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2020 (1) TMI 374 - AT - Central ExciseSSI Exemption - clubbing of clearances - dummy unit - mutuality of interest - sole reason for clubbing the clearances of JPPL with PPI only that there were some financial transactions and there are controlled by family member and there are some records were found in each other factory premises - HELD THAT - During the course of visit, the machinery for manufacture of finished goods was found installed in the premises of JPPL. Moreover, some stocks on finished goods were also lying there and it is not denied by the Revenue that these two units are not separate units. In fact, both the units are located at a distance of 5 KM. from each other and having any manufacturing infrastructure separately installed in their premises. Merely, both the units are owned by the family members cannot be the reason for clubbing the clearances. Moreover, it was not alleged in the show cause notice that JPPL is a dummy unit. Further, the directors of both the units are not common and initially PPI was a proprietorship concern and JPPL is a private limited company. The private limited company is distinct from an individual, therefore, it cannot be said both are same units. In the absence of any corroborative evidence on record, the clearances cannot be clubbed. The other ground for clubbing the clearances is that there are some financial transactions between each unit - HELD THAT - The individuals have given money on loan to the units and if other unit is required money, the same is returned by the other unit to the individual who further give the loan to that unit and on all the transactions interest has been paid. In these circumstances, it cannot be said that there was flow of funds between the both units and these types of transactions cannot be the reason for clubbing the clearances - Moreover, another allegation is that both units are managed by the family members or one person, the same cannot be the reason to club the clearances. The clearances of both the units cannot be clubbed together and M/s JPPL is entitled for benefit of SSI exemption N/N. 08/2003-CE dated 01.03.2003 - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Clubbing of clearances of M/s PPI and M/s JPPL for determining the aggregate value of clearances. 2. Invocation of the extended period under proviso to Section 11A(1) of the Central Excise Act, 1944. 3. Allegation that M/s JPPL is a dummy unit of M/s PPI. 4. Confirmation and recovery of Central Excise duty demand. 5. Imposition of interest on unpaid duty under Section 11AB of the Central Excise Act, 1944. 6. Imposition of penalties on M/s PPI and its directors under Section 11AC of the Central Excise Act, 1944 and Rule 26(1) of the Central Excise Rules, 2002. Issue-wise Detailed Analysis: 1. Clubbing of Clearances: The primary issue was whether the clearances of M/s PPI and M/s JPPL should be clubbed for determining the aggregate value of clearances under Notification No. 8/2003-CE. The adjudicating authority ordered the clubbing of clearances based on the mutuality of interest between the two units. However, the appellants argued that M/s JPPL and M/s PPI are two separate private limited companies with distinct legal existences, separate premises, machinery, workers, and financial transactions. The Tribunal found that both units had separate manufacturing infrastructure and were located 5 kilometers apart. The mere fact that both units were owned by family members was not sufficient grounds for clubbing clearances. Additionally, it was not alleged in the show cause notice that M/s JPPL was a dummy unit. 2. Invocation of Extended Period: The adjudicating authority invoked the extended period under the proviso to Section 11A(1) of the Central Excise Act, 1944, to demand Central Excise duty. The Tribunal, however, did not find sufficient grounds for invoking the extended period as the units were separate entities with separate registrations and there was no evidence of mutuality of interest or financial flowback. 3. Allegation of Dummy Unit: The adjudicating authority held that M/s JPPL was a dummy unit created to avail the benefit of SSI exemptions. The appellants contended that this finding was beyond the scope of the show cause notice, which did not allege that M/s JPPL was a dummy unit. The Tribunal agreed with the appellants, noting that M/s JPPL had its own machinery, workers, and separate legal identity, and thus could not be treated as a dummy unit. 4. Confirmation and Recovery of Duty Demand: The adjudicating authority confirmed and ordered the recovery of Central Excise duty amounting to ?61,44,952/- from M/s PPI. The Tribunal, however, set aside this order, finding that the clearances of M/s JPPL and M/s PPI could not be clubbed, and thus the duty demand was not sustainable. 5. Imposition of Interest: The adjudicating authority imposed interest on the unpaid duty under Section 11AB of the Central Excise Act, 1944. Since the Tribunal set aside the duty demand, the imposition of interest was also deemed unsustainable. 6. Imposition of Penalties: The adjudicating authority imposed penalties on M/s PPI and its directors under Section 11AC of the Central Excise Act, 1944, and Rule 26(1) of the Central Excise Rules, 2002. The Tribunal, having found that the clearances could not be clubbed and the duty demand was unsustainable, also set aside the penalties imposed on M/s PPI and its directors. Conclusion: The Tribunal concluded that the clearances of M/s JPPL and M/s PPI could not be clubbed, and M/s JPPL was entitled to the benefit of SSI exemption under Notification No. 08/2003-CE. Consequently, the impugned demands and penalties were set aside, and the appeals were allowed with consequential relief.
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