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TMI Blog2023 (9) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... be stated that the department is a bit confused as to the provisions of Notification 8/2003 which have been invoked in the SCN. Para 2(v) speaks about the situation for calculation of aggregate value of clearances for exemption limit (Rs.1.5 crore) when a manufacturer has one or more factories. It states that for the purpose of calculating the value of aggregate clearances the value of clearances of each factory of manufacturer should not be considered separately - Although it is alleged that BPKG which is run by GTP (Group of Three Persons) has exceeded the exemption limit and other units are dummy units, it is also alleged that BPI has exceeded the exemption limit of Rs.4 crores in terms of para 2 (vii). Admittedly, BPI is a firm which holds Central Excise registration and is paying excise duty. In other words, it does not avail SSI benefit. The unit BPI clears its goods on payment of duty. This fact has been accepted by the adjudicating authority. The duty liability raised in SCN is Rs.2,43,82,782/-. Taking into consideration the duty paid by BPI (Rs.16,60,246/-) the amount confirmed was reduced by the adjudicating authority to Rs.2,27,22,336/- (para 11.01 of OIO). In the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x return, income tax return etc. separately. The department has failed to establish the allegations raised in SCN for clubbing of clearances of the 11 firms. Further, the creation of a fictitious/deemed group (GTP) to be responsible for clandestine activities also does not find favor with us. As per the provisions contained in the Partnership Act 1932, persons can come together to form a partnership firm. Such a partnership can be terminated or dissolved only as per law - The department has, in fact, made all eleven units to be dummy units and created a new entity BPKG run and operated by GTP to be responsible for the clandestine activities. The provisions of law do not permit the same. The impugned order cannot sustain - Appeal allowed. - MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) AND MR. M. AJIT KUMAR, MEMBER (TECHNICAL) Shri N. Viswanathan, Advocate For the Assessee Shri M. Ambe, Deputy Commissioner (Authorized Representative) For the Revenue ORDER The issue involved in all these appeals being the same and being inter-connected, these appeals were heard together and are disposed of by this common order. 2.1 Brief facts are that M/s. Balaji Packag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing: Apart from the main unit, BPKG, the corrugated boxes were manufactured and sold under the invoice of 5 units namely, BPI, SHP, BC, KRK and BP. Out of this, Shri Andal Packaging (SAP) and Shri Pathmavati Packs (SPP) had no machinery for manufacture. Balaji Packaging (BPKG) having three partners namely, Shri V. Nagaraj and Shri K. Subbaiah and Shri K. Ravichandran, the de facto partner, representing his wife Smt. R. Rukmini, exercised overall control in the business activities of all manufacturing firms namely, BPKG, BPI, SHP, BC, KRK and BP and trading firms namely, SAP, SPP, SBPT, SEP and BIP. By doing so, they carried out their business activities with the common office staff and with the help of Shri R. Kasi Viswanathan, Manager of BPI and resorted to the following:- started manufacturing firms namely BPKG, BPI, BC, KRK, BP and SHP and trading firms namely SAP, SPP, SBPT, SEP and BIP with the help of their close relatives (as partners and proprietors), with an intention to evade excise duty payable on the clearances of Corrugated Carton Boxes manufactured by them at their BPKG unit or such other manufacturing units and by clearing such goods u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m under whose invoice the said Corrugated Carton Boxes are to be sold are mentioned in the Purchase Order under the markings as OC (i.e. Order Confirmation) although they purchased raw materials in the name of individual firms, they were brought to the premises of Common Office situated at BPI and distributed among the firms having manufacturing facilities such as BPKG, BC, KRK, SHP as per immediate requirement of the customers. even though all the manufacturing firms viz. BPKG, BPI, KRK, BC, BP and SHP have sufficient machinery to manufacture corrugated cartons and there is no difference in the type of goods manufactured (corrugated cartons),most of the corrugated cartons manufactured in BPKG, KRK, BC and SHP were sold under the invoice of other manufacturing firms of BPKG group including BPI and BP, they interchanged raw