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2016 (11) TMI 868 - AT - Central ExciseSSI exemption - clubbing of clearances - holding-subsidiary relationship - suppression of facts - Held that - the value of manufacturing and clearances of exempted goods from any unit has to be excluded, when the clearances of both the units are clubbed to determine the eligibility of SSI benefit to the appellants - we are in agreement with this plea of the appellants that there has not been any suppression of material facts by the appellants, when the two appellants viz., PJM and MBC are under the jurisdiction of one Commissionerate of Central Excise, who have granted separate central excise registration to them and from time to time, there has been correspondence between these two appellants and the department. Therefore, based on the facts as well as the ratios laid down by the Hon ble Supreme Court in the case of CC, Mumbai vs. MMK Jewellers 2008 (3) TMI 5 - SUPREME COURT , the demands issued for the period beyond one year are not sustainable and are, therefore, hereby set aside. In other words, the liability of Central Excise Duty has to be decided for the period of one year preceding the date(s) of the show-cause notice issued to the appellants. The matter requires quantification of liability of duty of Central Excise, if any, and for imposition of penalties, if any, in respect of the impugned periods - April 1997 to March 2003, for which respective show-cause notices were issued to the appellants. This will require detailed verification of figures and documents at the field level. Therefore, the matter for re-quantification of the liability of the appellants and imposition of penalties is being remanded to the original adjudicating authority, Commissioner of Central Excise, Bangalore, who shall decide the matter based on our findings, within four months of receipt of this Order after giving necessary opportunity for personal hearing and for production of documents to the appellants - appeal allowed by way of remand.
Issues Involved:
1. Clubbing of excisable goods manufactured by the holding company and the subsidiary company. 2. Suppression of material facts by both the aforesaid companies. Issue-wise Detailed Analysis: 1. Clubbing of Excisable Goods: The Tribunal was tasked with determining whether the excisable goods manufactured by the holding company (PJM) and the subsidiary company (MBC) should be clubbed together. The Tribunal analyzed the following points: - Separate Entities: PJM and MBC are separate legal entities with separate factory premises, machinery, and workforce. Both companies have separate central excise registration, sales tax registration, income tax registration, and SSI registration. - Contradiction in Findings: The Department's contradictory stance was noted, where MBC was termed as a dummy unit of PJM, yet duty was demanded from both units, indicating they were recognized as separate entities. Case laws such as Gajanan Fabrics Distributors Vs CCE and CCE, Chandigarh Vs. Shiva Exim Enterprises were cited to support the argument that duty should only be demanded from the principal unit. - Financial and Management Control: The Tribunal found that PJM had financial and management control over MBC, evidenced by common authorized signatories, shared administrative offices, and funding. The Tribunal referred to the Supreme Court's decision in Commissioner v. Modi Alkalies and Chemicals Ltd., which emphasized that pervasive financial and management control are indicators of interdependence. - Corporate Veil: The Tribunal pierced the corporate veil, concluding that despite being separate entities under company law, PJM and MBC acted as one manufacturer for the purpose of central excise duty. This conclusion was supported by the Ministry of Finance, CBEC Circular No.6/1992 and case laws such as British Scaffolding India Pvt. Ltd. vs. CCE, Delhi. - Exempted Goods: It was noted that the value of clearances of exempted goods should be excluded when clubbing the clearances of both units to determine eligibility for SSI exemption. 2. Suppression of Material Facts: The Tribunal examined whether there was suppression of material facts by PJM and MBC, which would justify invoking the extended period of limitation for demanding central excise duty. - Disclosure to Department: The Tribunal found that both companies had disclosed relevant information to the Department, including commencement of manufacturing activity, applications for central excise registration, and price declarations. There was continuous correspondence between the companies and the Department. - Extended Period of Limitation: Based on the facts and case laws such as CC, Mumbai vs. MMK Jewellers and CCE, Mangalore vs. Pals Microsystems, the Tribunal concluded that there was no suppression of material facts. Consequently, the extended period of limitation could not be invoked, and demands for periods beyond one year were not sustainable. Conclusion: The Tribunal concluded that: 1. There was a case for clubbing the excisable goods manufactured by PJM and MBC. 2. There was no suppression of material facts by PJM and MBC. The matter was remanded to the original adjudicating authority, Commissioner of Central Excise, Bangalore, for re-quantification of the duty liability and imposition of penalties, if any, based on the Tribunal's findings. The adjudicating authority was directed to complete this process within four months of receiving the order, after giving the appellants an opportunity for a personal hearing and production of documents.
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