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2016 (11) TMI 1227 - AT - Central ExciseSSI exemption - dummy unit - clubbing of clearances - Held that - The case establishes that M/s.KE was a bubble. That was used as a conduit of M/s.SI to divide clearances to claim SSI benefit by both falsely. M/s.KE was neither a distinct entity nor engaged in manufacturing activity nor also cleared any excisable goods. False records of M/s.KE were maintained in the premises of M/s.SI as is revealed from para-2 of the SCN. Only spurious transactions were recorded in the name of M/s.KE in its records. Such records were recovered from the premises of M/s.SI - we are shocked to notice that a concern not manufacturing goods i.e. M/s.KE was given undue advantage by the notice issuing authority granting SSI benefit in Annexure-II to SCN. That establishes that a dummy unit of M/s.SI got the SSI benefit which is not legally tenable to it. That aspect deserves enquiry by Chief Commissioner of Central Excise so that in future undue advantage of public grant is not given by officers. If the authority finds such grant has caused prejudice to Revenue, appropriate measure may be taken. The whole case of M/s.KE was based on the falsehood which was well known to the owners and Power of Attorney holder of both the units. Such act of sabotage to Revenue calls for dismissal of both the appeals - decided against assessee.
Issues:
- Misuse of SSI benefit by two related entities - Fabrication of documents and false records - Confirmation of duty demand and penalties by adjudicating and appellate authorities - Dismissal of appeals by appellate authority - Lack of manufacturing activity in one entity Analysis: The judgment pertains to the misuse of Small Scale Industry (SSI) benefit by two related entities, M/s.KE and M/s.SI, owned by the same family. The investigation revealed that M/s.KE was merely a front for M/s.SI to divide clearances and avail SSI benefits. M/s.KE had no manufacturing operations, with unusable machinery and no raw materials found on its premises. In contrast, M/s.SI had all the necessary equipment for manufacturing switchboards and control panels. The investigation also uncovered fabricated records and invoices in the name of M/s.KE at M/s.SI's premises, indicating a coordinated effort to deceive authorities and claim unwarranted benefits. The adjudicating and appellate authorities confirmed duty demands and penalties against both entities. While M/s.SI had its penalty reduced on appeal, M/s.KE's appeal against penalties was dismissed. The judgment highlights the deliberate fabrication of documents and records by the family owning both entities to falsely portray M/s.KE as a manufacturing unit eligible for SSI benefits. The lack of infrastructure and machinery at M/s.KE, coupled with the absence of manufacturing activity, exposed the deceptive practices employed by the entities to exploit the SSI exemption notification. The Tribunal criticized the authorities for granting SSI benefits to M/s.KE despite its non-existent manufacturing operations, emphasizing the need for thorough investigations to prevent future misuse of public grants. The judgment concluded that M/s.KE served as a conduit for M/s.SI to fraudulently claim SSI benefits, and the deliberate deception perpetrated by the entities warranted the dismissal of their appeals. The ruling underscores the importance of upholding the integrity of tax regulations and penalizing entities engaged in fraudulent practices to safeguard revenue interests.
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