2006 (7) TMI 35 - AT - Central Excise

Central Excise SSI Exemption In the absence of evidence of common funding or financial flow back Clearance not to be clubbed in spite of commonalities regarding management labour electric connection etc moreover other unit is held by Commissioner (Appeal) as not a dummy unit which is not challenged

Summary

Issues:
1. Clubbing of clearances of goods by two units.
2. Applicability of SSI notification.
3. Common funding and financial flowback between units.
4. Registration of units with the Department.
5. Allegation of one unit being a dummy unit of another.

Analysis:

1. The original authority confirmed a duty demand against the respondents for the period 1995-96 and 1996-97 by clubbing the clearances of goods by two units, alleging one unit was created as a dummy for the other. Penalties were imposed on both units. The Commissioner (Appeals) at Trichy allowed the appeal of the respondents, leading to the Department's present appeal.

2. The Commissioner (Appeals) at Madurai, in a separate order, found that one unit was not a dummy of the other, leading to the dropping of penalties. The absence of common funding and financial flowback was emphasized, citing a Rajasthan High Court judgment.

3. The respondents argued that without evidence of common funding and financial flowback, clubbing clearances was unwarranted. The High Court precedent was cited to support this argument, emphasizing the lack of such allegations in the show-cause notice.

4. The Tribunal observed that the absence of common funding or financial flowback in the show-cause notice rendered clubbing of clearances impermissible. The distinction between the present case and the High Court case was deemed irrational, as registration with the Department was not a relevant factor for SSI benefits.

5. The Tribunal noted the Commissioner (Appeals) at Madurai's finding that one unit was not a dummy of the other, which was not challenged by the Department. This finding influenced the decision to sustain the impugned order, dismissing the appeal.

In conclusion, the Tribunal upheld the decision, emphasizing the lack of evidence of common funding and financial flowback as crucial factors in determining the clubbing of clearances between the two units. The judgment highlighted the importance of specific allegations in show-cause notices and the relevance of registration status for SSI benefits.