2017 (3) TMI 58 - AT - Central Excise

SSI exemption - clubbing of clearances - creation of dummy entity - Held that - the actual business entity is M/s Coach Classic and its proprietor has formed a dummy company in the name and style of M/s Shearling Skins Pvt. Ltd. by showing its manufacturing unit just to have SSI Exemption. In the premises of this Company, no manufacturing activity was undertaken - Hence, the clearances are correctly liable to be clubbed for both the business entities as per para (vi) and (vii) of the SSI Exemption N/N. 8/2003-CE dated 01.03.2003. Appeal dismissed - decided against appellant.

Summary

Issues:

1. Clubbing of clearances of multiple business entities for SSI exemption.
2. Existence of a dummy company to evade Central Excise Duty.

Issue 1: Clubbing of clearances for SSI exemption

The case involved an appeal against the denial of SSI exemption to the assessee-Appellants due to the clubbing of clearances of two business entities. The primary contention was that M/s Coach Classic and M/s Shearling Skins Pvt. Ltd. were separate legal entities with distinct registrations and operations. However, it was found that the premises of M/s Shearling Skins Pvt. Ltd. were inadequate for any manufacturing activity, with machines for office furniture found at M/s Coach Classic's premises. Employees confirmed that both businesses were effectively run by the same individual. The Tribunal concluded that M/s Shearling Skins Pvt. Ltd. was a dummy company created to exploit SSI exemption benefits, leading to the correct clubbing of clearances for both entities as per relevant regulations.

Issue 2: Existence of a dummy company for Central Excise Duty evasion

The Tribunal analyzed the setup of M/s Shearling Skins Pvt. Ltd. and found it to be a sham entity used to evade Central Excise Duty. Despite having separate registrations, the lack of genuine manufacturing activity at M/s Shearling Skins Pvt. Ltd.'s premises indicated a deliberate attempt to misuse SSI exemption provisions. The Tribunal determined that the actual business entity was M/s Coach Classic, with the proprietor creating a facade of a separate company to benefit from regulatory exemptions. Consequently, the Tribunal upheld the lower authorities' decision, which granted partial relief to the assessee-Appellants but dismissed their appeal, emphasizing that no further relief was warranted.

In summary, the judgment addressed the issues of clubbing clearances for SSI exemption and the use of a dummy company for Central Excise Duty evasion. It highlighted the importance of genuine business operations and adherence to regulatory requirements to prevent misuse of tax benefits. The decision underscored the Tribunal's commitment to upholding tax compliance and preventing fraudulent practices in commercial activities.