2015 (12) TMI 932 - AT - Central Excise

SSI Exemption - dummy unit or not - Clubbing of clearances - Held that - Admittedly M/s. Saron Mechanical Works was established in 1994. The same cannot be held a dummy unit of M/s. Jagatjit Agro Industries, which was established in 2001. A unit which was already working for almost six to seven years cannot be held to be a dummy unit, which is yet to be come into existence - it is not the Revenue s case that both the units are not having complete machinery so as to manufacture the goods in question. Merely because a common electricity connection was used by both the units by itself will not make it a dummy of one another. Similarly, a common accountant or a common store room for raw-materials cannot be held to be a reason for clubbing the clearances of both the units established when there is no dispute about both the units being complete in themselves and manufacturing goods independently of each other - Decided against Revenue.

Summary

Issues: Clubbing of clearances of two units for excise duty calculation

Analysis:
The case involved an appeal by the Revenue against an order passed by the Commissioner (Appeals) regarding the clubbing of clearances of two units for excise duty calculation. The units in question were M/s. Saron Mechanical Works and M/s. Jagatjit Agro Industries, both engaged in manufacturing activities. The Revenue contended that since both units were located on the same plot, used a common electric connection, and shared a common storage place for raw materials, their clearances needed to be clubbed for excise duty calculation.

The Commissioner (Appeals) had ruled in favor of the assessees, stating that unless M/s. Saron Mechanical Works was declared as a dummy unit, its clearances could not be clubbed with M/s. Jagatjit Agro Industries. The appellate tribunal, after hearing arguments from both sides, analyzed the facts. It noted that M/s. Saron Mechanical Works was established in 1994, well before M/s. Jagatjit Agro Industries in 2001. The tribunal emphasized that a unit operating for several years could not be considered a dummy unit awaiting establishment.

Furthermore, the tribunal found that both units had complete machinery to independently manufacture goods, and the shared resources like electricity connection and raw material storage did not imply one unit was a dummy of the other. The presence of common facilities like an accountant or store room did not justify clubbing clearances when both units operated independently. Therefore, the tribunal rejected the Revenue's appeals, concluding that the clearances of the two units should not be clubbed for excise duty calculation.