2022 (8) TMI 981 - AT - Central Excise

SSI Exemption - clubbing of clearances - value of clearance of M/s. Impex Transformers, M/s. Index Marketing, M/s. Jay Power Protection Pvt. Ltd., M/s. Pruthivi Controls and M/s. Parth Electronics are includable with the value clearance of M/s. XPSPL or not - calculation of exemption limit under Notification No.8/2002-CE dated 1.3.2002 (erstwhile) and notification no.8/2003 dated 1.3.2003 for the period from 1.4.2002 to 16.5.2005 - batteries were stored in the factory premises of M/s. Xsis Power System Pvt. Ltd. and were cleared from the said factory along with UPS/Inverter/Constant Voltage Transformer or not - inclusion of value of batteries in the value of UPS/Inverter/Constant Voltage Transformer for determining the transaction value of the UPS/Inverter/Constant Voltage Transformer under Section 4 of the Central Excise Act, 1944. Whether the value of clearance of M/s. Impex Transformers, M/s. Index Marketing, M/s. Jay Power Protection Pvt. Ltd., M/s. Pruthivi Controls and M/s. Parth Electronics are includable with the value clearance of M/s. XPSPL for calculating the exemption limit under Notification No.8/2002-CE dated 1.3.2002 (erstwhile) and notification no.8/2003 dated 1.3.2003 for the period from 1.4.2002 to 16.5.2005? - HELD THAT - It can be seen that out of four units and the main unit M/s. XPSPL were situated in the Ramju Ice Factory Compound but each and every company/firm had a separate and independent premises with entry door. Merely because all the four units were located in one campus, this cannot be the reason for holding that all are working in one premises accordingly, all the five manufacturers had separate factories and manufacturing units. The goods manufactured by the five manufacturers were also separate, the transactions of purchase and sale among these five manufacturers were purely on a principal to principal and commercial basis. All the five manufacturers had purchased required raw material, inputs, etc. on their own. These five manufacturers had their own equipments and infrastructures as well as separate workers and employees also - The allegation of the department that Shri Zahir I Laliwala was looking after the affairs of all the units is contrary to the fact that Shri Zahir I Laliwala was not looking after any activity during the relevant period. The most important test involving clubbing of clearance is the financial flow back and this test has to be satisfied to hold that all the company/firm are clubbable - it is found that all the five manufacturers are totally different and none of them had any financial dependence of any nature or whatsoever on the other (or with M/s.Xsis). The learned Commissioner could not adduce evidence either by showing any financial records or in the books of account that there is any financial flow back among these five companies/firms. Only because the proprietors/directors of five manufacturing firms belongs to one family or that they were related to one another, the test of mutuality of interest has not been satisfied. Even in worst scenario than the charges made in the present case by the revenue, the various forums have held that clearances of different units cannot be clubbed and consequently, the exemption to SSI Unit cannot be denied - the value of all four units namely M/s. Impact Transformers, M/s. Index Marketing, M/s. Jay Power Protection Pvt. Ltd. and M/s. Pruthvi Controls cannot be clubbed with the value of M/s. XPSPL and consequently, each company/ firm having its clearance value within the exemption limit provided under notification are eligible for SSI exemption Notification No.8/2002-CE and 8/2003-CE. Whether the batteries were stored in the factory premises of M/s. Xsis Power System Pvt. Ltd. and were cleared from the said factory along with UPS/Inverter/Constant Voltage Transformer? - HELD THAT - There are force in the submission of the appellant that the batteries which were stored in the factory at the time of panchnama was batteries for Offline UPS which is inbuilt in the UPS, batteries supplied separately is only in respect of online UPS which were received and stored at the godown located at a few kilometres away from the factory at Bagh-E-Firdosh Shopping Centre. This is evident from the invoices of supplier of batteries which were addressed to the godown outside the factory of M/s. XPSPL. The adjudicating authority has heavily relied upon the seizure of 3768 batteries which were lying in the factory on 16.5.2005 to construe that the appellants were received the batteries in the factory and clearing the same along with UPS. In this regard, it is the submission of the appellant that out of 3768 batteries, 3743 number of batteries were meant for offline UPS as the size of the batteries itself establishes that batteries of 7AH and 9AH power were meant for installing an offline UPS for which there was no dispute whereas, other 25 batteries of higher ampere were kept for testing only because it is on record and accepted by the appellant also that few batteries were kept in the factory for testing of online UPS manufactured therein - even during cross examination of the appellant s production manager, he has confirmed the above position. With this fact, it is found that the reason for holding that the batteries for online UPS were stored and cleared alongwith UPS by the learned Commissioner is absolutely contrary to the fact hence, the contention is not acceptable. As regard the batteries supplied with offline UPS there is no dispute as the appellants were including the value of such batteries in the offline UPS. On the appreciation of the above fact supported with various evidences, it is found that the batteries were directly supplied from the godown by the appellant company M/s. XPSPL. For this reason the value of batteries was not includible in the assessable value of UPS system. Whether the value of batteries can be added in the value of UPS/Inverter/Constant Voltage Transformer for determining the transaction value of the UPS/Inverter/Constant Voltage Transformer under Section 4 of the Central Excise Act, 1944? - HELD THAT - The batteries were cleared from outside without bringing the same in the factory, the value of the batteries is not includible in the assessable value of UPS/Inverter therefore, the legal issue in this regard need not be dealt with, and the same is left open. The clubbing of value of four units with M/s. XPSPL and inclusion of value of batteries in the value of UPS, we are of the view that the entire demand is not sustainable. The learned Commissioner has imposed personal penalty on various persons under Rule 26 which are consequential to the confirmation of demand against M/s. XPSPL. Since the entire demand is not sustained, the consequential penalties on the persons shall also not sustain. Appeal allowed.

