2009 (6) TMI 499 - AT - Central Excise

Evasion of duty- demand confirmed on the ground that units floated and controlled by two persons and materials and capital goods exchanged and cash seized. All six units were independent units having own manufacturing facility. Sale tax and CST and SSI registration available with units separately. Units considered dummy without considering case laws. Evidence not strong to conclude manufacture and clearance were on behalf of another person. Clearance of existing unit clubbed and duty confirmed on non existing unit. Law cannot prevent unit or group working for common benefit. Unit may be common in present case but evidence not produced to show SP Group as a legal entity. Mere controlling of operation of six units by few person not make group as a legal entity. Mere controlling of operations of six units by few persons not make group as SP group duty not demandable from such non-existent entity. Show cause notice served to all six units and duty not demanded from them independently. Demand on SP Group jointly. Annexures showing year wise clearance by all independent units. Demand ought to have been confirmed against each independent unit based on figure in SCN. Held that- SP Group being non existent, demand confirmed on it not sustainable. Benefit of Notification No. 5/98-C.E. to be given to individual assessee and duty demand to be re determined. Matter remanded to adjudicating authority for confirmation of demand to be re-determined. Matter remanded to adjudicating authority for confirmation of demand against individual units. SSI exemption alleged as wrongly availed by fragmentation of units and goods clandestinely removed without payment of duty. Held that- as the Tribunal not able to give decision on clandestine removal as finding thereon absent in impugned order. Matter remanded to adjudicating authority to reconsider issue and pass fresh order.

Issues Involved:
1. Legitimacy of the show cause notice issued to a non-existent entity 'SP Group'.
2. Clubbing of clearances of various units to deny the benefit of Notification No. 5/98 dated 2-6-1998.
3. Allegation and determination of clandestine removal of goods.
4. Denial of Cenvat credit on capital goods not installed in the premises of M/s. SGPI.
5. Confiscation of currency and other materials.

Detailed Analysis:

1. Legitimacy of the Show Cause Notice Issued to 'SP Group':
The Tribunal found that the show cause notice issued to the 'SP Group' was incorrect as 'SP Group' was a non-existent entity. The show cause notice and subsequent order should have been directed to individual units. The Tribunal emphasized that "no law can prevent the units of a group working for the common benefit of the group," and the group itself is not a legal entity. Thus, the provisions of Section 11A cannot be invoked against a non-existent entity and must be invoked against an existing person, i.e., the individual units.

2. Clubbing of Clearances of Various Units:
The Tribunal held that the clubbing of clearances of all the appellants was incorrect. It was undisputed that all six units were independent with their own manufacturing facilities, land lease deeds, sales tax registrations, and SSI registrations. The Tribunal relied on the decision in CCE, Mangalore v. Sushil Chemicals - 2008 (230) E.L.T. 117 (Tri.-Bang.) which emphasized that mutual interest among units does not justify clubbing clearances unless there is a principal unit and others are dummies. The Tribunal concluded that the lower authorities erred in confirming the demand against the non-existent 'SP Group'.

3. Allegation and Determination of Clandestine Removal of Goods:
The Tribunal found that the Adjudicating Authority did not consider detailed submissions on clandestine removals made by the appellants. The charge of clandestine removal was based on statements, sales under coded invoices, and other alleged corroborative evidence. Since there were no specific findings on clandestine removal, the Tribunal was unable to come to any conclusion on this issue and remanded the matter for reconsideration.

4. Denial of Cenvat Credit on Capital Goods:
The Tribunal observed that the denial of Cenvat credit on the ground that the capital goods were not installed in the premises of M/s. SGPI was incorrect. The appellants provided evidence that the premises where the machines were installed belonged to M/s. SGPI, obtained on lease from M/s. SKPI. The Tribunal directed the Adjudicating Authority to reconsider the evidence and submissions regarding the capital goods.

5. Confiscation of Currency and Other Materials:
The Tribunal found that the confiscation of cash and other materials was not justified as the Adjudicating Authority did not record findings on submissions made by the appellants. The Tribunal directed the Adjudicating Authority to reconsider the evidence and submissions regarding the seized cash and other materials.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the Adjudicating Authority to reconsider the issues of clandestine removal, confirmation of demand against individual units, the benefit of exemption Notification No. 5/98, and the confiscation of currency and capital goods, following the principles of natural justice. All appeals were allowed by way of remand.

← Previous Next →