1996 (2) TMI 213 - AT - Central Excise

Summary

Issues Involved:
1. Clubbing of clearances of two partnership firms.
2. Eligibility for exemption under Notification No. 175/86.
3. Allegation of contravention of Central Excise Rules and intent to evade duty.
4. Imposition of penalty.

Summary:

1. Clubbing of Clearances:
The appeals challenge the order of the Collector, Central Excise, which clubbed the clearances of M/s. Rang Udyog and M/s. Indodyes Chemical Industries, treating them as a single manufacturer. The Collector's order was based on the observation that both units had common partners, shared machinery, premises, and workers, and were managed by the same individuals. The appellants argued that both units were separate legal entities with distinct registrations under various laws and maintained separate records and accounts. The Tribunal referred to several precedents, including the Supreme Court's ruling in Asstt. Collector v. M/s. Jayantilal Balubhai, which held that production by separate partnership firms cannot be clubbed merely due to common partners.

2. Eligibility for Exemption:
The appellants contended that both units were eligible for separate exemption limits under Notification No. 175/86 as amended, as they were registered as SSI units and their individual clearances did not exceed the prescribed limit. The Tribunal agreed, noting that there was no evidence of common funding or financial flow-back between the two firms, and each unit operated independently.

3. Allegation of Contravention and Intent to Evade Duty:
The Collector had alleged that the appellants contravened Rules 223, 226 read with Rule 173G(4) and Section 11A by not properly storing excisable goods and suppressing facts to evade duty. The Tribunal found no evidence to support these allegations, as the appellants had maintained separate records and there was no proof of common direction and control or financial interdependence.

4. Imposition of Penalty:
The Collector imposed a penalty of Rs. 5 lakhs on each unit. However, the Tribunal held that since the clearances of the two firms could not be clubbed and each was eligible for exemption, the intention to evade duty was not established. Consequently, the penalties were deemed unjustifiable.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals, and held that the clearances of M/s. Rang Udyog and M/s. Indodyes Chemical Industries could not be clubbed. Each firm was entitled to separate exemption under Notification No. 175/86, and no penalties were warranted.