2016 (7) TMI 892 - AT - Central Excise

Claiming SSI exemption through creating dummy units - clubbing of clearance of different units - Held that - it is clear that the Commissioner has taken into account all the allegations and contentions and arrived at a conclusion that M/s Andhra Poly Pack is an independent unit and their clearances cannot be Clubbed with that of respondent herein. We have to agree that there is no evidence to establish any mutuality of interest between the two units. - No demand - Decided against the revenue.

Summary

Issues:
1. Allegation of creating a dummy unit for illegal availing of SSI exemption.
2. Clubbing of clearances of two units.
3. Allegations of clandestine clearances and common facilities.
4. Evidence of mutuality of interest between the two units.

Issue 1: Allegation of creating a dummy unit for illegal availing of SSI exemption:
The case involved a partnership firm and a proprietary firm, both involved in manufacturing HDPE/PP woven bags/sacks and availing SSI exemption. The Revenue alleged that the proprietary firm was a dummy unit created to illegally avail the SSI exemption when the partnership firm was likely to exceed the SSI limit. The Revenue issued a show cause notice for central excise duty demand, interest, and penalties. The Commissioner dropped the clubbing of clearances but confirmed a demand of ?15,929 on the charge of clandestine clearances by the partnership firm, along with penalties. The Revenue appealed this decision.

Issue 2: Clubbing of clearances of two units:
The Revenue contended that there was sufficient evidence to prove that the proprietary firm was a dummy unit of the partnership firm. They argued that both units had mutual interests, were inter-related, and shared common facilities without any quid pro quo. The Revenue claimed that sales were diverted to the proprietary firm to keep both units within the SSI limit. However, the Commissioner, after analyzing statements, evidence, and legal positions, concluded that there was no evidence to establish any mutuality of interest between the two units. The Commissioner dismissed the appeal, stating that the proprietary firm's clearances cannot be clubbed with that of the partnership firm.

Issue 3: Allegations of clandestine clearances and common facilities:
The Revenue alleged that both units were engaged in clandestine clearances and shared common facilities like office, staff, telephone, computer, weighing scale, and stationary without any charge. They claimed that the computer system of the partnership firm contained accounts of the proprietary firm, protected by passwords. The Revenue argued that the units were managed by the same individual and had inter-related operations. However, the Commissioner found that there was no clear evidence of common control and management over the two units, and the allegations of clandestine clearances were not substantiated.

Issue 4: Evidence of mutuality of interest between the two units:
The Commissioner extensively analyzed the statements, evidence, and legal positions regarding the mutuality of interest between the partnership firm and the proprietary firm. The Commissioner cited legal precedents emphasizing the need for clear evidence of common funding, financial flow-back, and mutual business interests to club clearances of two units together. The Commissioner concluded that there was no evidence of mutual interest between the units, and therefore, upheld the decision to dismiss the appeal.

In conclusion, the appellate tribunal upheld the Commissioner's decision, dismissing the Revenue's appeal. The judgment highlighted the importance of establishing clear evidence of mutual business interests and common funding to club clearances of two units together for central excjson.