2006 (3) TMI 19 - AT - Central Excise

Central Excise SSI Exemption Mere mutually interest between two companies does not attract to clubbing of clearance Demand on holding company

Summary

Issues:
1. Disallowance of SSI exemption benefit under Notification Nos. 175/86-C.E. and 1/93-C.E.
2. Application of extended period of limitation for duty demand confirmation.
3. Imposition of penalty and confiscation of assets.
4. Interpretation of clubbing of clearances under different notifications.
5. Determination of mutuality of interest between subsidiary and holding company.
6. Liability for duty demand on the holding company.

Analysis:

1. The appellants were denied the benefit of SSI exemption under Notification Nos. 175/86-C.E. and 1/93-C.E. due to being a 100% subsidiary of a company not classified as an SSI unit. An extended period of limitation was applied for confirming a duty demand of Rs. 19,10,810 on clearances from July 1992 to March 1997.

2. The Commissioner (Appeals) based the decision on a Tribunal case regarding clubbing of clearances when a subsidiary manufactures goods on behalf of the main unit. However, the Tribunal noted that during the disputed period, the relevant notifications did not contain such conditions. It was established that the mere fact of one unit being a subsidiary of another does not warrant clubbing clearances, as both units are independently incorporated with no mutual interest or flow of funds.

3. The Tribunal referred to a previous case to determine that the holding company, not the subsidiary, should be held liable for exceeding the SSI exemption ceiling limit. It was argued that even if there was mutual interest between the appellant and the holding company, the holding company should be considered the manufacturer, as confirmed by the Additional Commissioner.

4. Considering the above arguments and following the precedent set in the Nutrine Sweets Pvt. Ltd. case, the Tribunal set aside the impugned order and allowed the appeal without delving into the limitation argument, thereby ruling in favor of the appellants.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision on each aspect of the case.