2008 (7) TMI 77 - SC - Central Excise

SSI exemption under Notification No.1/93 - respondent-companies submitted that all the three units were in existence and were independent of each other - flow back of money from one unit to another & mutuality of interest not proved by dept. - held that the respondents had disclosed all the material facts, as regards their constitution and functioning and it could not be said that they had suppressed any material facts - clubbing of clearances not justified larger period not invokable

Summary

Issues:
1. Whether the respondent company fraudulently availed SSI exemption by floating front units?
2. Whether the respondent deliberately suppressed facts regarding its relationship with front units?
3. Whether the duty amount demanded by the Revenue is justified?
4. Whether the extended period of limitation under Section 11A(1) of the Central Excise Act can be invoked?
5. Whether the units were working as a single entity?
6. Whether the Tribunal's decision on mutuality of business interest and financial flow back is correct?
7. Whether the extended period of limitation was correctly applied by the Tribunal?
8. Whether there was deliberate suppression of material facts by the respondents?
9. Whether the appeals filed by the Department are justified?

Analysis:
1. The respondent company was found to have floated front units to fraudulently avail the benefit of SSI exemption under a specific notification, resulting in short payment of duty.
2. The Revenue alleged that the respondent deliberately suppressed facts about its relationship with the front units, leading to the issuance of show cause notices demanding duty payment.
3. The Commissioner imposed duty, penalty, and interest on the respondent companies after finding that they were working as a single unit and denying them the SSI exemption benefit.
4. The issue of invoking the extended period of limitation under the Central Excise Act was raised concerning the suppression of material facts by the respondents.
5. The Tribunal held that there was no evidence of mutuality of business interest or financial flow back between the units, overturning the Commissioner's decision.
6. The Tribunal also ruled that the extended period of limitation could not be invoked due to the lack of material facts suppression.
7. The Supreme Court agreed with the Tribunal's findings, stating that there was no deliberate suppression of material facts by the respondents, leading to the dismissal of the appeals filed by the Department.
8. The Court noted that while the period from 1-6-1999 to 31-3-2000 was within the limitation, the issue became academic as the Tribunal's decision on merits was upheld.