2019 (8) TMI 147 - AT - Central Excise

SSI exemption - Clubbing of clearances - dummy units - Department contended that both IEC and RSF belonged to the appellant M/s SESPL - Clubbing of clearances of private limited company with the clearances of proprietorship concerns. HELD THAT - In the present case, the adjudged demands confirmed against the appellants pertain to the period from 1989-90 to 1992-93 and thus, the relevant statutory provision for consideration of the issue is Notification No. 175/86 dated 01.03.1986. The said notification grants exemption from payment of Central Excise duty on the excisable goods cleared from the factory of the manufacturer up to certain aggregate value prescribed therein. The issue of clubbing of clearances of various firms for the purpose of determination of the aggregate value has also been discussed in the said notification. In the case in hand, it is an admitted fact on record that the appellant is a private limited company, incorporated under the Companies Act, 1956 and the other two firms namely, M/s IEC and RSF are proprietorship concerns, belonging to Shri Sandeep Ghosh and Shri Sudeep Ghosh respectively - Since, the appellant is a private limited company; its clearances cannot be clubbed with the clearances of the proprietorship concerns, as per the above principles laid down by the CBEC in terms of Section 37B of the Act ibid. Benefit of N/N. 214/86-C.E. dated 03.04.1986 read with circular dated 04.09.1986 issued by CBEC - HELD THAT - While computing the proposed demand for the earlier show cause notice dated 16.12.1993, the value of chassis was excluded by the department, which is evident from the annexure to such show cause notice. Thus, in this case since, there is no change in the method of valuation adopted by the appellant and without proper substantiation of the allegation, it cannot be asserted that the appellant should not be entitled for the benefit provided under the said notification - Hence, there is no merit in the impugned order, so far as it relates to denial of the benefit of such notification to the appellant. Invocation of provisions of erstwhile Rule 173Q ibid read with Section 11AC ibid for imposition of penalty - HELD THAT - Section 11AC ibid was inserted in the statute book w.e.f. 28.09.1996 by Section 76 of the Finance (No.2) Act, 1996 (33 of 1996) - The period in dispute involved in the present case is prior to the date of such statutory enactment and thus, the provisions of Section 11AC ibid are inapplicable to the facts and circumstances of the case inasmuch as such enactment will have prospective effect and cannot be applied retrospectively. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Clubbing of clearances of the appellant's unit with two proprietorship concerns.
2. Denial of benefit under Notifications Nos. 175/86 and 1/93.
3. Inclusion of chassis value in the clearance value for SSI benefit.
4. Imposition of interest under Section 11AB of the Central Excise Act, 1944.
5. Imposition of penalty under erstwhile Rule 173Q and Section 11AC.
6. Confiscation of land, building, plant, and machinery under Rule 173Q(2).

Issue-wise Detailed Analysis:

1. Clubbing of Clearances:
The main issue in these appeals pertains to the clubbing of clearances of the appellant's unit with two proprietorship concerns, Industrial Engineering Company (IEC) and Rashmi Shellcast & Foundry (RSF). The Central Excise department contended that both IEC and RSF belonged to the appellant M/s SESPL, thus exceeding the eligibility criteria for the benefit under Notification Nos. 175/86 and 1/93. The Tribunal found that the appellant, being a private limited company, cannot have its clearances clubbed with those of proprietorship concerns as per the principles laid down by the CBEC in Circular No. 6/92 dated 29.05.1992. The Tribunal referred to judgments in cases such as Supreme Washers (P) Ltd., L.D. Industries, and Limca Flavours & Fragrances Ltd., which support the appellant's contention that clearances of a private limited company cannot be clubbed with those of proprietorship firms.

2. Denial of Benefit under Notifications Nos. 175/86 and 1/93:
The Tribunal noted that the appellant should be entitled to the benefit of Notification No. 175/86 for the clearances effected prior to 01.04.1993, as the clearances of a private limited company cannot be clubbed with those of proprietorship concerns. The impugned order's denial of this benefit was found to lack merit.

3. Inclusion of Chassis Value in Clearance Value:
The Tribunal found that the value of clearances for the relevant period was wrongly arrived at by including the value of the chassis for the LPG tanks manufactured by the appellant. As per Notification No. 241/86-C.E. and the circular dated 04.09.1986 issued by CBEC, the value of the chassis should be excluded from the value of the final product. The Tribunal noted that the department had excluded the value of the chassis in earlier computations, and thus, the impugned order's inclusion of the chassis value was incorrect.

4. Imposition of Interest under Section 11AB:
The Tribunal held that the interest liability under Section 11AB, inserted w.e.f. 28.09.1996, cannot be applied retrospectively to the period in dispute (1989-90 to 1992-93). The Hon'ble Bombay High Court's judgment in the case of Dev Ashish supported this view, stating that Section 11AB is penal in nature and applies only to clearances made after its effective date.

5. Imposition of Penalty under erstwhile Rule 173Q and Section 11AC:
The Tribunal found that the provisions of Section 11AC, inserted w.e.f. 28.09.1996, cannot be invoked for the period prior to its enactment. The impugned order's imposition of penalties under erstwhile Rule 173Q and Section 11AC was thus unsustainable.

6. Confiscation of Land, Building, Plant, and Machinery:
The Tribunal noted that Rule 173Q (2) was omitted by notification dated 12.05.2000, and thus, the confiscation order passed after this date should not be guided by the provisions of the omitted rule. The judgments in Kotak Mahindra Bank Ltd. and Choice Ceramics Tiles Pvt. Ltd. supported this view, leading the Tribunal to conclude that the confiscation and redemption fine imposed were not valid.

Conclusion:
The Tribunal found no merit in the impugned order passed by the adjudicating authority. The appeals were allowed in favor of the appellants, setting aside the impugned order.