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TMI Blog2018 (7) TMI 1277X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods being manufactured in one unit are being cleared in the name of other unit. When the two units are independent of each other and are manufacturing their own goods and doing the business independently as a separate legal entity, the clubbing of clearances cannot be done for the purpose of denial of the small scale exemption notification. Smt Niti Agarwal is a partner in M/s Mascot chemicals whose clearances stand clubbed with the clearances of M/s Chemicos. It is on record that no notice was sent to M/s Niti Agarwal calling upon her to show cause as to why the clearances of M/s Mascot Chemicals to which she is a partner should not be clubbed with the appellants Clearances. No statement of Smt Niti Agarwal was recorded and as such it is not justifiable on the part of the Adjudicating Authority to hold her partnership concern as a dummy of M/s Chemico, without even intimating the said facts to Mrs Niti Agarwal - one out of the two units is a proprietary unit and the other is a partnership unit. The clearances of the two units in question cannot be clubbed as held by the Tribunal in number of decisions - Reference made to the decision in the case of Mayur Printers V/s Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 16.01.2002 and carried out certain investigations relating to alleged misclassification of two of their products- Chemisol 35 and Chemisol 38. On the issue of misclassification the differential duty alleged was ₹ 48,51,929/- for the period January 2002 to March 2004. On the basis of investigations the departmental officers were also of the, prima facie, view that M/s Mascot Chemicals was a dummy firm and, therefore, the clearance value of both the appellant firm and M/s Mascot Chemicals were to be clubbed together to determine the duty liability under SSI exemption and duty evaded was alleged to be ₹ 44,47,770/- for the financial years 2000-01 to 2003-04. 5. Accordingly, show cause notice 24.03.2005 was issued demanding duty of ₹ 92,99,629/- covering the period April 2000 to March 2004. On the issue of classification six more show cause notices were issued covering the period April, 2004 to June, 2008. 6. After a number of rounds of litigation, going up to the CESTAT, the matter was finally decided by the commissioner vide Order 11-17/Commr/MRT-1/2011 dated 30.03.2011 wherein the demands relating to alleged misclassification were dropped, but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This, when added to the figures of clearances of ₹ 2,06,21,919/- relating to M/s Chemicos, the total clearance value for the two units, taken together for the year 2000-2001, comes to ₹ 2,88,01,057/-, which is below the threshold limit of ₹ 3 Crores for availing SSI exemption. B. During the year 2000-2001, M/s Mascot Chemicals were under the proprietorship of Shri Avdhesh Agarwal only up to 31.12.2000. Hence, clearance values of M/s Chemicos (the appellants) and M/s Mascot Chemicals can be clubbed only up to 31.12.2000, since after this date the constitution of M/s Mascot Chemicals was changed to that of partnership, a separate legal entity. C. Once M/s Mascot Chemicals became a partnership firm, it could not be said that the two firms were one and the same justifying clubbing of their clearances. D. For clubbing clearances of two legal entities it has to be established that either one is a dummy unit or that there is mutuality of interest, between two entities. There should be pervasive management on financial control of one entity over the other, including financial flow back. There is no evidence to this effect. There is only an assumption/presumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urer from a particular factory, are to be considered. In the instant case neither of the two factories were being operated by more than one manufacturer during a financial year. This means that the department has considered the case of the appellants as that of a manufacturer clearing goods from one or more factory. In other words, the department has considered the appellants as well as M/s Mascot Chemicals as one manufacturer for clubbing the clearances from both the factories/units. If both the factories are to be treated as per the department, as belonging to the same manufacturer (the appellants), goods cleared from one factory (the appellant s factory) to the other factory (deemed to be of the same manufacturer) would be fully exempt from duty under notification No.67/95-CE dated 16.03.1995. In that case, as per clause 3(a) of notification No. 9/2000-CE dated 01.03.2000 (and its subsequent notifications) value of all clearances made from the factory of the appellant to that of M/s Mascot Chemicals, would be exempt form duty, the duty already paid on such clearances by the appellants should be set off against the duty now proposed to be charged on the clearances of M/s Mascot C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oprietary concern, M/s Chemicos, as well as its proprietor, Shri Avdhesh Gopal Agarwal. 10. Learned DR appearing for the Revenue reiterated the reasoning of the Adjudicating Authority and held that the two units were created for a mala fide intention to avail the benefit of small scale exemption notification. 11. After carefully considering the submissions made by both the sides as also after going through the impugned order of the Commissioner, we find that the main reason for the Commissioner to club the clearances of both the units, one of which is a proprietary unit and the other one is a partnership unit is that Shri Avdesh Gopal Agarwal was looking after both the units and as such they have to be held as interconnected unit under the sole control of Shri Avdesh Gopal Agarwal. He has also observed that Smt. Niti Agarwal wife of Shri Avdesh Gopal Agarwal was not a working partner and has not produced any documents on record to show that there was any funding of financial investment done by her. He has also observed that the appellant was selling its goods to M/s Mascot Chemicals to the extent of about 99%. As such he has observed that M/s Mascot Chemicals was created as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tary unit and cannot be a partner in the other unit. The only situation where the clearances of two units can be clubbed is when both the unit either belong to the same manufacturer or are not fully equipped to manufacture the goods and the clearances are being bifurcated in a pseudo manner. As long as the proprietary and the partnership unit are completely independent units having independent factory and are fully equipped with the machinery to manufacture the goods, the same cannot be held to be a dummy of another. The expression Dummy itself leads to the fact the unit which is being held as a dummy unit is not fully equipped unit to manufacture the excisable goods. 14. We also note that Smt Niti Agarwal is a partner in M/s Mascot chemicals whose clearances stand clubbed with the clearances of M/s Chemicos. It is on record that no notice was sent to M/s Niti Agarwal calling upon her to show cause as to why the clearances of M/s Mascot Chemicals to which she is a partner should not be clubbed with the appellants Clearances. No statement of Smt Niti Agarwal was recorded and as such it is not justifiable on the part of the Adjudicating Authority to hold her partnership concern ..... X X X X Extracts X X X X X X X X Extracts X X X X
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