2019 (4) TMI 236 - AT - Central Excise

SSI Exemption - values based exemption - clubbing of clearances - dummy units - Held that - It appears that the basis for arriving at this proposition is that Navneet Industries had also filed ER-1 returns for the period April 2008 to July 2008 and that they had surrendered their registration certificate only w.e.f. 11.08.2008. All the same, there is no proof brought forth in the SCN that Navneet Industries were actually and still functioning from the very same premises which had been taken over by the appellant, namely, at No. 142-A, Sadayankuppam, Village Road, Manali, Chennai-600 0103. For reasons best known to Navneet Industries, the said entity has filed ER-1 returns for clearances purportedly effected by them. However, even the copies of ER-1 returns filed by Navneet Industries relied upon in the SCN were not furnished to the appellants herein. There is also no indication that investigations were extended by department to Navneet Industries also, to bring out irrefutable evidences that the said entity had been manufacturing in the same premises even after they handed over the premises to the appellants. The argument that in the present case, since clubbing is sought to be made of two units which are allegedly manufacturing and clearing goods from the same premises, therefore SCN is not required to be given to the other unit is a facile one. When the value of clearances of another unit, whether it is in the same premises or far removed is sought to be added for the purpose of arriving at aggregate clearances ie., the ratio of the case laws relied upon by the Ld. Advocate will apply in all fours. The allegations made in the SCN cannot be sustained - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of duty amount with interest and penalties based on aggregate value of clearances.
2. Clubbing of clearances of two entities operating from the same premises.
3. Validity of lease agreement and its impact on duty liability.
4. Requirement of separate Show Cause Notice (SCN) for clubbing clearances.
5. Applicability of case laws on clubbing clearances of multiple units.

Analysis:
1. The appeal involved a demand for duty amount, interest, and penalties on the appellants for manufacturing MS Rectal Bars. The demand was based on the aggregate value of clearances exceeding the exemption limit, as per Notification No. 8/2003. The original authority and Commissioner (Appeals) upheld the demand, leading to the appeal.

2. The primary issue was the clubbing of clearances of Navneet Industries with the appellants' clearances as they operated from the same premises. The appellant argued that no separate SCN was issued to Navneet Industries, which could vitiate the proceedings. The Tribunal noted discrepancies in proving Navneet Industries' continued operation from the premises after the appellants took over. Lack of evidence and failure to provide ER-1 returns of Navneet Industries to the appellants weakened the department's case.

3. The validity of the lease agreement was questioned by the department, citing it was not signed by both partners and unregistered. However, the Tribunal ruled that this contention was belated and lacked substantial proof of invalidity. The agreement's validity was not a decisive factor in determining duty liability unless proven as forged or concocted.

4. The requirement of a separate SCN for clubbing clearances of multiple units was debated. The appellant relied on case laws emphasizing the necessity of issuing SCN to all units proposed for clubbing. The Tribunal agreed with this stance, stating that irrespective of units operating from the same premises, due process must be followed, and SCN should be issued to all concerned units.

5. The Tribunal highlighted the distinction between cases involving multiple units in different locations and those in the same premises. It emphasized that legal principles on clubbing clearances apply universally, necessitating proper procedures and evidence for aggregating clearances. The impugned order was set aside due to the lack of legal basis in the department's allegations.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of following legal procedures, providing substantial evidence, and ensuring due process in matters of duty liability and clubbing of clearances. The decision highlighted the significance of upholding legal standards and principles in excise matters to prevent arbitrary actions and protect the rights of the appellants.