2020 (2) TMI 1015 - AT - Central Excise

Clandestine removal - compliance of Rule 9D of Central Excise Act, 1944 - SSI Exemption - clubbing of the clearances affected by the manufacturing units of the appellants, namely, M/s Ganpati Allied Works (Noticee No. 2), M/s Ganpati Steels (Noticee No. 1) and other two units - HELD THAT - There is evidence regarding pervasive control of these units by Shri Ashish Gupta only. We also find that the record regarding payment of the various units is interlinked with each other. It is on record that there had been supply by the one unit, however, the payments have been received by the other units, although subsequently, there is instances of transfer of all this amount to the respondent units. Transportation of raw material, finished goods and trading material - HELD THAT - There is intermixing of business activities of the units and same is being controlled by Shri Ashish Gupta, on behalf of other appellant as well. Regarding the evidences which was collected from the computer of the appellants it is on record that the same was being used by various persons and was not in the control of any individual person. No certificate has required under 36 B of Excise Act is available on record, and therefore, it is concluded that same has not been obtained by the Department during the course of investigation. Therefore, reliance cannot be placed on data derived from this computer/ hard disk. But, Shri Ashish Gupta as categorically accepted these clearances in his statement and also paid Central Excise duty voluntarily. It is evident that the Department has not only relied merely upon the data derived from the computer printout but also obtained from independent sources, which has been accepted by Shri Ashish Gupta. In this regard we are also relying on some of the observations made in the adjudication order by the Adjudicating Authority regarding the huge variation in the consumption of electricity furnished by the manufacturing noticee. This variation in the electricity consumption proves the abnormal production of finished goods as recorded in the private records. This abnormal consumption of electricity would lead to the fact that there had been manufacturing of finished goods without bringing those on the recorded production. This aspect further corroborated by purchase of unaccounted coal from M/s Laxmi Agency/ Jaya Agency. The benefit under SSI exemption is not available to the units where there is mutuality of interest and pervasive control of one unit by the other is established which is established in this case. It is also observed that there had been unaccountal of clearance of winding wire, roll products without payment of Central Excise duty, which were found to be maintained in private records. All these evidences have been accepted by Shri Ashish Gupta in his statement before the Investigating Officer. Whatever has been accepted need not be proved. Appeal dismissed.

Issues Involved:
1. Clubbing of clearances for determining SSI exemption eligibility.
2. Shortage of finished goods and raw materials.
3. Validity of statements recorded under Section 14 of the Central Excise Act.
4. Admissibility of computer printouts as evidence.
5. Pervasive control and mutuality of interest among the units.
6. Allegations of clandestine clearance and unaccounted transactions.
7. Segregation of manufacturing and trading sales.
8. Imposition of penalties.

Detailed Analysis:

1. Clubbing of Clearances for SSI Exemption:
The primary issue was whether the turnover and value of clearances of the four appellant units should be clubbed for determining SSI exemption eligibility under Notification No. 08/2003-CE. The Department argued that the units were interlinked and controlled by a single entity, Shri Ashish Gupta, which justified clubbing. The appellants contended that each unit was independent, with separate registrations, PAN numbers, and bank accounts. However, the Tribunal found evidence of pervasive control by Shri Ashish Gupta, including interlinked financial transactions and shared management, justifying the clubbing of clearances.

2. Shortage of Finished Goods and Raw Materials:
The appellants challenged the findings of shortages during stock-taking, arguing that the shortages were due to accumulated variations over several years and were within permissible tolerance limits. They also contended that the stock verification was not properly conducted. The Tribunal noted that the appellants had accepted the shortages and paid the duty voluntarily, and thus upheld the demand.

3. Validity of Statements Recorded under Section 14:
The appellants argued that the statements of Shri Ashish Gupta were obtained under coercion and should not be relied upon. The Tribunal found that the cross-examinations of witnesses were conducted, and none deviated from their earlier statements. Therefore, the Tribunal held that the provisions of Section 9D of the Central Excise Act were complied with, and the statements were valid.

4. Admissibility of Computer Printouts as Evidence:
The appellants contended that the computer printouts used as evidence were not admissible as the provisions of Section 36B of the Excise Act were not followed. The Tribunal noted that the computer was used by multiple persons, and no certificate as required under Section 36B was provided. However, the Tribunal found that the data was corroborated by other evidence and accepted by Shri Ashish Gupta, thus upholding its admissibility.

5. Pervasive Control and Mutuality of Interest:
The Tribunal found evidence of pervasive control by Shri Ashish Gupta over all the units, including shared management and interlinked financial transactions. Statements from various individuals, including directors and employees, confirmed that Shri Ashish Gupta controlled the operations of all units. This justified the conclusion that there was mutuality of interest and pervasive control, supporting the clubbing of clearances.

6. Allegations of Clandestine Clearance and Unaccounted Transactions:
The Department alleged clandestine clearance based on seized documents and unaccounted transactions. The Tribunal found that the evidence, including private records and statements, indicated unaccounted production and clearance of goods. The Tribunal also noted the abnormal consumption of electricity and unaccounted purchase of raw materials, supporting the allegations of clandestine clearance.

7. Segregation of Manufacturing and Trading Sales:
The appellants argued that the Department failed to segregate manufacturing and trading sales, leading to incorrect demand computation. The Tribunal found that the appellants did not provide sufficient evidence to support this claim and upheld the demand based on the available records.

8. Imposition of Penalties:
The appellants contended that penalties should not be imposed as the demands were not sustainable. However, the Tribunal found that the evidence supported the findings of the Adjudicating Authority, including the acceptance of shortages and clandestine clearance. Therefore, the imposition of penalties was upheld.

Conclusion:
The Tribunal dismissed the appeals, upholding the impugned order, including the clubbing of clearances, demand for shortages, reliance on statements and computer printouts, and imposition of penalties. The Tribunal found no infirmity in the Adjudicating Authority's order and concluded that the evidence supported the findings of pervasive control, mutuality of interest, and clandestine clearance.

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