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2020 (7) TMI 291 - AT - Central ExciseSSI Exemption - clubbing of clearances - Two independent companies within same complex (factory premises) and common shareholders / directors / management - benefit of N/N. 8/03-CE dated 1.3.2003 as amended from time to time - HELD THAT - It is a fact on record that M/s. NCPL was established in the year 1993 as private limited company and M/s. NAPL as a private limited company. As per the CBEC Circular No.6/92 dated 29.5.1992, the Board has clarified that private limited companies are treated as separate, therefore, we have no hesitation to hold that both the units are separate units. As (i) both are private limited companies, (ii) both are manufacturing different products, (iii) both are having separate electricity connection, (iv) both are having different raw material which is separately stored, (v) both are having separate work force, (vi) both are having separate bank account and accountant to maintain record, (vii) both are having independent buyers and consideration have never flown from one company to another, (viii) money lended by one company has been returned, there is no diversion of funds and flow of funds from one unit to another unit, (ix) creation of the units were within knowledge of department since long back, (x) the appellant is availing benefit of SSI since its incorporation, (xi) shares holders of both the companies are same and common but not all (xii) directors of the are common but not all (xiii) the appellant is working in a separately demarcated portion. Moreover, necessary statutory declarations were filed by the appellant from time to time. Reliance can be placed in the case of CCE, JALANDHAR VERSUS M/S. S.K. SACKS PVT. LTD., SHRI ARVINDER PAL SINGH, DIRECTOR 2017 (3) TMI 413 - CESTAT CHANDIGARH where it was held that when the units have separate registration with the Central Excise Department/Income-Tax Authorites, permission to do job work on behalf of other undertaking, factors like one supervisor working for both the units and one unit have certain financial dealings for the other unit cannot be a basis for clubbing of clearances of two units. The clearance of the appellant unit and M/s. NAPL cannot be clubbed. If the clearances of the appellant are to be clubbed with M/s.NAPL then the duty is required to be demanded from M/s.NAPL, which is not the case here - the appellant is entitled to avail the benefit of exemption Notification No.8/03-CE dated 1.3.2003 - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Clubbing of clearances of M/s. Noble Chlorochem Pvt. Ltd. (NCPL) with M/s. Noble Alchem Pvt. Ltd. (NAPL) 2. Denial of SSI exemption to NCPL 3. Demand of duty and imposition of penalty on NCPL Issue-wise Detailed Analysis: 1. Clubbing of Clearances: The primary issue was whether the clearances of NCPL should be clubbed with those of NAPL. The show cause notices alleged that NCPL did not qualify as an independent entity due to shared premises, common shareholders and directors, financial transactions between the units, and other shared resources. However, the Tribunal found that NCPL was established as a separate private limited company in 1993, distinct from NAPL, which was established in 1987. Both companies had separate registrations with various authorities, separate machinery, labor, and bank accounts. The Tribunal noted that the mere presence of shared resources or common directors does not justify clubbing of clearances if the entities are legally and operationally distinct. 2. Denial of SSI Exemption: The Tribunal examined the denial of SSI exemption under Notification No. 8/2003-CE. The show cause notices invoked clauses 2(vi) and 2(vii) of the notification, which pertain to the aggregate value of clearances by one or more manufacturers from a factory. The Tribunal referred to CBEC Circular No. 6/92, which clarifies that private limited companies are treated as separate entities for the purpose of SSI exemption. The Tribunal also cited previous judgments, including the case of CCE vs. S.K. Sacks Pvt. Ltd., which supported the view that limited companies are distinct from their shareholders and entitled to separate exemption limits. Therefore, the Tribunal concluded that NCPL and NAPL should be treated as separate units, and NCPL was entitled to SSI exemption. 3. Demand of Duty and Imposition of Penalty: The Tribunal found that the demand of duty from NCPL was unsustainable because the clearances of NCPL should not be clubbed with those of NAPL. The Tribunal noted that if the clearances were to be clubbed, the duty should have been demanded from NAPL, which was not the case. The Tribunal also found that there was no suppression of facts by NCPL, as the activities of both units were within the knowledge of the department since 1993. Consequently, the extended period of limitation was not invokable. The Tribunal set aside the impugned order, allowing the appeals with consequential relief. Conclusion: The Tribunal held that NCPL and NAPL are separate entities and their clearances cannot be clubbed. NCPL is entitled to avail the benefit of SSI exemption under Notification No. 8/2003-CE. The demand of duty and imposition of penalty on NCPL were set aside, and the appeals were allowed with consequential relief.
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