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TMI Blog2020 (1) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... f both the units are not common and initially PPI was a proprietorship concern and JPPL is a private limited company. The private limited company is distinct from an individual, therefore, it cannot be said both are same units. In the absence of any corroborative evidence on record, the clearances cannot be clubbed. The other ground for clubbing the clearances is that there are some financial transactions between each unit - HELD THAT:- The individuals have given money on loan to the units and if other unit is required money, the same is returned by the other unit to the individual who further give the loan to that unit and on all the transactions interest has been paid. In these circumstances, it cannot be said that there was flow of funds between the both units and these types of transactions cannot be the reason for clubbing the clearances - Moreover, another allegation is that both units are managed by the family members or one person, the same cannot be the reason to club the clearances. The clearances of both the units cannot be clubbed together and M/s JPPL is entitled for benefit of SSI exemption N/N. 08/2003-CE dated 01.03.2003 - Appeal allowed - decided in favor of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by M/s PPI within thirty days of the receipt of this order. vii) I also impose a penalty of ₹ 10 lakhs (Rupees Ten Lakhs only) upon Shri Sushil Garodia, Director of M/s PPI under Rule 26(1) of the Central Excise Rules, 2004. viii) I also impose a penalty of ₹ 10 lakhs (Rupees Ten Lakhs only) only upon Shir Naveen Garodia, Diretor, JPPL under Rule 26(1) of the Central Excise Rules, 2002. 2. The facts of the case are as follows:- (i) That the appellant M/s Progressive Fibre Containers Pvt. Ltd. (PPI as referred in Show Cause Notice) was engaged in manufacture of corrugated boxes and were registered under Central Excise. The factory of the appellant was established in year 1972. From the establishment uptill 01.04.2009, the appellant s constitution was a proprietorship concern owned by Shri J.L. Garodia. The constitution of appellant was changed to a private limited company w.e.f. 01.04.2009. (ii) Another company by the name of M/s Jankesh Paper Products Pvt. Ltd. (referred to as JPPL in Show Cause Notice) located at Plot No. 37, Sector 27-A, Faridabad was also engaged in manufacture of corrugated b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e no common directors. There has been frequent unsecured loans advanced by the family members to both the units which was actually meant for financing the units in garb of advancing loans. It was also alleged that the day book titled as SUS maintained in premises of appellant shown payment of multiple miscellaneous expenses on account of casual salary and wages of workers of both the companies and maintenance of buildings of both the companies etc. Also some of the records of M/s JPPL were also found lying in the premises of the appellant and similarly certain gate passes of appellant were found lying in the premises of M/s JPPL. In view of these allegations it was alleged that appellant and M/s JPPL are being actually managed by Shri Sushil Garodia as he is real owner of both the units and thus, the appellant and JPPL are single units. In the Show Cause Notice, the existence of two separate private limited companies was not disputed and also it was nowhere alleged that the JPPL was a dummy unit. The adjudication took place and the impugned order is mentioned in Paragraph 1 herein above was passed. Against the said order, the appellants are before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned irrefuted facts clearly shows that the JPPL and the appellant has separate existence and legal identities which are not disputed by the Central Excise department. In such a case, it cannot be said that M/s JPPL and appellant are one unit. (iv) That the main basis of clubbing the clerances is certain unsecured loans advanced by family members of Shri Sushil Garodia to the appellant as well as M/s JPPL. In this regard, it is submitted that firstly, the unsecured loans were duly recorded in books of accounts of both the companies as per the norms of Companies Act as well as Income Tax Act and the said loans were returned alongwith interest which is specifically admitted in the Show Cause Notice. Therefore, the same cannot be treated as funding. Secondly, there is no loan advanced by M/s JPPL to the appellant or vice a versa, therefore, there is no direct loans between two companies. Thirdly, it is settled law that mere advancing loans are not sufficient to club the clearances (Gaziabad Organics Ltd. Vs. CCE, 2016 (344) ELT 965). (v) Further, it is alleged that the family members of Shri SuhilGarodia are managing both the companies being directors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two separate private limited companies does not stop at Central Excise level only. The Ministry of Corporate Affairs, authorities under Factories Act, the Income Tax department etc. has treated the two companies as separate entities and have assessed them separately. The Adjudicating Authority could not have passed any order in derogation of such assessments and upsetting the entire scheme. (xi) That it is not the case of department that the JPPL has engaged into clandestine clearances and no duty has been demanded from M/s JPPL. Even, the Adjudicating Authority has not imposed any penalty on M/s JPPL. In such a case, the appellant cannot be burdened with duty liability of clearances made by M/s JPPL even if the SSI exemption is denied to M/s JPPL. In view of the above, it is prayed that impugned order may kindly be set aside by dropping the demand of duty as well as penalties on the appellants. 