2020 (3) TMI 829 - AT - Central Excise

SSI Exemption - clubbing of clearances - the allegation in the case is that unit Nos. II and III were not having manufacturing facility to manufacture the goods in question and the same have been manufactured by unit No. I which has been cleared on the invoices issued by units Nos. II and III, therefore the duty is required to be paid by the unit No. I for clearance of the said machines. HELD THAT - The reports relied upon by the Revenue is without visiting and examining the machinery installed at unit No. II and unit No. III whereas the report produced by the appellants is based on physical verification of the machinery installed by the Chartered Engineer at unit No. II and unit No. III. As Shri N.K. Arora has given report after visiting the unit and have stated that Unit No. II and III are having manufacturing facility to manufacture the goods in question, therefore, the allegation made by the Revenue that unit Nos. II and III are not having manufacturing facility is not sustainable. Therefore, it is held that the unit Nos. II and III are having the facility to manufacture the goods in question, therefore, the allegation against unit No. I is not sustainable. The allegation is that all the units are family concern, therefore, the clearance of made by all the units are to be clubbed with the clearances of unit No. I - unit No. I is private limited company and unit No. II and III are partnership concern, therefore, it cannot be said that all the units are family concerns as the director and the company are two separate entities. The allegation of the Revenue that unit Nos. II and III are not having manufacturing facility and the same cleared clandestinely by unit No. I are based on assumptions and presumptions. Therefore, the demands against the appellant are set aside and no penalty is imposable on all the appellants. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Duty demand on unit No. I under Central Excise Act, 1944
- Penalties imposed on various units and individuals under Central Excise Rules
- Allegations of evasion of duty and clandestine clearance
- Ownership and relationship among family members operating different units
- Financial transactions and flow among the units
- Reliability of chartered engineer reports
- Clubbing of clearances among units
- Legal interpretation of family concerns and separate entities

Analysis:
The judgment by the Appellate Tribunal CESTAT Chandigarh involved multiple issues. Firstly, the duty demand on unit No. I under the Central Excise Act, 1944 was confirmed, along with penalties imposed on different units and individuals under the Central Excise Rules. The case revolved around allegations of evasion of duty and clandestine clearance of goods by unit No. I, II, and III, which were owned by family members. The authorities alleged that units II and III had no manufacturing facility and cleared goods on invoices issued by unit I to evade duty. The Tribunal considered the ownership structure and financial transactions among the units. The appellants argued that the show cause notice lacked specificity in imposing penalties under Rule 173Q, citing legal precedents.

The appellants contended that the family members operated different business entities, and unit I being a private limited company should not be considered a family concern. They also challenged the allegations of financial flow back among the units as a ground for clubbing clearances. The reliability of chartered engineer reports was crucial, with conflicting opinions presented. The Tribunal noted the differing reports and found that the reports relied upon by the Revenue lacked physical verification of machinery at units II and III. Based on the report favoring the appellants, it was held that units II and III had the manufacturing facility, contradicting the Revenue's claims.

Additionally, the Tribunal analyzed the legal interpretation of family concerns and separate entities. It was observed that unit I being a private limited company and units II and III being partnership concerns did not automatically classify all units as family concerns. The Tribunal distinguished the case from a precedent cited by the Revenue, emphasizing the lack of common purchase of raw materials and integrated manufacturing in the present case. Consequently, the demands against the appellants were set aside, and no penalties were imposed. The impugned order was overturned, and the appeals filed by the appellants were allowed with consequential relief, if any.