2017 (10) TMI 894 - AT - Central Excise

SSI exemption - clubbing of clearances of three units namely, M/s. Sterlite Chemicals Pvt. Limited (SCPL), M/s. Emulsion Products and M/s. Anurag Dyes and Chemicals Pvt. Limited (ADCL). - The allegation of the Revenue is that M/s. SCPL and M/s. Emulsion Products are dummy units and manufacturing activities being undertaken by M/s. ADCL as the appellant did not have entire machinery for manufacturing of their final products - time limitation. Held that - all the three units were established way back in 1970s and all the units were registered with Central Excise department and having separate registrations. All the units have surrendered their Central Excise registration in the year 2002. As the facts of establishment of these units were in the knowledge of the department and have been granted registration under Central Excise Acts, after due verification and it is fact on record machineries were not disputed while granting registration to them. It is also on record that all the units are located in Plot No. 40 but Plot No. 40 is having different shades and the units were located in different sheds. Therefore, it cannot be said that all the units are located in a same building. Moreover, they are having different entry gates for them. It is fact that in all the units, Shri Atul Gulati is a common person who is managing affairs of all the three units but same cannot be taken a ground for clubbing the clearances of all units, in the light of decision in the case of Renu Tandon vs. UOI 1992 (1) TMI 126 - HIGH COURT OF JUDICATURE FOR RAJASTHAN , where it was held that Mere blood relationship or sharing of staff, some temporary common employment, similarity of product is also not sufficient to draw an inference that the two units should be clubbed together. All the three units have been registered separately after completing investigation. In that circumstance, the clearances made by three units cannot be clubbed in the light of the decision in the case of Plasto Containers (India) Pvt. Limited vs. CCE, Nagpur 2011 (1) TMI 806 - CESTAT, MUMBAI , where it was held that as both the units are having separate directors, separately registered with Registrar of Companies, separate sales tax registration, income tax, bank account, and separate lease deed with MIDC and are having separate premises also. In that event the clearance of both units cannot be clubbed. M/s. ADCL is manufacturing Poly Vinyl Acetate Emulsion which is raw material for M/s. SCPL and M/s. Emulsion Products who are manufacturing Synthetic Adhesive and therefore M/s. ADCL and other two units are not manufacturing the same goods and in fact, one is the raw material for the other and the goods manufactured by M/s. ADCL cannot be manufactured by M/s. SCPL and M/s. Emulsion. The constitution of firms is Private Limited and Partnership Firm, therefore, merely being a one person is common in all the units cannot be a ground for clubbing the clearances of all units. Further, all the units were having separate registration with Central Excise department, different Sales Tax registration, ESIC etc. and having different trademarks and filing their IT Returns separately. In these circumstances, merely surrendering the Central Excise registration in the year 2002, the clearances of all the units cannot be clubbed - clearances made by all the three units cannot be clubbed altogether. Extended period of limitation - Held that - all the three units have separate registration with the Central Excise department was well within the knowledge of department while granting the registration and surrendering the registration in the year 2002. In that circumstance, charge of suppression cannot be alleged against the appellants - extended period of limitation is not invokable. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Clubbing of clearances of three units.
2. Allegation of dummy units.
3. Financial flow back and mutual interest.
4. Separate registration and independent machinery.
5. Extended period of limitation and suppression of facts.

Issue-wise Detailed Analysis:

1. Clubbing of Clearances of Three Units:
The appellants contested the clubbing of clearances of M/s. Sterlite Chemicals Pvt. Limited (SCPL), M/s. Emulsion Products, and M/s. Anurag Dyes and Chemicals Pvt. Limited (ADCL). The Revenue alleged that SCPL and Emulsion Products were dummy units, and their clearances should be added to ADCL's clearances to deny the Small Scale Industry (SSI) exemption. The Tribunal found that all three units were established in the 1970s, registered separately with the Central Excise department, and had their registrations duly verified and granted. The Tribunal held that the clearances of the three units could not be clubbed as they were registered independently and had separate operations.

2. Allegation of Dummy Units:
The Revenue argued that SCPL and Emulsion Products were dummy units controlled by ADCL, with common directors and shared machinery. The Tribunal noted that all units had independent machinery, separate registration, and different entry gates, and were located in different sheds within the same plot. The Tribunal referred to the case of Renu Tandon Vs. UOI, which established that common management or shared employees alone could not justify clubbing clearances unless there was mutual business interest or financial flow-back.

3. Financial Flow Back and Mutual Interest:
The Tribunal emphasized that there was no evidence of financial flow-back or mutual business interest among the units. The Tribunal cited the case of Plasto Containers (India) Pvt. Limited Vs. CCE, which held that clearances could not be clubbed without proof of mutuality of interest or financial flow-back. The Tribunal found that the units had separate financial arrangements, bank accounts, and operated independently, thus no basis for clubbing clearances existed.

4. Separate Registration and Independent Machinery:
The Tribunal observed that all three units had separate registrations with the Central Excise department, different sales tax registrations, and independent machinery. The Tribunal referenced the CBEC Circular No. 6/1992, which stated that limited companies are entitled to separate exemption limits. The Tribunal concluded that the presence of common machinery like a boiler and generator set did not justify clubbing clearances, as the units had independent machinery for their respective manufacturing processes.

5. Extended Period of Limitation and Suppression of Facts:
The Tribunal found that the extended period of limitation could not be invoked as there was no suppression of facts by the appellants. The Tribunal noted that the units were registered with the Central Excise department, filed returns, and were subject to periodic audits. The Tribunal cited several decisions, including CCE Vs. Dabur India Limited, which held that the extended period of limitation could not be invoked if the department was aware of the facts. Consequently, the Tribunal ruled that the demand for duty was time-barred.

Conclusion:
The Tribunal set aside the impugned order, holding that the clearances of the three units could not be clubbed, and the extended period of limitation was not applicable. The appeals were allowed with consequential relief.

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