4. The Ld. AR reiterated the findings of the impugned order. 5. Heard the parties and considered the submissions. 6. On hearing the parties, we find that the sole reason for clubbing the clearances of JPPL with P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndestinely without payment of duty. 15. First, we will deal with the issue whether the clearance of M/s. DSA can be clubbed with the clearance of M/s. NOVA. In the impugned order, the allegation against the appellant is that both the companies were promoted by Shri D.V. Khanna himself as Managing Director of both the companies and Director in both the companies are same. It is also found that by the Adjudicating Authority, the salesman/dealers to be decided mutually and marketing of both the companies were commonly and salary of employee of M/s. Nova was paid from M/s. DSA and commission of employees of M/s. NOVA was paid from M/s. DSA s account. The annual incentives were given to the dealers on the basis of combined sales of both the units. Moreover, the shareholding in both the units by the Directors is almost common. Sometimes, money was given to each other but nothing was shown in the balance sheet. Therefore, clearance of both the units are to be clubbed as the same are managed by Shri D.V. Khanna, Managing Director in the clearance of NOVA. 16. We also find that in this case, both the units are private limited and registered with the Regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the impugned order is set aside and the appeals are allowed. The cross objections filed by the Revenue are disposed off accordingly. 18. Further, we find that, in the case of CCE v. Sharad Industries reported in 2013 (294) E.L.T. 561 (T) this Tribunal again observed as under: We, after appreciating the submissions of both the sides find that there is not much dispute on factual position. It is not the Revenue s case that two units owned by Smt. Kamlesh Gupta and her husband Shri Avdesh Kumar Gupta not complete units having all the necessary machines and infrastructure for manufacture of their final product. Both the units have separate Sales Tax Registration, Industries Registration, Income Tax Registration, Electricity Connection, Telephone Connection ESI Registration etc. Merely because there is a door between the two units and power of attorney stand given to her husband to look after the job of her unit, by itself cannot be held to be a ground for holding both the units as one. Admittedly, husband and wife are entitled to their own business and if the husband is looking after the business of the wife that will not make the unit owned by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Commissioner in the impugned order has given the following findings : - 70 (ii) Whether each unit is entitled to a separate limit (under the SSI exemption notification) as per the Board s Circular No. 6/1992, dated 29-5-1992. I have perused the Circular No. 6/1992, dated 29-5-1992 [issued from F. No. 213/15/92-CX-6] issued by the Central Board of Excise and Customs, New Delhi in the context of SSI exemption Notification No. 175/86-C.E., dated 1-3-1986. In the said Circular, the board had, inter alia, clarified that the limited companies, whether public or private, are separate entities distinct from the shareholders composing it and hence, each limited company is a manufacturer by itself and would be entitled to a separate exemption limit. It is not in dispute that M/s. Ennar Cements and M/s. Seshashaila Cements are private limited companies registered separately under the Companies Act and each of them have separate factories. Taking various facts into account I have already held in my findings on (i) above that the management [of both the units] is one and the same and both the units are not independent to each other, thereby they are to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inasmuch as the services rendered being paid for in terms of agreement between them - Clubbing of clearances of units not justified in absence of conclusive evidence of financial flow back among them - Notification No. 83/83, dated 1-3-1983, No. 85/85, dated 17-3-1985 and No. 175/86, dated 1-3-1986. 23. We also find that the activity of the appellants were in the knowledge of the department as they were registered with the Central Excise Department and units are located in the same range, therefore, extended period of limitation is also not invokable for clubbing the clearance of DSA with NOVA. 24. From the analysis of the above decisions and the facts of the case before us, we find that both the units are separately located having separate registrations and dealing separately. We also find that there is no financial flow back, therefore, there is no mutuality of interest between the units. Accordingly, clearances of both the units cannot be clubbed together. 25. In these circumstances, the charge of clubbing of the clearance of M/s. DSA with M/s. NOVA is not sustainable and the same is set aside. 12. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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