Summary

Issues Involved:
1. Clubbing of clearances of multiple units with M/s. Xsis Power Systems Pvt. Ltd. (XPSPL) for calculating exemption limits under relevant notifications.
2. Inclusion of the value of batteries in the assessable value of UPS/Inverter/Constant Voltage Transformer.
3. Confiscation of seized goods and consequential penalties.

Issue-wise Detailed Analysis:

1. Clubbing of Clearances:
The adjudicating authority alleged that M/s. XPSPL and other units (M/s. Impex Transformers, M/s. Index Marketing, M/s. Jay Power Protection Pvt. Ltd., and M/s. Pruthvi Controls) were not independent entities and should be clubbed for excise duty purposes. The Commissioner based this on statements from various individuals and the commonality of premises and management.

However, the Tribunal found that the statements used were not cross-examined as mandated under Section 9D of the Central Excise Act, 1944. The Tribunal emphasized that without cross-examination, these statements lack evidentiary value. The Tribunal also noted that each unit was independently registered, had separate addresses, directors, and financial transactions, and were operational long before the disputed period. The Tribunal cited several precedents where common management or familial relationships alone were insufficient to justify clubbing unless there was clear evidence of financial flowback or control by one entity over others. Consequently, the Tribunal held that the clearances of the units could not be clubbed with M/s. XPSPL.

2. Inclusion of Value of Batteries:
The adjudicating authority included the value of batteries in the assessable value of UPS, arguing that batteries were integral to UPS functionality and were cleared from the factory along with UPS. The Tribunal found that the batteries were stored and supplied from a separate godown and not from the factory. It was established that only a few batteries used for testing were stored in the factory, while the majority were directly supplied to customers. The Tribunal relied on several judgments, including those of the Supreme Court, which held that the value of batteries supplied separately and not from the factory should not be included in the assessable value of UPS. Hence, the Tribunal concluded that the value of batteries could not be included in the assessable value of UPS/Inverter/Constant Voltage Transformer.

3. Confiscation of Seized Goods and Consequential Penalties:
The confiscation of goods and penalties were based on the denial of SSI exemption and the inclusion of battery value in the assessable value of UPS. Since the Tribunal found that the clearances of the units should not be clubbed and the value of batteries should not be included in the assessable value, the basis for confiscation and penalties was invalid. Consequently, the Tribunal set aside the confiscation and penalties.

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeals and granting consequential relief in accordance with the law. The Tribunal emphasized the importance of cross-examination for the admissibility of statements as evidence and upheld the independence of the units based on their separate legal and operational status. The value of batteries supplied separately was not to be included in the assessable value of UPS, and the penalties imposed were also invalidated.