1996 (3) TMI 264 - AT - Central Excise

Summary

Issues Involved:
1. Whether the value of clearance of both units should be clubbed for determining eligibility for exemption u/s Notification No. 71/78 and 80/80.
2. Whether the units are interrelated and functioning as a single entity to avail the benefit of small-scale exemption.

Summary:

Issue 1: Clubbing of Value of Clearance for Exemption Eligibility
The primary question was whether the value of clearances from both units, Ambica and Jai Ambica, should be clubbed to determine eligibility for exemption u/s Notification No. 71/78 and 80/80. The Department argued that both units were interrelated, sharing common office premises, telephone, and machinery, and thus should be considered a single entity for exemption purposes. The Additional Collector, however, found that both units operated independently, with separate purchases of raw materials, no exchange of raw materials, separate registrations, and independent sales under their respective brand names. The Tribunal upheld the Additional Collector's decision, noting the lack of evidence for financial interlinking or dummy operations, and dismissed the revenue's appeal.

Issue 2: Interrelation and Functioning as a Single Entity
The Department contended that Ambica, a partnership firm, and Jai Ambica, a proprietary concern, were interrelated, sharing machinery and labor without financial transactions, suggesting a single operational entity created to stay within exemption limits. The defense argued that mere family relations and shared resources did not constitute a single entity, emphasizing independent operations and financial transactions. The Tribunal found no evidence of financial flow back or dummy operations, noting that shared resources among family-run units did not automatically imply a single entity. The Tribunal concluded that the units operated independently, and the benefit of doubt favored the respondents, leading to the dismissal of the revenue's appeal.

Conclusion:
The Tribunal dismissed the revenue's appeals, upholding the Additional Collector's order that both units operated independently and were entitled to separate exemptions u/s Notification No. 71/78 and 80/80. The lack of evidence for financial interlinking or dummy operations was crucial in the decision.