2019 (8) TMI 483 - AT - Central Excise

SSI Exemption - Crossing of threshold exemption limit - clubbing of clearances - cas of Revenue is that clubbing of clearances made by the Appellant under the invoice of M/s JRSE have to be clubbed with the clearance of the Appellant M/s Prints Electronics Equipments Pvt. Ltd. HELD THAT - We find substance in the argument of the Appellant inasmuch as the entire case has been built up by the Revenue mainly on the ground that since M/s JRSE alleged to have no adequate manufacturing facility on the date of visit of the officers to the premises at Bangalore, one of the employee of M/s PEEPL stationed at Bangalore and statements of employees/Director that all the goods must have been manufactured at the premises of M/s PEEPL at Malad, Mumbai and cleared without payment of duty, under the invoice of M/s JRSE. There is no evidence to the effect that M/s PEEPL Ltd had procured raw material assembled at their premises at Malad and cleared/sold in the market without payment of duty. No evidence has been brought on record of those buyers who purchased the said goods and to whom the manufactured goods were sold and mode of delivery of alleged goods clandestinely from the manufacturing premises at Malad to the buyer s premises - In absence of substantial evidences of manufacturing and clearances of the goods, it cannot be assumed that since, the facility of manufacture at the premises of M/s JRSE, is inadequate, therefore, the goods must have been manufactured and cleared from the premises at Malad Unit of M/s PEEPL in the local market against the invoices of M/s JRSE. The kind of electronic goods manufactured by the Appellants, do not require a huge premises and machineries; it could be assembled with simple tools/machineries. The demand confirmed clubbing the clearances of M/s PEEPL with that of M/s JRSE, is not sustainable - penalties also set aside - appeal allowed - decided in favor of appellant.

Issues Involved:

1. Manufacturing and clearance of goods by M/s Prints Electronics Equipments Pvt. Ltd. (PEEPL) and M/s J.R.S. Electronics Pvt. Ltd. (JRSE).
2. Clubbing of clearances of M/s PEEPL with M/s JRSE.
3. Alleged clandestine clearance of goods.
4. Validity of the show cause notice issued by the Commissioner at Mumbai.
5. Imposition of penalty under Rule 26 of Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Manufacturing and Clearance of Goods by M/s PEEPL and M/s JRSE:

The Appellant, M/s PEEPL, engaged in manufacturing excisable goods such as Electronics Attendance Recorder and Access Control System, availed small scale exemption under Notification No. 8/2003-CE. The factory was at Malad, Mumbai, and the administrative office at Vadala, Mumbai. M/s JRSE, situated in the same industrial estate as M/s PEEPL's administrative office, also manufactured similar goods but had a factory in Bangalore.

2. Clubbing of Clearances of M/s PEEPL with M/s JRSE:

The Department alleged that M/s PEEPL clandestinely cleared goods under M/s JRSE's invoices, thus, the clearances should be clubbed. The Appellant argued that M/s JRSE was an independent unit with no mutual interest or financial flow back between the companies. The Tribunal found no evidence of mutual interest or control, and thus, clubbing of clearances was deemed unsustainable.

3. Alleged Clandestine Clearance of Goods:

The Department's allegations were based on the visit to M/s JRSE's Bangalore factory, which reportedly lacked manufacturing equipment and technical manpower. Statements from M/s JRSE's Technical Director and an employee suggested that goods were not manufactured at Bangalore. The Tribunal noted the absence of substantial evidence proving that goods were manufactured at M/s PEEPL and cleared under M/s JRSE's invoices.

4. Validity of the Show Cause Notice Issued by the Commissioner at Mumbai:

The Appellant contended that even if goods were cleared under M/s JRSE's invoices, the situs for levy and collection of duty was Bangalore, making the show cause notice by the Mumbai Commissioner beyond jurisdiction. The Tribunal did not find sufficient grounds to uphold the notice issued by the Mumbai Commissioner.

5. Imposition of Penalty under Rule 26 of Central Excise Rules, 2002:

Penalties were imposed on M/s JRSE under Rule 26, alleging that they had no manufacturing setup and that M/s PEEPL used their invoices for clearance. The Tribunal found that M/s JRSE had provided sufficient evidence of manufacturing activities at Bangalore, including a certificate from the Karnataka Director of Industries & Commerce and various records. Thus, the penalties were deemed unwarranted and set aside.

Conclusion:

The Tribunal concluded that the demand for clubbing the clearances of M/s PEEPL with M/s JRSE was not sustainable due to a lack of substantial evidence. Consequently, penalties imposed on the Appellants were also set aside. The impugned order was modified, and the appeals were disposed of accordingly.

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