1991 (1) TMI 252 - AT - Central Excise

Summary

Issues Involved:
1. Limitation for demand of duty u/s 11A of Central Excises & Salt Act, 1944.
2. Allegation of suppression of facts by the appellants.
3. Clubbing of clearances for determining eligibility for small scale industries exemption.
4. Imposition of personal penalties on the appellants.

Summary:

Limitation for Demand of Duty:
The appellants argued that the demand for duty was time-barred as the show cause notice was issued beyond the six-month period specified u/s 11A. The Tribunal held that the extended period for demand was not justified because the appellants had informed the authorities about their entitlement to exemption and had submitted classification lists that were approved by the Department. The Tribunal found no evidence of suppression of facts by the appellants.

Allegation of Suppression of Facts:
The Department alleged that the appellants suppressed facts about their inter-relationship with Medley Pharmaceuticals to wrongly avail of the small scale industries exemption. The Tribunal found that the appellants had communicated their status and provided necessary documents to the Department, which had conducted investigations and approved the classification lists. Therefore, the charge of suppression of facts was not sustainable.

Clubbing of Clearances:
The Department contended that the appellants' firms should be treated as a single entity for the purpose of determining eligibility for small scale industries exemption, citing mutual business interests and inter-locking management. The Tribunal observed that the firms were separate legal entities with distinct registrations and no conclusive evidence of financial flow-back among them. The Tribunal referred to precedents which emphasized that common management or pooling of resources alone does not justify clubbing of clearances unless there is evidence of financial control or ownership by a single entity. The Tribunal held that the clearances of the appellants' firms should not be clubbed.

Imposition of Personal Penalties:
The Department imposed penalties on the appellants, Sami Khatib and Sohel Khatib, under Rule 209A without amending the show cause notice to include this rule. The Tribunal found no specific allegations or evidence against these individuals to justify the penalties. Consequently, the personal penalties imposed on the appellants were set aside.

Conclusion:
The Tribunal allowed the appeals, setting aside the demand for duty and penalties imposed on the appellants. The Tribunal held that the extended period for demand was not justified, there was no suppression of facts, and the clearances of the firms should not be clubbed.