2023 (6) TMI 191 - AT - Central Excise

SSI Exemption - independent units or not - clubbing of clearances - four units have been created on paper without having proper manufacturing facilities - units manufacturing Gears, Gear Boxes and parts thereof - evasion of duty - N/N. 8/2003-CE dated 01.03.2003 - HELD THAT - The proprietor of the above said four units are related to each by blood i.e they are blood relatives as admitted by them in their respective statements recorded by the department. Further it is also admitted facts on records that out of four units, three units did not have all the machines required to manufacture of Gears, Gear Boxes and Parts thereof. Whereas, the fourth unit i.e M/s Omkar Technolgies did not have any machinery installed in his shed. These facts have also been admitted by the proprietor of the above said four units as well as Shri Suresh J. Patel, Authorized person of M/s Orkey Gears in their statements. He also admitted the facts that seven workers on the pay roll of M/s Omkar Technolgies as Shed No. 43 were being utilized commonly by the above four units. Further during the investigation the department also found that one room situated at shed No. 42 and 43 which is common premises where the spares of all the above four units were stored. The proprietor of the above said four units, in their respective statements have admitted that in case of necessity in business they lend money to each other without any condition as they are all members of the one family, they also agreed with the contents of the Panchnama dated 07.02.2007 as well as with the statement dated 07.02.2007 of Shri Suresh Patel. We find that the above facts are not disputed by the Appellants during the entire proceedings. The manufacture and clearances made by the said four units availing the benefit of Notification No. 8/2003-CE have to be clubbed together as we hold that these units are one and the same, when their operations are under common management/family members and financial control and have mutuality of financial interest with each other - The facts and circumstances have warranted to examine the reality of these units; and after going behind the mask of these entities, it has been revealed that activities of these units i.e. manufacture, clearance, etc. has to be clubbed together. In the present matter, it is also found that appellants have not been able to show that all the four units were functioning independently and were capable of functioning independently. Considering the above facts there are no reason to interfere with the impugned orders. Appeal dismissed.

Summary

Issues Involved:
1. Evasion of duty by M/s Orkay Gears and associated units.
2. Eligibility for SSI Exemption under Notification No. 8/2003-CE.
3. Clubbing of clearances from multiple units.
4. Imposition of penalties on the appellants.

Summary:

Issue 1: Evasion of Duty
The case originated from intelligence suggesting that M/s Orkay Gears (Appellant No.1) was evading duty. A search revealed that none of the four units involved had the full machinery needed for manufacturing Gears, Gear Boxes, and Parts. It was found that the manufacturing process was completed across the units, indicating that these units were not independent and were created to avoid duty liability.

Issue 2: Eligibility for SSI Exemption
The department argued that the four units were not separately eligible for the SSI Exemption under Notification No. 8/2003-CE. The clearances shown by the other three units should be clubbed with M/s Orkay Gears to determine eligibility for the exemption. The adjudicating authority confirmed the demand for central excise duty and imposed penalties, which was upheld by the Commissioner (Appeals).

Issue 3: Clubbing of Clearances
The appellants contended that each unit operated independently, purchasing raw materials, selling products, and maintaining separate accounts and registrations. They cited various case laws to argue against clubbing based on common administrative facilities and relationships. However, the department's investigation showed that the units shared machinery, labor, and financial resources, and were managed by blood relatives, justifying the clubbing of clearances.

Issue 4: Imposition of Penalties
The appellants argued that the show cause notice was only issued against M/s Orkay Gears, not the other units. They cited case laws to support their position that all units should have been issued notices. The department maintained that the units were created on paper to avail SSI exemption fraudulently.

Judgment:
The Tribunal found that the four units were related by blood and shared resources, machinery, and labor. The units were under common management and financial control, warranting the clubbing of clearances. The Tribunal upheld the findings of the adjudicating authority and dismissed the appeals, affirming that the units were not functioning independently and were created to evade duty. The cited case laws by the appellants were found distinguishable based on the facts of the present case.

Conclusion:
The appeals were dismissed, and the impugned orders were upheld, confirming the clubbing of clearances and the ineligibility for SSI exemption under Notification No. 8/2003-CE. The penalties imposed on the appellants were also upheld.