2005 (9) TMI 16 - AT - Central Excise

SSI Exemption- A Limited company can t clubbed his clearnces with an independent partnership firm- Clubbing of clearance is set aside and exemption allowed.

Summary

Issues:
- Clubbing of clearances for duty demand
- Denial of SSI exemption benefit
- Imposition of personal penalties
- Independence of M/s. JEE from M/s. JTPL
- Allegations of fraudulent exemption availing
- Bar of limitation for demand

Analysis:

Clubbing of Clearances for Duty Demand:
The appeals arose from an impugned order confirming a duty demand of Rs. 3,31,421 by clubbing the clearances of two entities, M/s. Jifcon Engineering Enterprises (M/s. JEE) and M/s. Jifcon Tools Pvt. Ltd. (M/s. JTPL). The Commissioner upheld the duty demand and imposed personal penalties on the manufacturing units and individual appellants. The issue centered around whether the clearances of both entities should be clubbed for duty computation.

Denial of SSI Exemption Benefit:
The Commissioner denied the benefit of Small Scale Industries (SSI) exemption notification to the entities, alleging that M/s. JEE was created solely to avail the exemption benefit. The contention was that due to financial inter-connections and related directors between M/s. JTPL and M/s. JEE, their clearances needed to be clubbed for SSI Notification compliance.

Imposition of Personal Penalties:
Personal penalties of Rs. 1 lakh each were imposed on the manufacturing units, and Rs. 25,000 each on individual appellants. The issue revolved around whether the penalties were justified based on the alleged clubbing of clearances and denial of SSI exemption.

Independence of M/s. JEE from M/s. JTPL:
The appellants argued that M/s. JEE and M/s. JTPL were independent entities with separate infrastructure and finances. They presented various documents and evidence to establish the independence of M/s. JEE, including separate registrations, licenses, financial arrangements, and operational aspects. The core issue was whether M/s. JEE could be considered a dummy of M/s. JTPL.

Allegations of Fraudulent Exemption Availing:
The Commissioner contended that M/s. JEE was a front to fraudulently avail the SSI exemption, citing instances of raw material transfers, common business relations, and non-charging of interest. The question was whether the operations of M/s. JEE were genuine or a scheme to exploit the exemption provision.

Bar of Limitation for Demand:
The appellants argued that the demand was time-barred as the classification lists were duly approved, and there was no suppression of facts to warrant an extended limitation period. The issue centered on whether the demand was within the statutory limitation period for recovery.

In the final judgment, the Tribunal held in favor of the appellants, ruling that M/s. JEE was an independent unit entitled to the SSI benefit. The clubbing of clearances was deemed unjustified, and the demand was considered barred by limitation. The impugned order confirming the duty demand and penalties was set aside, emphasizing the separate entity status of M/s. JEE and the compliance with exemption criteria.