2014 (2) TMI 1094 - AT - Central Excise

SSI Exemption - Clubbing of clearance - two units held by husband and wife separately - Clandestine Removal - Held that - Held that - adjudicating authority has nowhere referred to any mutuality of interest between the units of husband and units owned by wife. He has observed that lack of mutuality of interest or financial flow back can be only one of the important consideration but cannot be made sole basis for arriving at the decision. Merely because the two owners of the units were husband and wife and the profits earned by them came into same household, does not mean that clearances of all the units is required to be clubbed. All the units were separately registered with income tax as also sales tax authorities. Their locations of business were at separate places. In fact one of the unit was located in Delhi itself. There was no financial inter-twining and all the units were working with their own independent financial resources. There is no evidence on record to show that there was any mutuality of interest between the units except for the fact that Shri Pradeep Khanna was sometimes looking after the affairs of the units belonging to his wife which, as already discussed by us, cannot be made the basis for clubbing the clearances of the units owned by husband and wife. - Benefit of SSI exemption allowed - Decided in favor of assessee. Clandestine Removal - Air-Conditioners / Compressors - sale through dealers - accounting entries of the dealers considered - realizations of unaccounted money - Held that - When there are dealers appointed by the manufacturers with appropriate price margins who are engaged in such trading activity, an OEM could not have indulged in parallel sales of such large number of compressors because of the market forces and if they indulge in such activity it would have come to the notice of the manufacturer and the representative of the manufacturer testifies that no such trading had come to their notice. So this claim of trading in compressors is a very weak defence. Contention of the appellant that the case is made on assumptions and surmises is not acceptable. Every case is to be decided based on inference to be drawn by a prudent judge from the evidence available. - In a clandestine activity, it is not possible to unearth every piece of evidence and such standard of proof is not required for proving evasion of tax. - Revenue has proved their case in respect of 606 air-conditioners held to be cleared without payment of duty by the appellant - demand of duty and penalty confirmed - Decided against the assessee.

Issues Involved:
1. Clubbing of clearances for SSI exemption eligibility.
2. Confiscation of goods and imposition of penalties.
3. Alleged clandestine removal and duty evasion.
4. Applicability of extended period for demand.
5. Procedural lapses in issuance of show cause notices.

Detailed Analysis:

1. Clubbing of Clearances for SSI Exemption Eligibility:
The primary issue was whether the clearances of multiple units, owned by Ms. Neera Khanna and her husband, Mr. Pradeep Khanna, should be clubbed to determine eligibility for SSI exemption under Notification No. 175/86. The Revenue argued that the units were interconnected and managed by Mr. Pradeep Khanna, thus justifying the clubbing of clearances. The Commissioner supported this view, noting the involvement of Mr. Pradeep Khanna in procurement and sales for all units, and the familial relationship between the owners.

However, the Tribunal found no substantial evidence of mutuality of interest or financial interdependence between the units, emphasizing that mere assistance by a husband in his wife's business does not justify clubbing. The Tribunal also noted that all units were separately registered and operated independently. Consequently, the demand of Rs. 83,60,821/- and penalties imposed on M/s. Thermotech were set aside.

2. Confiscation of Goods and Imposition of Penalties:
The Tribunal addressed the confiscation of five air conditioners and other goods seized from M/s. Thermotech's premises. The appellants argued that they were not manufacturing air conditioners but were trading or getting them manufactured by job workers. The Tribunal accepted this defense, noting insufficient power installation for manufacturing air conditioners and the lack of concrete evidence from the Revenue to prove otherwise. Consequently, the confiscation orders and penalties were set aside.

3. Alleged Clandestine Removal and Duty Evasion:
For M/s. Flevel International, the Commissioner confirmed a duty demand of Rs. 61,98,465/- for alleged clandestine removal of goods and denied the benefit of Notification No. 75/87. The Tribunal found that the evidence primarily relied on ledger entries and statements, which were insufficient to substantiate the charges of clandestine removal. The Tribunal emphasized the absence of corroborative evidence such as excess raw material procurement, increased power consumption, or statements from employees. Thus, the demand and penalties were largely set aside, except for the duty demand of Rs. 3,16,800/- for 24 air conditioners seized from the residential premises, which was upheld by the majority opinion.

4. Applicability of Extended Period for Demand:
The Tribunal scrutinized the invocation of the extended period for raising demands. It was argued that the issue of illegal availment of Notification No. 175/86 justified the extended period due to the alleged mala fide actions of the appellants. However, the Tribunal found no sufficient grounds to support the extended period, given the lack of clear evidence of deliberate suppression or misstatement by the appellants.

5. Procedural Lapses in Issuance of Show Cause Notices:
The Tribunal highlighted procedural lapses in the issuance of show cause notices. It was noted that no notices were issued to the other units whose clearances were proposed to be clubbed with M/s. Thermotech. This procedural flaw was critical, as it violated the principle of natural justice, leading to the setting aside of the clubbing of clearances and related demands.

Separate Judgments:
The Tribunal delivered separate judgments for the appeals:
- Appeals by M/s. Thermotech and Mr. Pradeep Khanna were allowed in totality.
- Appeal by M/s. Flevel International was partially allowed and partially remanded, with specific findings on duty demands and penalties.

Conclusion:
The Tribunal's judgment comprehensively addressed the issues of clubbing of clearances, confiscation of goods, alleged clandestine removal, applicability of the extended period, and procedural lapses, ultimately providing significant relief to the appellants by setting aside substantial demands and penalties.

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