1999 (2) TMI 350 - AT - Central Excise

Summary

Issues Involved:
1. Clubbing of clearances for small scale exemption.
2. Mutuality of interest and financial transactions among units.
3. Disclosure of inter-relationship among units.
4. Eligibility for small scale exemption.
5. Extended period of limitation for duty demand.
6. Imposition of redemption fine and penalty.

Issue-wise Detailed Analysis:

1. Clubbing of Clearances for Small Scale Exemption:
The central issue was whether the clearances of seven units should be clubbed for determining eligibility for small scale exemption under central excise duty notifications. The Collector of Central Excise, Pune, adjudicated that the units were not independently eligible for the exemption as they were part of the same group, leading to a confirmed demand of Rs. 47,60,833.39 and penalties.

2. Mutuality of Interest and Financial Transactions Among Units:
The units admitted to having common Chartered Accountant, Company Secretary, Quality Control Executive, Labour Adviser, and shared financial resources. The units operated as a group for inviting foreign buyers, raising resources, modernizing, and extending market share. The adjudicating authority found that these shared resources and mutual financial transactions indicated a single entity rather than independent units.

3. Disclosure of Inter-relationship Among Units:
The units did not disclose their inter-relationship to the Department, which was crucial for determining eligibility for small scale exemption. The show cause notice alleged that the units suppressed facts with fraudulent intent to evade excise duty. The Tribunal upheld that the units' failure to disclose their relationship justified the invocation of the extended period of limitation.

4. Eligibility for Small Scale Exemption:
The Tribunal examined whether each unit was eligible for small scale exemption individually or collectively. The units were found to be controlled, supervised, and managed by a central figure, with coordinated manufacturing activities and shared financial interests. The Tribunal concluded that the units should be treated as a single manufacturer for exemption purposes, thus requiring the aggregation of clearances.

5. Extended Period of Limitation for Duty Demand:
The Tribunal upheld the invocation of the extended period of limitation, as the units did not disclose necessary facts for determining eligibility for exemption. The non-disclosure was seen as a deliberate act to evade duty, justifying the extended period for duty recovery.

6. Imposition of Redemption Fine and Penalty:
The adjudicating authority imposed a redemption fine of Rs. 12,30,000/- and a penalty of Rs. 12,00,000/-. The Tribunal confirmed the duty demand but reduced the redemption fine to Rs. 5,00,000/- and the penalty to Rs. 5,00,000/-, considering the facts and circumstances.

Conclusion:
The Tribunal confirmed the central excise duty demand of Rs. 47,60,833.39, reduced the redemption fine to Rs. 5,00,000/-, and the penalty to Rs. 5,00,000/-. The appeals were otherwise rejected, affirming that the units were not independently eligible for small scale exemption and had to be treated as a single entity for exemption purposes.