2017 (11) TMI 1176 - AT - Central Excise

SSI Exemption - dummy unit - mutuality of interest - Revenue s case is that two units BM and KA are in effect, one unit only and the second unit KA has been opened only for the purpose of wrongly availing SSI exemption separately for both units - clandestine removal - Held that - KA with its own manufacturing facility cannot be held as a dummy of BM especially in view of separate sales tax assessments in the name of BM as well as KA. Both the units also had separate Income Tax, Sales Tax and Central Excise registrations and were also fling returns separately - there is no valid ground for clubbing the turnover of both the units. Clandestine removal - Revenue s case is that BM as Involved in clandestine clearance of goods as evidenced by certain kaccha parchies recovered from the residence of Sh SB Goyal - Held that - Clandestine clearance is a very serious charge and is required to be established by Revenue on the basis of tangible evidence - In the present case, absolutely no investigation has been carried out either at the end of the buyers who have allegedly purchased the finished goods or at the end of the suppliers who might have supplied the additional quantity of raw materials which would have been necessary to produce the goods allegedly clandestinely. The kaccha parchies have been linked to the manufacturer only through the statement of Sh SB Goyal which stands retracted. In the absence of any other corroboration evidence, this piece of evidence cannot be used to demand duty against the appellant - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged clandestine removal of goods, validity of kaccha parchies recovery, retraction of statement, clubbing of value of clearances

Alleged Clandestine Removal of Goods:
The case involved two business entities engaged in manufacturing copper wire, where a search led to the recovery of kaccha parchies allegedly indicating clandestine removal. The Revenue contended that the two units were essentially one, opened to wrongly avail SSI exemption separately. The charge of clandestine clearance was upheld based on the kaccha parchies recovered. However, the appellant challenged this, arguing that the parchies were not recovered from the residence of the key individual and were signed under duress. The Tribunal emphasized the need for tangible evidence to establish clandestine clearances, noting the lack of investigation at the buyer and supplier ends. Given the retraction of the statement linking the parchies to the manufacturer, the duty demand on this charge was deemed unsubstantiated and set aside.

Validity of Kaccha Parchies Recovery and Retraction of Statement:
The validity of the kaccha parchies recovery and subsequent retraction of the statement played a crucial role in the case. While the panchnama did not specifically mention the parchies, the individual in question confirmed their contents but retracted the statement the next day. The Revenue argued that the retraction before a Judicial Magistrate was invalid, insisting it should have been made before the recording officer. The Tribunal acknowledged the retraction but stressed the need to evaluate the statement's evidentiary value alongside corroborative evidence. Ultimately, the retracted statement's link to the manufacturer through the parchies, without additional corroboration, did not suffice to support duty demand, leading to its dismissal.

Clubbing of Value of Clearances:
The lower authority had clubbed the value of clearances of both units due to family ties, despite one unit having the capacity for independent production. However, separate registrations, tax assessments, and operational autonomy indicated distinct entities. The Tribunal found no valid ground for clubbing the turnover of both units, leading to the setting aside of the impugned order and allowing the appeals.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, and the Tribunal's reasoning, resulting in the dismissal of the duty demand for alleged clandestine clearances and the setting aside of the impugned order concerning the clubbing of clearances.