2016 (11) TMI 1346 - AT - Central Excise

Demand - Clubbing the turnover - Held that - certain relationship could be established between the main appellant and M/s Seating Systems which is also not rebutted by the appellant, to make one of the unit as dummy units without legal status and consider all its turnover on account of main appellant is not legally sustainable - These evidences in no way lead to a conclusion that M/s Seating Systems has no legal existence for the purpose of Central Excise - Appeal allowed - Decided in favor of the assessee.

Summary

Issues:
Appeals against confirmation of Central Excise duty demand and penalties by Commissioner (Appeals), Delhi II.

Analysis:
The judgment pertains to five appeals challenging a common impugned order confirming a Central Excise duty demand of ?17,13,064 against the main appellant, M/s Pandey Furniture Pvt. Ltd., along with penalties imposed by the Original Authority. The main appellant, initially a partnership firm manufacturing furniture, later converted into a private limited company. The case revolves around the legal status of M/s Seating System owned by Shri Raj Kishore, operating from premises formerly used by the main appellant. The Revenue alleged that M/s Seating System was a dummy unit created to evade excise duty. The show cause notice outlined six points supporting this claim, including similarities in products, common buyers, and shared management. However, the Tribunal found the reasons insufficient to establish M/s Seating System as a dummy unit for excise purposes.

Upon examining the relationship between the units, the Tribunal noted that two employees of the main appellant were involved in the operations of M/s Seating System under the direction of Shri K.N. Pandey. The Revenue's contention that M/s Seating System was a sham operation was based on subsequent closure and departure of Shri Raj Kishore. However, the Tribunal observed separate financial records, machinery ownership, and employment practices between the two entities, indicating distinct operations. Despite some shared suppliers and workers, the Tribunal found no conclusive evidence to deem M/s Seating System a mere front for the main appellant.

The Tribunal emphasized that while a connection between the main appellant and M/s Seating System was evident, the evidence presented was insufficient to disregard the legal existence of M/s Seating System for excise purposes. Citing legal precedents, the Tribunal concluded that the evidence provided by the Revenue was inconclusive and did not establish full control or management by the main appellant over M/s Seating System. Consequently, the impugned order confirming the duty demand and penalties was set aside, and the appeals were allowed.