is not a case in the Central Excise wherein the assessee has to obtain registration for all the units therefore, the clearances made by one unit cannot be clubbed with the other unit - SSI exemption cannot be denied on account of clubbing of clearance. Clandestine removal - fake trading shown in the balance sheet - actual sales - Whether the fact of fake trading entries made in the balance sheet can be treated as clandestine removal or not? - Held that - It is an admitted fact in the show cause notice itself recorded that both the units have shown fake trading. When Revenue itself is admitting in the show cause notice that entries are fake and without establishing the fact of manufacturing of the goods indicating how much inputs was required, how much goods have been produced, how much electricity has been consumed, in the absence of any such corroborative evidences, merely on the basis of fake entries which are to obtain loan from banks etc., it cannot be held that fake entries are of clandestine removal of goods - demand not sustainable. Under valuation - Revenue sought to include the value of hardware, labour charges and polishing charges done at the site of the buyers in assessable value - Held that - As all these activities have been done at the buyer s place and are part of immovable property, in that circumstances, activity conducted at the end of buyer s place such as hardware fitting, labour charges for polishing etc. cannot be included in the assessable value of the goods. Therefore, the charge of undervaluation is not sustainable against the appellants. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Clubbing of clearances of two units for excise duty exemption eligibility
2. Allegation of fake trading entries leading to duty liability
3. Assessment of undervaluation charges on final goods

Analysis:

Clubbing of clearances:
The case involved two private limited companies, both engaged in manufacturing similar products and availing SSI exemption under Notification No. 8/03-CE. The Revenue alleged that the units were controlled by the same individual and operated as one entity for tax evasion. However, the Tribunal found that the units were separate legal entities with distinct registrations, located over 20kms apart, and had separate factories. The Tribunal emphasized that mere common directors and statements from employees were insufficient to establish the units as one. As the units had separate registrations and operated independently, the Tribunal held that clubbing their clearances for denying SSI exemption lacked concrete evidence and was unsustainable.

Fake trading entries and clandestine removal:
The Revenue accused the appellants of showing fake trading entries in balance sheets, suggesting clandestine removal of goods. The Tribunal noted that the Revenue itself admitted the entries were fake without providing evidence of actual production, input usage, or other manufacturing aspects. Without corroborative evidence on procurement, production, and consumption, the Tribunal held that the charge of clandestine removal based on fake entries was not sustainable. The benefit of doubt was given to the appellants as no substantial evidence was presented.

Undervaluation charges:
Regarding undervaluation allegations, the Revenue sought to include hardware, labor, and polishing charges in the assessable value of goods. The Tribunal observed that certain post-clearance activities like hardware fitting and polishing done at the buyer's site were part of immovable property and not part of the assessable value. As these activities were conducted post-clearance, they could not be considered for valuation purposes. Therefore, the Tribunal concluded that the charge of undervaluation was not valid against the appellants.

In conclusion, as the Tribunal found in favor of the appellants on all issues, the impugned order was set aside, and the appeals filed by the appellants were allowed with any consequential relief deemed necessary.