2017 (11) TMI 1327 - AT - Central Excise

SSI Exemption - dummy units - clubbing of clearances - clandestine removal - use of kacchha parchis - Revenue finally concluded that other than JSW all units were dummy and hence, the clearances by all units are to be considered as clearance from M/s JSW - use of brand name of others - Held that - After appreciation of overall evidences both documentary as well as oral-picture that emerges is that none of the companies had the full infrastructure to manufacture the goods they were shown to make. The final assembly of goods said to be manufactured in different units. For moving the goods from one unit to another unit, some times, kachhi parchies were used. There is no clear evidence of flow back of funds among the units. All these evidences lead to an escapable conclusion that all the units were having separate existence in record by taking separate registrations under sales tax/ income tax etc. They were also filing separate declarations every year to Central Excise authorities claiming that their turnover was below the SSI limit. However, the investigation has established that all units though were shown to have separate de jure existence but the de fecto contract was with Sh. Ram Niwas Jindal - in the eye of law, it alone cannot be ground to deny the benefit of SSI exemption - the turnover of all the units need not be clubbed. Use of brand name - allegation of clearance of goods by JSW bearing the brand name belonging to HSW - Held that - the allegation that the goods cleared to HSW were bearing the brand names of the later is not substantiated by corroborated evidence - appellants were not marking the finished goods supplied to HSW with the brand names, Hindware or Rassi . They were initially mentioning the model number of the products manufactured for supply of HSW. Such marks such as BTT , BTJ , etc. cannot be considered as brand names in the absence of any investigation to prove the name mentioned on such labels was brand name or name of another person - there is no justification for denying the SSI benefit to appellant companies. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Clubbing of clearances for SSI exemption.
2. Allegations of clandestine clearances.
3. Clearance of goods bearing the brand name of another entity.
4. Penalties imposed on various individuals and entities.

Detailed Analysis:

1. Clubbing of Clearances for SSI Exemption:
The primary issue was whether the clearances of several group units should be clubbed together to deny the benefit of Small Scale Industries (SSI) exemption. The department alleged that although de-jure all the units were separate legal entities, they were de-facto managed and controlled by Sh. R. N. Jindal of JSW to fraudulently avail the SSI exemption. Evidence showed that Sh. R. N. Jindal was involved in managing purchases, issuing sales invoices, and controlling the financial and operational aspects of all units. Despite this, the Tribunal found that each unit had separate registrations, infrastructure, and maintained separate stock registers. The Tribunal concluded that the mere control by Sh. R. N. Jindal did not justify clubbing the clearances, thus allowing the SSI exemption.

2. Allegations of Clandestine Clearances:
The department alleged that JSW and its group units made clandestine clearances, supported by kachha parchis and other evidence. The investigation revealed that certain goods were manufactured in one unit but invoiced by another, and there was inter-unit transfer of goods without proper documentation. However, the Tribunal noted that there was no clear evidence of financial flowback among the units and that each unit maintained separate books of accounts reflecting the transactions. Thus, the Tribunal did not find sufficient evidence to uphold the allegations of clandestine clearances.

3. Clearance of Goods Bearing the Brand Name of Another Entity:
The department claimed that JSW and its group units cleared goods bearing the brand names "Hindware" and "Rassi," which belong to HSW, thus disqualifying them from SSI exemption. However, the Tribunal found that the goods supplied to HSW bore only model numbers and not brand names. Statements from HSW officials corroborated that the final branding was done at HSW's premises. The Tribunal referenced case law indicating that model numbers do not constitute brand names. Consequently, the Tribunal concluded that the goods did not bear the brand names of another entity, allowing the SSI exemption.

4. Penalties Imposed:
The adjudicating authority had imposed significant penalties on JSW and various individuals under Section 11AC and Rule 26 of the Central Excise Rules, 2002. Given the Tribunal's findings that the clubbing of clearances was not justified and the allegations of clandestine clearances and brand name usage were unsubstantiated, it set aside all penalties. The Tribunal directed the original adjudicating authority to re-calculate the demand after allowing the SSI benefit for clearances to HSW.

Conclusion:
The Tribunal allowed the appeals, concluding that the clubbing of clearances was not justified, the allegations of clandestine clearances were unsubstantiated, and the goods did not bear the brand names of another entity. All penalties imposed were set aside, and the adjudicating authority was directed to re-calculate the demand, allowing the SSI benefit.

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