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TMI Blog2022 (8) TMI 830X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted simultaneous searches on various premises on 07.08.2013. Incriminating documents along with CPUs/laptop were seized under mahazar drawn at the respective premises. As a follow up action searches were also conducted at the premises of few dealers. The CPUs seized from the factory of M/s.VPPL and other CPUs / laptop / note pad / pen drive which were seized from various other places as mentioned in office letter dated 30.08.2013 (Annexure-A20) were handed over by DGCEI to Central Forensic Laboratory (CFL), GEQD at Hyderabad for retrieval of documents. The laboratory furnished printouts of documents retrieved vide their letter dated 28.09.2015. On the basis of documents retrieved / seized from the premises and also after recording statements of various persons, it appeared that M/s.VPPL was evading Central Excise Duty by clandestinely clearing the goods in the name of other firms and thus suppressing their actual sales turnover. It also appeared that M/s.VPPL and their group firms were claiming discount @ 20% mostly upto December 2012 and @ 37.8% from January 2013 onwards in their invoices issued to the customers without actually passing on the discounts to customers. M/s.VPP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s.Revathi Fireworks Industries, M/s.Vadivel Flame Factory, M/s.Venus Fire Works, M/s.Vadivel Pyro Park shall also liable to pay the appropriate interest under Section 11AA of the Central Excise Act, 1944 on the amount demanded from them as above. 8. I impose a penalty of Rs.95,58,702/- (Rupees Ninety five lakh fifty eight thousand seven hundred and two only) on M/s.Karthi Fire Works under Section 11AC(1)( c) of the Central Excise Act, 1944." 2.3 Separate penalties were imposed on the Managing Director Shri V. Arumugasamy and his son Shri A. Vasant Vikas, Director as under : "25. I impose a penalty of Rs.86,58,453/- (Rupees Eighty six lakh fifty eight thousand four hundred and fifty three only) under Rule 26 of CER, 2002 on Shri.V.Arumugasamy, Managing Director of M/s.Vadivel Pyrotech Private Limited, Sivakasi. 26. I impose a penalty of Rs.86,58,453/- (Rupees Eighty six lakh fifty eight thousand four hundred and fifty three only) under Rule 26 of CER, 2002 on Shri.A.Vasanth Vikas, S/o.Shri V.Arumugasamy, Director of M/s.Vadivel Pyrotech Private Limited, Sivakasi." 2.4. Aggrieved by the confirmation of duty along with interest and the penalties imposed, the appellants namel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P Ltd during 2013 4 M/s.Karthi Fire Works Partnership firm: V.Arumugasamy Athiban (son) Merged with M/s.Vadivel Pyrotech Park in 2013 5 M/s.Vadivel Pyro Park Partnership firm: V.Arumugasamy Vasantha Vikas (son) Sujatha (daughter in law) Athiban (son) M/s.Karthi Fire Works merged in 2013 Prior to merger, all these small units were availing SSI exemption and consequently not discharging Central Excise duty. 4. Learned counsel submitted that the period of dispute is from 2011-12 to 2014-15. He submitted that though the small units were formed by family members of Shri V. Arumugasamy as partners, the existence of the units were independent. Prior to merger, none of the units were dependent on one another and there were no inter-unit transactions. Each unit had separate factory premises on their own with infrastructure equipment and capital to run the units and were not sharing any profits among them. There was no flow of funds for purchase of raw material or clearance of goods between these units. The units also did not do any job work for others and were independent of each other and enjoyed the SSI exemption available to each one of them. 5. The first allegation rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions : (i) Premium Packaging Pvt. Ltd. Vs CCE Kanpur 2005 (184) ELT 165 (Tri.-Del.) (ii) Surya Boards Ltd. Vs CCE Rohtak 2014 (312) ELT 282 (Tri.-Del.) (iii) Ambica Organics V s CCE& Cus. Surat-I - 2016 (334) ELT 97 (Tri.-Ahmd.) confirmed by Gujarat High Court reported in 2016 (334) ELT A67 (Guj.) (iv) S.N. Agrotech Vs CC, New Delhi - 2018 (361) ELT 761 (Tri.-Del.) (v) Vishnu Kumar Traders (P) Ltd. Vs CC Chennai-IV 2019 (369) ELT 1070 (Tri.-Chennai) (vi) CCE Delhi Vs Jindal Nickel & Alloys Ltd. 2020 (371) ELT 661 (Del.) 7. In para-26 of the SCN, the appellants have been called upon to show cause jointly and severally. Further, in sub-para (b) of para-26 of SCN, the appellants have been called upon to show cause why all the units should not be treated as single financial entity constituting one single manufacturer and why their clearances should not be clubbed together to demand duty. It can be seen that though department alleges that clearances of all the units have to be clubbed as one unit and as a single manufacturer, in sub-paras (c) to (h) of para-26 of the SCN, the department has proposed to demand duty separately on all the units. It thus appeared that depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the same details appeared in File No.109/1, it is authentic and does not need any corroboration by the said dealers as to purchase of goods clandestinely. Such observation is erroneous. Even though the department conducted searches on the premises of raw material supplier and transporters, no incriminating evidence was brought out to prove excess production to support the allegation of clandestine removal. The excess receipt of raw material or consideration has not been alleged or established by the Department. 10. After investigation, common show cause notice has been issued to all the units wherein the proposal is to demand duty jointly and severally. Such demand made against the appellant jointly and severally cannot sustain when the allegation is to club the clearances of all the units alleging that some of the units are dummy units. 