2024 (8) TMI 712 - AT - Central Excise

SSI Exemption - clubbing of clearances - mutuality of interest - flow back of funds between the units - N/N. 8/2003-CE dated 02/03/2003 - HELD THAT - It is found that the Revenue has erred by not issuing any Show Cause Notice to DTS whose turnover is being sought to be clubbed with that of the appellant. This goes against the judicial principles since the other party is not even given notice to make their submissions. The Calcutta High Court in the case of COMMISSIONER OF C. EX., KOLKATA-II VERSUS DIAMOND SCAFFOLDING CO. 2011 (7) TMI 854 - CALCUTTA HIGH COURT has held that ' clubbing of clearance, the Tribunal further came to the conclusion that clearances of two other units were clubbed with the clearance made by the importer without issuing any show cause notice to the other units and there was no notice to the two units for clubbing clearance with the clearance of the importer. In such circumstances, in our opinion, the Tribunal was quite justified in holding that demand by clubbing the clearance of other units without issuing any show cause notice was not sustainable.' It is also found that the Revenue has not brought in any specific evidence towards mutuality of interest and flow back of funds between these units. In respect of the second Show Cause Notice, it is found that the Hon ble Supreme Court in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP 2006 (4) TMI 127 - SUPREME COURT has held that ' When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view taken in the aforesaid judgments and respectfully following the same, hold that there was no suppression of facts on the part of the assessee/appellant.' The impugned order is set aside - appeals allowed on merits as well as on account of limitation.

Summary

Issues:
1. Whether the Appellant is eligible for SSI exemption under Notification No. 8/2003-CE.
2. Whether the demands raised in the Show Cause Notices are time-barred.
3. Whether the turnover of two units can be clubbed together to deny SSI benefit.
4. Whether there is evidence of mutuality of interest and flow back of funds between the units.

Analysis:
1. The Appellant, a manufacturer of PSC Sleepers, claimed SSI exemption under Notification No. 8/2003-CE. Show Cause Notices were issued alleging common directors and staff with another manufacturing unit, seeking Excise Duty for the period 2008-2013. The Commissioner upheld the demands, leading to the Tribunal appeal.

2. The Appellant argued that the units supplied different products to distinct buyers, had separate registrations, and lacked evidence of fund flow. Citing relevant case laws, they contended that turnover clubbing without issuing notice to the other unit was unjust. They also claimed the demands were time-barred, referencing legal precedents.

3. The AR justified the demands based on common staff and directors, indicating mutuality of interest. However, the Tribunal found the lack of a Show Cause Notice to the other unit unjust, citing a Calcutta High Court case. No concrete evidence of mutual interest or fund flow was presented by the Revenue.

4. The Tribunal referenced Supreme Court judgments emphasizing the necessity of evidence for clubbing clearances and mutual interest. They found no suppression of facts by the Appellant, supporting the appeals on merits and limitation. The Appellant was granted relief, with consequential benefits as per law.

In conclusion, the Tribunal allowed the appeals, highlighting the importance of evidence in establishing mutual interest and flow of funds between units for turnover clubbing. The judgment underlined the need for fair procedures, including issuing notices to all concerned parties, and upheld the Appellant's claim for SSI exemption and time-bar limitations.