2013 (9) TMI 213 - AT - Central Excise

SSI Exemption - Clubbing of two units for the Central Excise taxation purpose - two units owned by Husband and wife respectively - M/s R.R. Iron Foundry and M/s Sharad Industries had common office During the search of M/s R.R. Foundry, Agra certain doors interconnected with an adjacent unit working in the name and style of M/s Sharad Industries, Agra Held that - It is not the Revenue s case that two unit owned by Smt Kamlesh Gupta and her husband Shri Avdesh Kumar Gupta not complete units having all the necessary machines and infrastructure for manufacture of their final product. Both the units have separate Sale Tax Registration, Industries Registration, Income Tax Registration, Electricity Connection, Telephone Connection & ESI Registration etc. Merely because there is a door between the two units and power of attorney stand given to her husband to look after the job of her unit, by itself cannot be held to be a ground for holding both the units as one - Husband and wife are entitled do their own business and if the husband is looking after the business of the wife that will not make the unit owned by the wife as a dummy unit. The prime requirement, for clubbing the clearance of two units is not having complete independent machinery and infrastructure to manufacture the goods. If both the units are complete by itself, capable of manufacturing the goods without any help from the other unit, it has to be held that both the units are independent units - Financial flow back an financial intertwining between the two units is the main reason for reflecting upon the fact of their being independent or not There are various decisions which upholds the abovementioned legal position s.a. the case of M/s. Renu Tandon Vs. Union of India, 1992 (1) TMI 126 - HIGH COURT OF JUDICATURE FOR RAJASTHAN ; M/s. Electro Mechanical Engg. Corporation Vs. CCE, Jaipur 2003M/s. Electro Mechanical Engg. Corporation Vs. CCE, Jaipur 2002(5)TMI 186 CEGAT, NEW DELHI etc. Appeal rejected Decided against the Revenue.

Summary

Issues:
Clubbing of clearances of two units for duty payment based on common ownership and financial flow back.

Analysis:
The case involved the appeal by the revenue against the order passed by the Commissioner (Appeals) regarding the clubbing of clearances of two units, M/s R.R. Iron Foundry and M/s Sharad Industries, for duty payment. The Central Excise Officers observed commonalities between the units, such as shared office, records, and labor, leading to the conclusion that the clearances of both units should be clubbed together. Show Cause Notices were issued, and the Joint Commissioner confirmed the demand and penalty. The Commissioner (Appeals) allowed the appeal of the respondents, emphasizing the separate registrations, lack of financial flow back, and the usage of the brand name by both units as per an agreement. The Commissioner held that without evidence of financial flow back, the allegations of clubbing based on common features were not sustainable. The absence of identification of a dummy unit and lack of specific findings by the Adjudicating Authority were also noted.

The revenue reiterated arguments regarding common ownership based on financial control, shared office, and power of attorney. However, the Appellate Tribunal found that both units were complete entities with separate registrations and infrastructure for manufacturing. The presence of a door between the units and the husband looking after the wife's business were not sufficient grounds for clubbing the clearances. Precedent decisions highlighted the importance of financial flow back and intertwining between units to determine independence. The Tribunal upheld the Commissioner (Appeals) decision, emphasizing the lack of financial flow back and the independence of the units despite common features.

In conclusion, the Tribunal rejected the revenue's appeal, upholding the Commissioner (Appeals) decision regarding the clubbing of clearances of the two units for duty payment. The judgment highlighted the significance of financial flow back and independence of units in determining common ownership for duty payment purposes. The case underscored the need for concrete evidence and specific findings to support allegations of clubbing clearances based on common features.