2001 (8) TMI 244 - AT - Central Excise

Summary

Issues Involved:
1. Clubbing of clearances of four units for Central Excise Duty.
2. Denial of SSI exemption benefits.
3. Independent duty demands on each unit.
4. Penalties imposed under Section 11AC of Central Excise Act, 1944.
5. Interest levied under Section 11AB of Central Excise Act, 1944.
6. Invocation of Section 370 of the Companies Act.

Detailed Analysis:

1. Clubbing of Clearances:
The primary issue was whether the four units, namely ARPL, TMTTPL, MR, and RE, should be treated as one entity for the purpose of calculating the aggregate value of clearances for Central Excise Duty. The Commissioner concluded that these units were not independent of each other due to common management, shared resources, mutual financial transactions, and centralized control by key individuals. Therefore, the clearances were clubbed, and the benefits of SSI exemption notifications were denied.

2. Denial of SSI Exemption Benefits:
The Commissioner denied the benefits of Notifications 1/93, 16/97, 8/98, and 8/99 to all four units for the period from 1995 to November 1999. This decision was based on the finding that the units were operating with mutuality of interest and were essentially controlled by a single entity, thereby disqualifying them from individual SSI exemptions.

3. Independent Duty Demands on Each Unit:
The show cause notice demanded independent duties from each of the units while simultaneously alleging that they should be clubbed. The appellants argued that this was a fundamental error, as per the judgment in Gajanan Fabrics Distributors v. CCE, Pune, which held that demands should be raised against the principal unit when the corporate veil is lifted. The Tribunal noted this inconsistency and found that the demands should have been raised on the principal unit, ARPL.

4. Penalties Imposed:
Penalties were imposed on each unit under Section 11AC of the Central Excise Act, 1944, for contravening various provisions of the Central Excise Rules, 1944. The penalties were substantial, reflecting the amounts of duty short-paid or not paid by each unit during the specified periods.

5. Interest Levied:
Interest at the rate of 24% per annum was levied on the duty amounts determined for each unit under Section 11AB of the Central Excise Act, 1944. This was in accordance with Notification No. 8/2000-C.E. (N.T.), dated 1-3-2000.

6. Invocation of Section 370 of the Companies Act:
The Commissioner invoked Section 370 of the Companies Act, which had been omitted in 1999, to analyze the concept of "Companies Under the Mismanagement." The Tribunal found this reliance inappropriate and noted that the section was not applicable for the purpose of clubbing clearances. The omission of this section from the statute book rendered its invocation legally unsustainable.

Conclusion:
The Tribunal granted waiver of pre-deposit and stayed the recoveries, noting non-application of mind by the Commissioner and the order being against principles of natural justice. The Tribunal remanded the case to the Commissioner for re-examination in light of the Apex Court judgment in Gajanan Fabrics Distributors v. CCE, Pune. The Commissioner was directed to provide a clear finding on whether the principal unit, ARPL, should pay the entire duty amounts when clearances are clubbed with mutuality of interest. The Tribunal emphasized the need for the Revenue to correct the mistake in the show cause notice without changing its foundational parameters. The appeals were allowed by remand for de novo consideration.