11. The Ld. Counsel submitted that reason for alleging that appellant M/s.VPPL has clandestinely cleared the goods to the other small units and thus has suppressed the value of clearance is because all the units were managed / owned by the members of the same family. Further because the accounts of all the units were maintained in the office o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm Value of clearances 1 2012-13 RFW 29,41,555/- 2 2012-13 VFW 61,670/- 3 2012-13 VFF 11,08,713/- 14. The above units are separate legal entities and they have separate premises/sheds to produce crackers. They have foreman and other workers in their factory to produce fire crackers. The raw materials were produced out of their funds and sales proceeds of finished products were realized by cash and cheque which was accounted properly. The workers have been paid wages from their own funds. There was no common funding or sharing of profits with any of the firms of the Vadivel Group or with VPPL. These units were registered with the Director of Industries as a Micro unit producing fire crackers. Each unit had separate VAT and CST registration. So also, they have separate PAN issued by the Income Tax Department. The amount of each unit had been properly audited by the statutory auditors and Income Tax returns have been filed. In terms of Notification No.8/2003-CE each of the above unit is entitled to avail exemption upto the aggregate value of clearance of excisable goods upto the value of Rs.1.50 crores. Since none of the above units had exceeded the limit of exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms which corroborated with the details in file No.109/1. Again, the printouts contained the ledger of various parties and showed details of invoices of M/s.VPPL and other firms of Vadivel group. The amounts under column "Bill amounts, Sales, Total and Receipts" were deliberately shown in two digit less in order to evade payment of tax. The date wise sales details of the firms namely, Karthi Fire Works, Revathi Fire Works Industries, Vadivel Flame Factory, Venus Fire Works and VPPL for the period 2012-13 and 2013-14 were found in the said file No.109/1. The ledger print outs in the nature of bill amounts were corroborated with the total amount mentioned against respective firms. 20. Countering the argument of Ld. Counsel that computer printouts contained in File No.109/1 and the hard disc etc. are not admissible evidences, he adverted to the discussions of the adjudicating authority in para 41.8. 21. Ld. A.R argued that Managing Director of VPPL and his son Mr. Vasant Vikas admitted that the details in the printouts retrieved from the CPU were fed in the computer by their employees. The data in such print outs seized from the factory matched with the document retrieved by CRL, Hyd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk and thereby wrongly availed the small scale exemption under Notification No.8/2003-CE dated 01.03.2003. 27. The relevant part of the Notification No.8/2003-CE which gives SSI exemption reads as under : "In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) (herein after referred to as the Central Excise Act) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 8/2002-Central Excise, dated the 1st March, 2002, published in the Gazette of India vide number G.S.R. 129(E), dated the 1st March, 2002, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts clearances, specified in column (2) of the Table below (hereinafter referred to as the said Table) for home consumption of excisable goods of the description specified in the Annexure appended to this notification (hereinafter referred to as the specified goods), from so much of the aggregate of, - (i) the duty of excise specified thereon in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the First Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances referred to in paragraph 3 of this notification) till the date of exercising the option; (iii) the manufacturer shall not avail the credit of duty on inputs under rule 3 or rule 11 of the CENVAT Credit Rules, 2002 (herein after referred to as the said rules), paid on inputs used in the manufacture of the specified goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified in the said Table does not exceed rupees one hundred lakhs; (iv) the manufacturer also does not utilise the credit of duty on capital goods under rule 3 or rule 11 of the said rules, paid on capital goods, for payment of duty, if any, on the aforesaid clearances, the aggregate value of first clearances of which does not exceed rupees one hundred lakhs, as calculated in the manner specified in the said Table; (v) where a manufacturer clears the specified goods from one or more factories, the exemption in his case shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said Table and not separately for each factory; (vi) where the specified goods are cleared by one or more manufacturers f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e small units have to be treated as a single financial entity constituting one single manufacturer and their value of clearances should be clubbed together as they have wrongly availed the SSI exemption. The demand of duty is seen to have been raised separately on all the 6 units. Thus, though it is alleged that the value of clearances have to be clubbed, the duty demand has been raised separately on all the units which indicate that the department considers all these units to have independent existence. In other words, though department alleges that M/s.VPPL was using other units as dummy units for clandestinely removing their finished products, they in fact admit that these units have independent existence. In other words, these small units are not dummy units. Since duty demand is separately raised on all the units, the allegation that M/s.VPPL was clandestinely removing the finished products using the dummy units appears to be confusing. We are not able to decipher as to what exactly is the ground for clubbing the clearances. 31. In para-26 of the SCN, all the appellants have been called upon to show cause jointly and severally against the allegations. The Learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in the printouts retrieved from the hard disc of the CPU seized at the factory premises of M/s.VPPL. Para 4.1.3 of the SCN reads as under : "4.1.3 Similar all sales details of 2012-2013 and 2013-2014 (upto 9/7/2013) were observed in the Printouts of documents retrieved by GEQD, Hyderabad from the CPU seized at the factory premises of VPPL. Pages Nos.491 to 737 contains printouts captioned "All Sales Details for All" - Period from 01/04/2012 to 31/03/2013 (Annexure A-24) and from Pages No.738 to 899 contains printouts captioned "All Sales Details for All" - Period from 01/04/2012 to 09/07/2013. (Annexure A-25). Details available in the printouts retrieved by GEQD, Hyderabad found to contain the same details available in file S.No.109/1 seized from the factory premises of VPPL. Thus it appears to show that the details were entered and stored in the system by VPPL personnel and that the transactions were sales details of VPPL and their related firms." 