2008 (8) TMI 272 - AT - Central Excise

Clubbing of clearances of both the units to deny SSI exemption - SCN proposed to club the clearances of both the units without identifying as to which is the real unit and which is the dummy unit - There should always be a correct identification of the real unit or the dummy unit. This has not been done. Both the Order-in-Original as well as the Order-in-Appeal had demanded the duty on both the partnership units - there is a fundamental flaw in the show cause notice as well as in the impugned order, which cannot be cured at this stage impugned order set aside

Summary

Issues:
Appeal against Order-in-Appeal No. 129/2002-C.E. dated 8-3-2002 for clubbing clearances of two partnership units for SSI exemption.

Analysis:
The appeals were filed against the Order-in-Appeal No. 129/2002-C.E. dated 8-3-2002, passed by the Commissioner of Central Excise (Appeals), Bangalore. The proceedings were initiated against the appellants on the grounds of suppressing production of goods and clubbing clearances of two partnership units, M/s. Rao Industries and M/s. Rao Trailors, for SSI exemption. The show cause notice proposed to deny SSI exemption by combining the clearances of both units without identifying the real manufacturer and the dummy unit. This lack of identification was a fundamental flaw in the show cause notice and the subsequent orders. The learned Advocate argued that each unit had separate registrations, manufacturing facilities, and tax registrations, questioning the basis for clubbing clearances. The Order-in-Original and Order-in-Appeal confirmed the demand on both units without distinguishing the real and dummy units, contrary to the requirements of Section 11A of the Central Excise Act.

The appellants presented evidence, including separate partnership deeds, registrations, tax assessments, licenses, financial assistance, power connections, building plans, bank accounts, and books of accounts for both units, demonstrating their independent existence. The Department's failure to identify the real and dummy units and confirming the demand on both units was considered a fundamental flaw that could not be legally sustained. The Tribunal found a lack of merit in the impugned order due to the failure to correctly identify the units and the imposition of penalties based on flawed grounds. Therefore, the impugned order was set aside, and the appeals were allowed.

The Tribunal referred to various case laws, such as Gajanan Fabrics Distributors, CCE v. Shiva Exim Enterprises, Malik & Company v. CCE, Highland Dye Works Pvt. Ltd. v. CCE, Hindustan Foam Industry v. CCE, Additional Collector v. Kathiresan Pillai, Jagjivandas & Co. v. CCE, CCE v. Saint Laboratories, Renu Tandon v. UOI, and P. K. Industries v. CCE, emphasizing the principles of recognizing independent existence of units, the distinction between real and dummy units, and the importance of proper identification in demanding duties.

In conclusion, the Tribunal found a fundamental flaw in the clubbing of clearances without identifying the real and dummy units, leading to the setting aside of the impugned order and allowing the appeals. The decision was pronounced in the open court on 13-8-2008.