2016 (1) TMI 150 - AT - Central Excise

SSI Exemption - Clubbing of clearances - whether or not the turnover of 4 SSI appellants are to be clubbed together with the main appellant for the purpose of arriving at the turnover to extend the benefit of notification 1/93-CE dated 28.02.1993 - Held that - For the subsequent period Revenue authorities have treated the manufacturing units as separate from petitioners and thus accepted that there is a relationship of buyer and seller between the petitioner and the four manufacturing units without any mutuality. It was also observed that the Adjudicating Authority dropped the proceedings vide order dated 18.03.2005 following the Tribunal s order dated 04.08.2004 - confirming the demand of recovery from the SSI units along with the principal (M/s. Kores (India) Ltd.) indicates ambiguity in the demand to the effect that if there is only one manufacturer in terms of notification no. 1/93-CE the duty liability will arise only against such manufacturer not against two units. If the department recognizes more than one manufacturer clubbing up their turnover is not provided for in the notification. Holding that the SSI units have separate legal existence but turnover has to be clubbed for the purpose of notification no. 1/93-CE is not a tenable legal proposition. There is no clarity on this aspect for the impugned order. There is no supporting evidence for common finance and common management and there is no finding by the original authority that the main appellant has floated, financed and incorporated the SSI units. There is no evidence that the main appellant investing money in SSI units. The main appellant and the other SSI units are limited / Pvt. Ltd. companies respectively and are independent entities irrespective of their Directors / shareholders. We find that there is no evidence that Directors of SSI units are related with M/s. Kores (India) Ltd. as per the provision of Central Excise Act or Companies Act. Merely because 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 - independent existence and legal identity of the SSI units have not been disputed. In that position we find the financial and management control as discussed in the impugned order has also not been categorically established. The original order also did not assert under which provision such clubbing is called for either in terms of the notification 1/93-CE or the provision of Central Excise Act or Rules made there under. As such we find that the findings of the original authority cannot be sustained and accordingly we set aside the order - Decided in favour of assessee.

Summary

Issues:
1. Clubbing of turnover of multiple entities for SSI eligibility determination.

Analysis:
The case involved a dispute regarding the clubbing of turnover of multiple entities, specifically 4 SSI units and a main appellant, to determine eligibility for Small Scale Industries (SSI) exemption. The Revenue contended that the staple pins manufactured by the SSI units should be considered as manufactured in the facility of the main appellant, leading to combined turnover for SSI eligibility. The Original Authority confirmed demands against the entities, which were later modified by the Tribunal. The matter was remanded by the High Court for fresh consideration, resulting in the impugned order dated 30.03.2010.

The appellants argued that the entities were separate, independent units, registered with statutory authorities, and engaged in commercial transactions on arm's length basis. They emphasized the legal recognition of each entity and cited case laws supporting their stance. The Revenue, however, asserted administrative and financial control by the main appellant over the SSI units, justifying the turnover clubbing for SSI exemption.

Upon examination, the Tribunal scrutinized the impugned order and the arguments presented. The High Court's directive highlighted the need to consider clubbing in light of relevant circulars. The Tribunal found the Original Authority's reasoning for clubbing turnover lacking legal basis. Despite acknowledging the separate legal existence of the SSI units, the Original Authority ordered turnover clubbing based on administrative and financial control, which was not conclusively proven. The Tribunal emphasized the necessity of clear legal provisions for such clubbing, which were absent in this case.

The Tribunal further referenced various case laws to support its decision. It emphasized the independent identity of the SSI units, lack of evidence for financial interdependence, and absence of legal grounds for turnover clubbing. Notably, the Tribunal highlighted that common management or financial transactions alone do not warrant treating entities as a single unit for SSI eligibility. Ultimately, the Tribunal set aside the Original Authority's order, allowing the appeal due to the lack of substantiated grounds for turnover clubbing.

In conclusion, the judgment focused on the legal recognition of separate entities, the absence of concrete evidence for financial interdependence, and the necessity of clear legal provisions for turnover clubbing in SSI cases. The Tribunal's decision underscored the importance of upholding the independent identity of entities unless legally justified otherwise.