2002 (1) TMI 126 - AT - Central Excise

Summary

Issues Involved:
1. Clubbing of clearances for the purpose of determining the value of clearance in excess of the exemption limit.
2. Mutuality of interest between M/s. DMG and M/s. CAE.
3. Invocation of the extended period of limitation.
4. Imposition of penalties under Rule 173Q and Rule 209A.
5. Non-imposition of mandatory penalty under Section 11AC.

Summary:

1. Clubbing of Clearances:
The duty demand on M/s. DMG was based on the clubbing of clearances with M/s. CAE for the period from 1-4-1993 to 31-12-1997. The adjudicating authority found that CAE had been carved out of DMG with the ulterior motive to split the latter's clearances for misutilising SSI exemption under Notification Nos. 175/86-C.E. and 1/93-C.E. The basis for this finding included common control, workforce, management, stores, and other shared resources between the two companies.

2. Mutuality of Interest:
The Commissioner concluded that there was mutuality of interest between DMG and CAE, necessitating the clubbing of clearances. However, the Tribunal applied the test of mutuality of interest laid down by the High Court in Renu Tandon's case, which requires evidence of common funding and financial flow-back. The Tribunal found no such evidence in this case, thus rejecting the finding of mutuality of interest.

3. Extended Period of Limitation:
The adjudicating authority invoked the extended period of limitation for confirming the duty demand and imposing penalties on M/s. DMG due to the alleged misdeclaration in their classification lists and failure to disclose mutuality of interest.

4. Imposition of Penalties:
Penalties were imposed under Rule 173Q on M/s. DMG and under Rule 209A on S/Shri C.M. Handa, D.K. Jain, and R.K. Sharma. The Tribunal set aside these penalties, noting that the demand of duty was vacated and the companies had fulfilled all Central Excise requirements.

5. Non-imposition of Mandatory Penalty:
The Revenue's appeal against the non-imposition of mandatory penalty under Section 11AC was rejected. The Tribunal held that once the demand of duty was set aside, the penalty equal in quantum to duty would also stand reduced to nil.

Conclusion:
The Tribunal allowed Appeals No. 2859-62/2000, setting aside the duty demand and penalties imposed on M/s. DMG and the individuals. The Tribunal rejected Appeal No. 1663/2001, which sought the imposition of a mandatory penalty under Section 11AC.