2006 (7) TMI 63 - AT - Central Excise

Demand and Penalty- SSI Exemption- Alleged that clearance of two unit can t clubbed in absence of no common funding and financial flowback - Impugned order setting aside demand and penalty not interfered with

Summary

Issues:
1. Demand of duty invoked under the proviso to Section 11A(1) of the Central Excise Act for the period 1995-96 and 1996-97.
2. Clubbing of clearances of goods by two units.
3. Imposition of penalties under Section 11AC and Rule 173Q.
4. Appeal filed by M/s. National Adhesive & Chemicals allowed by the Commissioner (Appeals), Trichy.
5. Appeal filed by M/s. Ranveer & Co. considered by the Commissioner (Appeals), Madurai.
6. Allegation of M/s. Ranveer & Co. being a dummy unit of M/s. National Adhesive & Chemicals.
7. Finding of common funding and financial flowback between the units.
8. Relevance of registration with the Department for SSI notification benefit.
9. Challenge to the finding regarding M/s. Ranveer & Co. being a dummy unit.

Analysis:
1. The original authority confirmed a demand of duty against the respondents for the period 1995-96 and 1996-97 under the proviso to Section 11A(1) of the Central Excise Act. The demand was based on clubbing the clearances of goods by M/s. Ranveer & Co. with the respondents' clearances, as the former was considered a dummy unit of the latter. Penalties were imposed under Section 11AC and Rule 173Q, along with a penalty on M/s. Ranveer & Co. The Commissioner (Appeals), Trichy allowed the appeal filed by M/s. National Adhesive & Chemicals, leading to the Department's present appeal.

2. The Commissioner (Appeals), Madurai, in a separate appeal by M/s. Ranveer & Co., found that the allegation of it being a dummy unit of M/s. National Adhesive & Chemicals did not hold, as per Order-in-Appeal No. 41/2003. This finding was crucial and not challenged by the Department. The issue of clubbing clearances between the units was central, with the absence of common funding and financial flowback being emphasized by the respondents' counsel.

3. The Tribunal considered the arguments regarding the lack of evidence of common funding and financial flowback between the units. It was highlighted that the absence of such evidence made it impermissible to club clearances, as per a judgment of the Rajasthan High Court. The distinction made by the appellant between the present case and the High Court's case was deemed irrational, especially concerning registration with the Department for SSI notification benefit.

4. The Tribunal noted that the finding from the Commissioner (Appeals), Madurai, regarding M/s. Ranveer & Co. not being a dummy unit was significant in the present case. As this finding was unchallenged, the Tribunal upheld the impugned order, dismissing the appeal. The decision was made after careful consideration of the submissions and relevant legal precedents.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals), Trichy, in favor of the respondents, emphasizing the lack of evidence of common funding and financial flowback between the units as crucial in determining the clubbing of clearances. The finding regarding M/s. Ranveer & Co. not being a dummy unit was pivotal and remained unchallenged, leading to the dismissal of the Department's appeal.