2015 (12) TMI 738 - HC - Central Excise

Duty demand - Clandestine removal of goods - Clubbing of clearances - Held that - Tribunal failed to appreciate that the proprietors of both the units had not retracted from their statements as well as of their Accountant and Store Incharge made before the search team. Both the respondents had stored the raw material without maintaining any separate record regarding their respective manufacturing of boring machines by using raw material and machinery with the help of both the units as and when required. Even both the respondents were having common electricity connection, telephone, computer, office accountant. They were dependent on each other as they were issuing the sale bills as per their requirement. They had fragmented their sales in order to avail the benefit of SSI exemption fraudulently. The adjudicating authority had rightly clubbed the clearances of both the respondents removed by them in a clandestine manner. The Commissioner (Appeals) and the Tribunal ought to have relied upon the statements of the proprietors which were not under inducement or threat. - The fact of clandestine removal of goods had not been proved. Mere quoting the statements of the proprietors and some of their employees was not enough. The value of clandestinely removed goods had not been adjudged. - view adopted by the Commissioner (Appeals) and the Tribunal is a plausible view based on appreciation of material on record and, therefore, does not warrant any interference by this Court - Decided against Revenue.

Issues Involved:

1. Whether the Tribunal erred in not appreciating the statements of the proprietor and employees of M/s Jagatjit Agro Industries admitting clandestine removal of goods.
2. Whether the Tribunal erred in not clubbing the clearances of M/s Jagatjit Agro Industries and M/s Saron Mechanical Works and ordering recovery of central excise duty.

Detailed Analysis:

Issue 1: Statements of Proprietor and Employees

The revenue contended that the Tribunal failed to appreciate the statements made by the proprietor, accountant, and store in-charge of M/s Jagatjit Agro Industries, which admitted to the clandestine removal of goods. These statements were not retracted during the proceedings. The revenue argued that these admissions should have been sufficient to establish the clandestine removal of goods and justify the demand for central excise duty.

However, the Commissioner (Appeals) and the Tribunal found that mere statements without corroborative evidence were insufficient to prove clandestine removal. The Commissioner (Appeals) noted that the statements alone did not establish the actual manufacture and removal of goods. The Tribunal upheld this finding, emphasizing that the statements were not supported by any physical evidence of clandestine activity, such as unaccounted raw materials or finished goods.

Issue 2: Clubbing of Clearances

The revenue argued that the clearances of M/s Jagatjit Agro Industries and M/s Saron Mechanical Works should be clubbed as they were essentially operating as one entity to fraudulently avail the SSI exemption. The revenue pointed out that both units shared common facilities such as electricity, telephone, computer, and office accountant, and were issuing sale bills as per their requirement, indicating interdependence.

The Commissioner (Appeals) reversed the adjudicating authority's decision to club the clearances, stating that M/s Saron Mechanical Works was not declared a dummy unit. The Commissioner (Appeals) highlighted that the investigation did not prove that the two units were operating as a single entity. The Tribunal agreed, noting that M/s Saron Mechanical Works had been established in 1994, long before M/s Jagatjit Agro Industries started in 2001. The Tribunal found that both units were independently complete with their machinery and operations, and common facilities alone did not justify clubbing their clearances.

Findings by Commissioner (Appeals):

The Commissioner (Appeals) found that the evidence on record did not support the allegations of clandestine removal. The slips and loose documents recovered during the search lacked proper attribution and dates, making it difficult to establish a clear link to clandestine activities. The Commissioner (Appeals) also noted that the statements of key individuals, such as Pala Ram, who allegedly issued the slips, were not recorded, weakening the revenue's case. The Commissioner (Appeals) concluded that without declaring M/s Saron Mechanical Works as a dummy unit, their clearances could not be clubbed with those of M/s Jagatjit Agro Industries.

Findings by Tribunal:

The Tribunal upheld the Commissioner (Appeals)'s decision, emphasizing that M/s Saron Mechanical Works could not be considered a dummy unit of M/s Jagatjit Agro Industries, given its earlier establishment. The Tribunal found no evidence to suggest that the two units were not independently capable of manufacturing goods. The Tribunal concluded that common facilities did not warrant the clubbing of clearances, especially when both units were independently operational.

Conclusion:

The High Court found that the findings of the Commissioner (Appeals) and the Tribunal were based on a plausible view of the evidence and were not illegal or perverse. The Court noted that the judgments relied upon by the revenue were based on different fact situations and did not apply to the present case. Consequently, the appeals were dismissed, and no substantial question of law was found to arise.

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