2019 (9) TMI 324 - AT - Central Excise

SSI exemption - clubbing of clearances - dummy unit - non-inclusion of clearances of other unit namely, M/s Kumar Polyextrusion, which is owned by the wife of the proprietor - case of appellant is that merely because two units are owned by husband and wife, clearance of one unit cannot be clubbed with another in considering the SSI exemption notification. HELD THAT - The learned Commissioner (Appeals) has erred in appreciating the evidence as a whole and in particular the control and management of the unit M/s Kumar Polyextrusion by Proprietor of M/s Mali Pipe Industries even though on paper both the units were shown and claimed to have separate existence and functions separately carrying out its business of manufacture and sale of goods independent to each other. On the contrary, the entire operation and business of both the units undoubtedly controlled and managed by one person that is Shri Kumar Shankar Mali, hence, the clearance of both units be clubbed. The facts of the present case are more or less similar to the facts of the case in M/S LIBRA ENGINEERING WORKS VERSUS COMMISSIONER OF CENTRAL EXCISE-AHMEDABAD-I 2016 (7) TMI 1116 - CESTAT AHMEDABAD , hence by the judgment of this Tribunal delivered in the said case where it was held that for all practical purposes, the management/control of the business of manufacture and sale has been handled by Mr. Asgarali A. Siddiqui, proprietor of the Appellant and clearances were clubbed. Maintainability of appeal - the respondents raised another issue that the Revenue has not filed four appeals but instead filed only one appeal, therefore, the same is not maintainable - HELD THAT - The learned Commissioner (Appeals) has decided the issues partly in favour of the respondents, modifying the Order of the adjudicating authority, therefore, the Revenue has filed only one appeal challenging the Order-in-Appeal only to the extent it was not accepted by the Revenue, that is on the issue of clubbing of clearance. Consequently the Appeal is sustainable. Demand upheld - decided in favor of Revenue.

Summary

Issues Involved:
1. Clubbing of clearances for SSI exemption.
2. Separate legal entity status of the units.
3. Filing of a single appeal by the Revenue.

Issue-wise Detailed Analysis:

1. Clubbing of Clearances for SSI Exemption:
The core issue is whether M/s Mali Pipe Industries and M/s Kumar Polyextrusion are entitled to SSI exemption benefits under Notification No. 8/2003-CE separately or if the clearance value of M/s Kumar Polyextrusion should be clubbed with that of M/s Mali Pipe Industries. The Revenue contended that both units, although shown as separate legal entities, were controlled and managed by a single person, Shri Kumar Shankar Mali. The investigation revealed that M/s Kumar Polyextrusion, owned by Mrs. Latika Kumar Mali, was merely a namesake entity with all activities controlled by her husband. The Commissioner (Appeals) had earlier set aside the demand of duty, penalty, and interest of ?27,66,055/- confirmed on clubbing the clearances. However, the Tribunal found that the Commissioner (Appeals) erred in appreciating the evidence which indicated that both units were controlled by Shri Kumar Shankar Mali. Consequently, the Tribunal restored the original order demanding ?27,66,055/- by clubbing the clearances of both units.

2. Separate Legal Entity Status of the Units:
The respondents argued that both units had separate Income Tax PAN numbers, Sales Tax registrations, Bank accounts, and SSI registrations, and operated independently. However, the Revenue provided evidence that despite these separate registrations, the actual control and management of both units were centralized under Shri Kumar Shankar Mali. Statements from Mrs. Latika Kumar Mali and other employees confirmed that she was not involved in the day-to-day operations, and her husband managed everything. The Tribunal concluded that the separate legal status on paper did not reflect the operational reality, where both units were essentially under a single control, justifying the clubbing of clearances.

3. Filing of a Single Appeal by the Revenue:
The respondents contended that the Revenue's appeal was not maintainable as it was filed as a single appeal against multiple respondents. The Revenue countered that they complied with Rule 6A of the CESTAT (Procedure) Rules, 1982, which allows filing a single appeal against a single adjudication order. The Tribunal upheld the Revenue's position, stating that since the Commissioner (Appeals) had issued a single order modifying the adjudicating authority's decision, the Revenue's single appeal was valid and maintainable.

Conclusion:
The Tribunal modified the impugned order by setting aside the portion that dropped the demand of ?27,66,055/-, interest, and penalty on the issue of clubbing clearances. The original adjudication order was restored to that extent, and the appeal was disposed of accordingly.