1994 (3) TMI 203 - AT - Central Excise

Summary

Issues involved:
The judgment deals with the issue of whether the clearances of multiple units can be clubbed based on financial assistance and common management, and whether the units can be considered as dummy units for the purpose of availing tax exemptions.

Clubbing of Clearances:
The case involved determining whether the clearances of five units could be clubbed due to interest-free loans granted by one unit to the others, despite each unit having separate licenses and independent functioning in various aspects. The department alleged that the units were dummies created to evade duty and avail irregular exemptions. The Collector held that all units were related and under the same management, justifying the clubbing of clearances and invoking a larger period for duty determination.

Arguments and Citations:
The appellants argued that mere financial management does not make the units dummy units, citing various judgments that settled the issue. They emphasized the distinction between related persons and dummy units, stating that the units in question were independently functioning entities with no evidence of control or profit sharing. The appellants also relied on rulings regarding the time bar for invoking duty.

Decision and Analysis:
Upon considering the submissions and citations, the Tribunal found that the mere provision of interest-free loans and common management did not warrant treating the units as dummy units. The concept of a dummy unit involves non-existence in reality and manipulation for tax evasion, which was not evident in this case. The Tribunal clarified that related persons under the law are distinct from dummy units created for tax evasion purposes. The judgment highlighted that the absence of money flow back, profit sharing, and total control by the main unit negated the claim of clubbing clearances. Consequently, the impugned order was set aside, and the appeals were allowed in favor of the appellants.