2016 (3) TMI 898 - AT - Central Excise

SSI Exemption - Clubbing of clearance value of the proprietaryship firm with the private limited company - imposition of penalty on dummy units - Held that - On perusal of the list of machineries, we find that these machineries were purchased during the period 1990 to 2001. The learned Advocate fairly submits that these lists were not placed before the Adjudicating authority. It is submitted that these lists were submitted before the Commissioner (Appeals). On a query from the Bench, the learned Advocate failed to place any evidence that these documents were placed before the Commissioner (Appeals). We find that the search was conducted in 2005 and the impugned order was passed in 2008. But the Appellant had not placed these documents before the lower authorities which are related to the period 1990 to 2001. The Assessee has not given any reasons as to why they have failed to disclose these evidences before the lower authorities and therefore, such evidence cannot be accepted before the Tribunal, at a belated stage. To sum up, it is evident from the records that there was no manufacturing activity in other units. Hence, the Adjudicating authority rightly clubbed the clearance value of other units with M/s BEW. Imposition of penalty on the dummy units cannot be sustained. According to the Revenue, the other units are dummy and therefore, imposition of penalties on the dummy units cannot be sustained. However, we find force that Shri Babubhai Mistry, Director of M/s CEPL and Proprietor of M/s BEW and Smt. Jasuben B. Mistry, Proprietress of the Assessee and Director of CEPL were involved directly in this evasion of duty. The learned Advocate submits that the quantum of penalty is excessive, which is required to be considered. We modify the impugned order to the extent that the demand of duty alongwith interest and penalty imposed on the Assessee is upheld. The penalties imposed on Shri Babubhai Mistry and Smt. Jasuben Mistry are reduced to ₹ 1 lakh (Rupees One Lakh only) and ₹ 50,000.00 (Rupees Fifty Thousands only) respectively. The penalty imposed on M/s CEPL and M/s Hitech, M/s BEW are set aside. The Assessee is entitled to pay penalty 25% of the duty alongwith entire amount of duty and interest within 30 days of communication of this order as provided under Section 11AC of Central Excise Act, 1944. The appeals of M/s Hitech, M/s BEW and M/s CEPL are allowed.

Summary

Issues involved:
Clubbing of clearance value of multiple units for duty demand, imposition of penalties on different entities, evidence of financial flowback between units, manufacturing activity in different units, validity of Panchnama, relevance of list of machineries, imposition of penalties on dummy units, involvement of individuals in duty evasion, excessive quantum of penalty.

Clubbing of clearance value for duty demand:
The case involved the clubbing of clearance value of multiple units for duty demand. The Appellant argued that clubbing the clearance value of a proprietary firm with a private limited company is impermissible under the law. The Appellant provided evidence of separate registrations, turnovers, and invoices for each unit. However, the Revenue contended that all units shared common facilities and financial transactions indicated interdependence. The Tribunal found that there was no manufacturing activity in the other units and upheld the duty demand based on the corroborating evidence from the Panchnama and lack of machinery in certain units.

Imposition of penalties on different entities:
Penalties were imposed on various entities involved in the case, including the Assessee, directors, and the different units. The Appellant argued that penalties on dummy units were not justified, emphasizing the independent existence of each unit. However, the Tribunal noted the direct involvement of certain individuals in the duty evasion and reduced the penalties imposed on them while setting aside penalties on the dummy units. The Tribunal upheld the penalties on the Assessee and reduced the penalties on the involved directors.

Evidence of financial flowback between units and manufacturing activity:
The case revolved around the evidence of financial flowback between the units and the presence of manufacturing activity in different units. The Revenue pointed out transactions without proper documentation and shared facilities among units. The Tribunal found that there was no evidence of manufacturing activity in certain units and that financial transactions indicated a lack of independence, leading to the decision to uphold the duty demand and penalties on specific individuals.

Validity of Panchnama and relevance of list of machineries:
The validity of the Panchnama and the relevance of the list of machineries were also significant aspects of the case. The Appellant raised concerns about the preparation of the Panchnama and submitted lists of machineries purchased during specific periods. However, the Tribunal noted that these documents were not presented before the lower authorities in a timely manner and could not be accepted at a belated stage. The Tribunal considered the lack of manufacturing activity in certain units based on the available evidence.

Imposition of penalties on dummy units and involvement of individuals in duty evasion:
The Appellant contested the imposition of penalties on dummy units, arguing for their independent existence. However, the Tribunal acknowledged the direct involvement of certain individuals in the duty evasion scheme and reduced penalties on them while setting aside penalties on the dummy units. The Tribunal upheld penalties on the Assessee and adjusted penalties on the involved directors based on their roles in the evasion.

Excessive quantum of penalty:
The Appellant raised concerns about the excessive quantum of penalty imposed. The Tribunal agreed that penalties on dummy units could not be sustained but noted the direct involvement of specific individuals in the evasion. The Tribunal reduced penalties on these individuals while upholding penalties on the Assessee and adjusting penalties based on the level of involvement. The decision aimed to balance the penalty amounts with the extent of individual responsibility.

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