1997 (5) TMI 182 - AT - Central Excise

Summary

Issues:
1. Whether the clearances of two separate units can be clubbed together for determining the value of clearances under the Central Excise Rules.
2. Whether the new unit was a shadow unit of the old unit, justifying the imposition of penalty.

Analysis:
1. The case involved M/s. Rock Drill (India) and Rock Drill (India) Pvt. Ltd. The Revenue alleged that the clearances of both units should be combined for valuation. The Additional Collector held that the units were separate legal entities and their clearances could not be clubbed together. He imposed a penalty on the parent unit for contravention of the Central Excise Rules. The Revenue appealed this decision.

2. The Revenue argued that Rock Drill (India) Pvt. Ltd. was a shadow unit of the old unit based on common directors and financial aspects. However, the Bench noted that these allegations were not raised in the show cause notice. The Additional Collector found no evidence to support the claim of unity between the units. He observed that the mere sharing of electricity did not establish unity. The Revenue failed to provide sufficient evidence of financial interflow or administrative control between the units.

3. The judgment emphasized the necessity of substantial evidence to prove unity between two units. The department must demonstrate free financial interflow and total administrative control for such claims. In this case, the Additional Collector correctly concluded that the units were independent based on the lack of evidence. The Tribunal upheld the order, dismissing the Revenue's appeal.

This judgment clarifies the criteria for determining the unity of separate units under the Central Excise Rules and highlights the importance of substantial evidence in such cases.