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2017 (8) TMI 1171 - HC - Central ExciseSSI exemption - dummy units - It was found that while the Show Cause Notice ( SCN ) was issued to the Respondent and three of its directors no SCN was issued to the dummy units - Held that - each of the four units have independent existence as private limited companies or partnerships. Two of them were stated to be existing even prior to the incorporation of the Respondent - without issuing the SCN to the other units the clearance of those units could not be combined with that of the Respondent - appeal dismissed - decided in favor of respondent-assessee.
Issues:
- Appeal under Section 35G of the Central Excise Act, 1944 against a final order passed by the Customs, Excise & Service Tax Appellate Tribunal. - Allegations of manufacturing excisable goods using dummy units controlled by the Directors of the Respondent. - Challenge regarding the addition of turnover of dummy units for 'Small Scale Industry' exemption. - Reliance on decisions of Calcutta High Court and Gujarat High Court by the Customs, Excise & Service Tax Appellate Tribunal. - Reference to a decision of the Delhi High Court in a similar case. - Distinction drawn between the present case and a previous case based on the issuance of Show Cause Notices. Analysis: 1. The appeal before the Delhi High Court stemmed from a final order passed by the Customs, Excise & Service Tax Appellate Tribunal, where the Commissioner, GST Delhi (East), challenged the order in relation to investigations conducted in the premises of the Respondent, engaged in manufacturing cardboard cartons. The Respondent was accused of using dummy units controlled by its Directors for manufacturing excisable goods without being registered with the department due to turnover below the threshold limit under the Central Excise Act, 1944. 2. The Department contended that the turnover of the dummy units should be added to the Respondent's turnover for the 'Small Scale Industry' exemption. However, the Respondent argued that each dummy unit had independent existence as private limited companies or partnerships, and since no Show Cause Notice was issued to these units, their turnover could not be combined with that of the Respondent. 3. The Customs, Excise & Service Tax Appellate Tribunal, while allowing the Respondent's plea, relied on decisions of the Calcutta High Court and the Gujarat High Court to quash the demand raised in the impugned adjudication order. The Tribunal found merit in the argument that without issuing Show Cause Notices to the dummy units, their turnover could not be clubbed with that of the Respondent for determining eligibility for the 'Small Scale Industry' exemption. 4. The Department, represented by the Senior Standing Counsel, relied on a decision of the Delhi High Court in a different case. However, the Delhi High Court in the present case found that the said decision was distinguishable as in that case, Show Cause Notices were issued to all units whose turnover was sought to be clubbed, unlike the current scenario where the turnover of the dummy units was not subjected to Show Cause Notices. 5. Ultimately, the Delhi High Court upheld the decision of the Customs, Excise & Service Tax Appellate Tribunal, stating that there was no legal flaw in their order. The Court concluded that no substantial question of law arose for consideration, leading to the dismissal of the appeal and the pending application.
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