2005 (12) TMI 19 - AT - Central Excise

Central Excise Small scale exemption Clubbing of clearances Family members are partners in both units, located in same premises Brand name used by both units are same No separate balance sheet

Issues Involved:
1. Clubbing of clearances for SSI exemption
2. Penalty imposition under Section 11AC
3. Assessable value determination based on invoices
4. Quantity of trailers sold discrepancy
5. Legal entity status of separate units
6. Common infrastructure and management control
7. Evidence of under-valuation and clandestine removal

Analysis:

1. Clubbing of Clearances for SSI Exemption:
The case involved the clubbing of clearances of two units for the purpose of Small Scale Industries (SSI) exemption. The Commissioner of Central Excise upheld the clubbing, considering the common partners, premises, and infrastructure of the units. The Tribunal found that even though the units were separate legal entities, they lacked a clear demarcation in activities. Citing precedent, the Tribunal held that if activities show no distinction between units, the corporate veil can be lifted, and clearances can be clubbed. The appellants' arguments regarding separate registrations and infrastructure were considered, but the Tribunal dismissed the appeals.

2. Penalty Imposition under Section 11AC:
Regarding penalty imposition, the Commissioner reduced the penalty on one individual but upheld the penalty equivalent to duty evaded for a specific period. The appellants challenged this penalty under Section 11AC. The Tribunal noted the Commissioner's consideration of the Supreme Court's decision in the Elgi Equipments case and found the penalty imposition legal and proper, leading to the dismissal of the appeals.

3. Assessable Value Determination Based on Invoices:
The appellants raised concerns about the assessable value determination based on quotations/proforma invoices issued for bank loan purposes. They argued that the assessable value should be determined from regular invoices. However, the Tribunal found the lower authorities' determination reasonable, as no proof was provided to show refunds based on proforma values. Therefore, the Tribunal did not interfere with this finding.

4. Quantity of Trailers Sold Discrepancy:
There was a discrepancy in the quantity of trailers sold, with the Additional Commissioner determining a higher number than certified by the Regional Transport Office (RTO). The appellants contended that all quotations and proforma invoices were not actual sales. However, as no representation was made during the hearing, the Tribunal agreed with the Additional Commissioner's findings, leading to no interference in this regard.

5. Legal Entity Status of Separate Units:
The appellants argued that each unit was a separate legal entity, emphasizing separate registrations and infrastructure. However, the Tribunal observed that despite being separate entities, one individual managed both units, indicating a lack of clear distinction in operations. This lack of separation led to the dismissal of the appeals.

6. Common Infrastructure and Management Control:
The Tribunal highlighted the common infrastructure and management control by one individual across both units. The Tribunal noted the absence of involvement by other partners and the intermingling of operations, such as clearances and payments. These factors contributed to the decision to uphold the clubbing of clearances and dismiss the appeals.

7. Evidence of Under-valuation and Clandestine Removal:
The case involved findings of under-valuation, clandestine removal, and manipulation of records. The Original Authority confirmed duty demand and penalties based on these violations. The Tribunal considered the evidence unearthed during investigation, including discrepancies in clearances and payments, to support the decision to uphold the penalties and dismiss the appeals.

In conclusion, the Tribunal upheld the Order-in-Appeal, emphasizing the lack of distinction between the units' operations, the evidence of under-valuation and clandestine removal, and the legal and proper imposition of penalties. The appeals were dismissed based on these findings.

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