1997 (9) TMI 220 - AT - Central Excise

Summary

Issues Involved:
1. Clubbing of clearances of multiple units.
2. Suppression of facts and evasion of duty.
3. Applicability of the larger period of limitation under Section 11A(1) of the Central Excise Act, 1944.
4. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Clubbing of Clearances of Multiple Units:
The core issue was whether the clearances made by three firms, namely PTR, PEC, and PEN, should be clubbed together for the purpose of calculating the exemption limit under various SSI exemption notifications. The Tribunal examined the relationship between the three firms, noting that they were constituted by the same two male partners and their wives in different combinations. The firms shared common premises, workers, and brand names, indicating that they were not operating independently. It was found that the firms were deliberately set up to distribute clearances in such a manner that each firm's clearances remained below the exemption limit of Rs. 6 lakhs, thereby avoiding licensing control and excise duty. The Tribunal upheld the adjudicating authority's decision to club the clearances, concluding that the three firms were essentially functioning as a single manufacturer.

2. Suppression of Facts and Evasion of Duty:
The Tribunal noted that the appellant had engaged in a deliberate plan to fragment the principal unit (PTR) and divert production to two dummy units (PEC and PEN) to evade central excise duty. The evidence showed that the firms had common financial and administrative arrangements, and the motors cleared in the name of PEC were partly manufactured in PTR's premises. The Tribunal found that the appellant had willfully suppressed material facts and provided false declarations to evade duty. The Tribunal dismissed the appellant's argument that the firms were separate legal entities with different registrations, emphasizing that these formalities were a facade to hide the reality of a single manufacturing entity.

3. Applicability of the Larger Period of Limitation under Section 11A(1) of the Central Excise Act, 1944:
The appellant contended that the show cause notice was barred by time as it was issued more than six months after the period of demand. However, the Tribunal held that the larger period of five years under the proviso to Section 11A(1) was applicable due to the appellant's suppression of material facts and deliberate evasion of duty. The Tribunal found that the appellant's actions justified the invocation of the extended limitation period.

4. Imposition of Penalty:
The Tribunal upheld the imposition of a penalty of Rs. 50,000 on the appellant under Rule 173Q(1) of the Central Excise Rules, 1944. The Tribunal found that the appellant's deliberate plan to evade duty and licensing control warranted the penalty. The quantum of the penalty was deemed reasonable given the circumstances of the case.

Conclusion:
The Tribunal dismissed the appeal, affirming the adjudicating authority's decision to club the clearances of the three firms, confirm the demand for duty, and impose a penalty. The Tribunal found that the appellant had engaged in a deliberate scheme to evade duty by fragmenting the principal unit and creating dummy units, thereby justifying the extended limitation period and the penalty imposed.