1996 (11) TMI 196 - AT - Central Excise

Summary

Issues:
1. Clubbing of clearances for small scale exemption.
2. Allegation of M/s. PUROFIL being a dummy concern.
3. Imposition of penalty on M/s. Ashok Enterprises.

Analysis:
1. The judgment revolves around the clubbing of clearances for small scale exemption. The Collector of Central Excise directed that the clearance values of two concerns, M/s. Ashoka Enterprises and M/s. PUROFIL, shall be clubbed together for allowing the small scale exemption. The impugned order confirmed the demand issued on the concerns under Rule 9(2) of the Central Excise Rules, 1944, and imposed a penalty of Rs. 25,000. The main contention was whether the clearances of the two concerns should be clubbed together as they were separate legal entities. The department argued that the circumstances indicated a connection between the two concerns, justifying the clubbing of clearances.

2. The allegation that M/s. PUROFIL was a dummy concern created to evade duty was a significant issue in the judgment. The department presented circumstantial evidence to support this claim, including the common control by the father and sons, shared premises and machinery, common customer, and involvement of family members in both concerns. The judgment concluded that the evidence overwhelmingly supported the view that M/s. PUROFIL was a sham entity created to circumvent duty obligations. Despite efforts to create a facade of separateness, the court found that the two concerns were essentially part of the same business operation.

3. The judgment also addressed the imposition of a penalty on M/s. Ashok Enterprises. The penalty was upheld based on the findings regarding the clubbing of clearances and the establishment of M/s. PUROFIL as a dummy concern. The court found no reason to interfere with this aspect of the order, indicating that the penalty was justified in the circumstances. Ultimately, the appeals were dismissed, affirming the decision to club the clearances and uphold the penalty on M/s. Ashok Enterprises.