33. Thus, the main documentary evidence relied by the department is the computer printouts obtained from Income Tax Department as well as from the hard disc of the CPU seized from the factory premises of VPPL. The Ld. Counsel for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible. (2) The conditions referred to in sub-section (1) in respect of a computer printout shall be the following, namely :- (a) the computer printout containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; (b) during the said period, there was regular supply to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived; (c) throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of period was not such as to affect the production of the document or the accuracy of the contents; and (d) the information contained in the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accounts of all other units. As already seen from the above decisions, merely because one unit is maintaining the accounts of the other units, it cannot be said that the other units are dummy units. In para-10 of SCN, the account details obtained from various banks have been reproduced. However, there is no discussion that the amounts were paid to raw material suppliers for purchasing raw material in the name of dummy units so as to facilitate clandestine clearance in the name of the main unit. After discussing various bank details, in para 10.11 of the SCN, it is stated that Vadivel Group of firms have maintained various accounts not only in the name of their firms but also in the name of other units and received money and used in their business activities. These bank statements do not show that there is flow back of funds in the nature of transactions for purchase of raw material or collection of amounts from the customers. 39. For clubbing the clearances, the department has to establish mutuality of interest, flow back of funds between the main unit and the alleged dummy units. For this, the department has to produce evidence that the main unit was purchasing raw material thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Coimbatore Engineering Works Vs CCE Coimbatore - 2009 (239) ELT 366 (Tri.-Chennai) held that borrowing funds in need is not a bar between two units eligible for SSI benefit. 42. In the case of CCE Kanpur Vs Sharad Industries - 2013 (294) ELT 561 (Tri.-Del.), it was observed that husband and wife are entitled to do their own business and if husband is looking after the business of wife, it would not make the unit owned by wife as dummy unit. The prime requirement, for clubbing the clearance of two units is that both the units do not have any independent existence or independent machinery and infrastructure to manufacture the goods. If both the units are complete by itself, capable of manufacturing the goods without any help from the other unit, it has to be held that both the units are independent units. The evidence of common office premises, common staff and common maintenance of records cannot be a sufficient ground to club clearances of the units. The relevant paragraphs of this decision are reproduced as under : "2. Brief facts of the case are that a team of Central Excise Officers of Agra visited the factory of M/s. R.R. Foundry, Agra on 5-8-1995. The officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is with the husband to run the business which is in wife's name and the products are with the Brand name which is admittedly belonging to their family therefore prima-facie it appears that the benefit of both the units is accruing to the same set of persons constituting a family. Merely because they are having separate records for the requirement of Trade Tax Act etc, the two cannot be considered separate. The acid test in such case is recipient of the benefit. Unless the wife or husband are professional and engaged in separate business by virtue of their professional standing and practice it is difficult to hold that enterprises having common product, common management and common brand name etc. are separate. Though the noticee have argued that prior to year 1991 M/s. Sharad Industries was a partnership firm but there is nothing to prove that the other partner Smt. Kamlesh Gupta was a person not closely related to the family. Moreover, the period prior to year 1991 is not subject matter of these Show Cause Notices. In the case of Ashok Enterprises v. CCE - 1997 (92) E.L.T. 77 the Tribunal held that the two partnership firms owned by son and daughter in law producing the other pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been able to establish sufficient grounds for clubbing the clearances of each unit or for confirming duty against all the 6 units. 43. The second duty demand is with respect to the allegation that M/s.VPPL has not passed on the discount to their customers and has thus suppressed their actual sales turnover. It is submitted by the Ld. Counsel that clearances made by all the units were totally accounted in their books. Though the department has obtained invoices and sales ledgers in regard to their customers they have merely relied upon sales ledger maintained by a few customers only. In para 41.24.1 the adjudicating authority has made a very small discussion about this allegation. It is stated that appellants have mentioned the discount amount in their invoices but collected the amounts from the parties later. To support such allegation, they have mainly relied upon computer printouts in File No.109/1 as well as printouts obtained from the hard disc. Further, these have been compared with sales ledgers from two or three customers. It is the case of the department that the sales ledgers of the customers show that they have paid to the appellants amounts including the discount. W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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