2018 (11) TMI 901 - AT - Central Excise

SSI Exemption - clubbing of clearances - two units managed by same person - separate entities or not - mutuality of interest - Held that - Both the units are being managed by Sh. Shiv Kumar Goel and Sh. Yash Pal Goel, but are two separate private limited companies located at two separate locations and are having their own separate plant and machinery to manufacture their final products - if any amount is transferred from one company to another, the same has been returned back within reasonable time, then it cannot be alleged that there was a flow of the funds - Moreover, the allegation that too from M/s DST, the amount has been withdrawn by the shareholders to purchase the shares of M/s KCP, cannot be a reason of clubbing of clearances - If the adjudicating authority is of the view that both M/s DST and M/s KCP are one and same, in that circumstance, it is required to be declare by the adjudicating authority who is the principal unit and duty is to be demanded on the principal unit only. But in this case, duty has been demanded separately from both the units, which also shows that the adjudicating authority is in doubt to conclude that which is the principal unit - clubbing of clearances not justified - decided in favor of assessee. Clandestine removal - reliability on statements of persons based on which charge of clandestine removal is based - Held that - During the course of cross examinations, Sh. Rahul Jain, one of the supplier, appeared who stated that he has issued the invoices in the name of M/s KCKL and received the payment from M/s KCKL, therefore, the statement of Sh. Rahul Jain during the course of cross examination established that M/s KCKL was a trading firm and was not a dummy firm as alleged by the Revenue. Moreover, the other witnesses whose statements have been relied upon, were not cross examined despite the direction of this Tribunal, therefore, the statements of these witnesses are not admissible to allege the clandestine removal of the goods - thus, clearances made on the invoices of M/s KCKL cannot be held as clandestine removal goods by M/s DST. The charge of clubbing of units in the absence of determining which is the principal unit and which is the dummy, the charge is not sustainable - the charge of clandestine removal of the goods is also not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Clubbing of clearances of M/s Dharam Steel Tubes Pvt Ltd (DST) and M/s K.C. Pipes Pvt Ltd (KCP).
2. Allegation of clandestine removal of goods by M/s DST using the invoices of M/s Kapoor Chand Krishan Lal (KCKL).

Detailed Analysis:

(A) Issue of Clubbing:

7.1 Separate Legal Entities:
The Tribunal noted that although both units were managed by the same individuals, Shiv Kumar Goel and Yash Pal Goel, they were separate private limited companies located at different locations with their own plant and machinery. The adjudicating authority's claim of fund flow between the units was examined and found insufficient to establish a case for clubbing. The CBEC Circular No. 6/92-CE dated 29.05.1992 clearly states that clearances of private limited companies cannot be clubbed. Additionally, the duty was demanded separately from both units, indicating the adjudicating authority's uncertainty about which was the principal unit.

7.2 Legal Precedents:
The Tribunal referenced the case of Bentex Industries vs. CCE, where it was held that both companies had independent registrations and the Central Excise Department had previously recognized them as separate entities. Similarly, in CCE vs. Shiva Exim Enterprises, the Tribunal emphasized that clubbing can only be ordered if one unit is a dummy of the other, which was not established in this case. The Tribunal also cited Nova Industries Pvt Ltd. vs. CCE, where it was held that separate registrations and independent operations preclude clubbing of clearances.

7.3 Conclusion on Clubbing:
The Tribunal concluded that both units, M/s DST and M/s KCP, were independently registered and operated, with separate locations, workforces, and resources. The mere fact that they shared common directors did not justify clubbing their clearances. Therefore, the charge of clubbing was set aside.

(B) Clandestine Clearance:

7.5 Allegation of Clandestine Removal:
The Tribunal examined the allegation that M/s DST was clearing goods clandestinely using invoices of M/s KCKL. It was established that M/s KCKL was a legitimate trading firm, as confirmed by the cross-examination of Sh. Rahul Jain. The statements of other witnesses were not admissible as they were not cross-examined despite the Tribunal's direction.

7.6 Parameters for Clandestine Removal:
The Tribunal referred to the case of Arya Fibres Pvt Ltd., which outlined specific criteria for establishing clandestine manufacture and clearance, such as tangible evidence of excess raw materials, actual removal of unaccounted finished goods, and corroborative statements from buyers. None of these criteria were met by the Revenue in this case.

7.7 Conclusion on Clandestine Removal:
The Tribunal found no substantial evidence to support the allegation of clandestine removal. Even if the clearances on M/s KCKL's invoices were considered, M/s DST's total clearances remained below the SSI exemption threshold. Thus, the charge of clandestine removal was also set aside.

Conclusion:
The Tribunal held that the charges of clubbing of clearances and clandestine removal of goods were not sustainable. The impugned order was set aside, and the appeals were allowed with consequential relief.

Result:
The appeals were allowed with consequential relief, if any.