materials and final products among themselves without any monetary consideration they had shown mutual financial interest in as much as all proprietor (s) and partners of BPKG group of firms are close relations and since no coolie charges were collected for manufacture of corrugated cartons in one firm for the other firm among BPKG group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of BPI, Smt. R. Rukmani, Proprietor of BIP and Partner of BPKG / BP, Shri S. Rajathilagar, Proprietor of SHP, Shri K. Kanakaraj, Proprietor of SAP, Shri K. Gopi, Proprietor of SEP stated that they did not involve in the business activities of their respective firms. Shri K. Ravichandran , Partner of BPI/BC/BP, Proprietor of KRK and Sri V. Nagaraj, Partner of BPKG / BC and Proprietor of SBPT and Sri A. Subbiah partner of BPKG and BC admitted that they are carrying out the business activities of all firms. Therefore, Sri K. Ravichandran, Sri. V. V. Nagaraj and Sri A. Subbiah were responsible for running the business of all firms. From the above, it appeared that from the common office functioning at the premises of BPI which is headed by Shri R Kasi Viswanathan, the Manager of BPI, who looked after the entire business activities of all the manufacturing and trading firms of BPKG group under the directions of Shri K Ravichandran, Shri V Nagaraj and Shri A Subbiah a fact admitted by him in his statement dated 20-12-2013, there was financial flow among the units, which was claimed to have been carried out, when sufficient fund was not available in the account of a firm, there wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore factories or from a factory by one or more manufacturers, does not exceed rupees four hundred lakhs in the preceding financial year It appeared that the group of three persons namely Shri K.Ravichandran, Shri V.Nagaraj and Shri A.Subbiah were able to carry out the affairs of the BPKG Group units/firms in the above manner since they have exercised over all managerial, financial, operational and administrative control over the business activities of all the firms of BPKG group such as procurement of purchase orders, procurement of raw materials, distribution of raw materials, manufacture and clearance of corrugated cartons. They started the BPKG group firms with an intention to evade payment of central excise duty payable thereon for availing the SSI exemption on Corrugated Carton Boxes cleared in excess of Rs. 1.5 crores for which they are not entitled, and value of clearances of all the units/firms are clubbable with the value of clearances of BPKG, the firm having the said three persons as partners (or de facto partner) and being the firm started first, in terms of sub para (v) and para (vii) to para 2 to Notification No.8/2003 as amended. Show Cause Notice No. 26/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1944 on the duty demanded in para 13.04. 13.07.1 impose a penalty of Rs 2,27,22,336/( Rupees Two Crores Twenty Seven Lakhs Twenty Two Thousand Three hundred and Thirty Six Only) under Section 11AC of the Central Excise Act, 1944 on BPKG controlled and run by Shri V.Nagaraj and Shri A Subbiah and Shri K.Ravichandran 13.08. In respect of the co-noticees viz, BPI, BC, BP, SHP, KRK, BIP, SHP, SAP, SPP, SBPT, S/Shri. K. Ravichandran, V.Nagaraj, A Subbiah and R. Kasi Viswanathan, I impose a penalty of Rs. 50,00,000/ (Rupees Fifty Lakhs only) on each of them under Rule 26 of the Central Excise Rules, 2002. 4. Aggrieved by above, the appellant is now before the Tribunal. 5. Subsequently, show cause notices on the very same set of facts and investigation was issued for the different period from 01.04.2013 to 30.06.2017. After due process of law, the original authority confirmed the demand, interest and imposed penalty. On appeal, the Commissioner (Appeals) set aside the confirmation of demand, interest and penalties. Aggrieved by such order the department has filed appeal E/40725/2019. 6.1 On behalf of the appellants, Ld. Counsel Sri N. Viswanathan appeared and ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am V. Nagaraj 14.10.09 Trading 10. Sri Andal Packaging[SAP] 725/H-1, Virudhunagar Road, Thiruthangal, Sivakasi MK. Kanagaraj 19.11.09 Trading 11. Sri Padmavathi Packs [SPP] 1/17, North Street, M. Alagapuri, Meesalur PO, Sivakasi Smt. K. Devaki 07.10.10 Trading 6.2 The Ld. Counsel filed written submissions as follows : That BPKG is a partnership firm established in the year 1988 and were engaged in the manufacture of corrugated cartons and pads falling under Chapter 48 of the Schedule to the Central Excise Tariff and were availing the value-based benefit of the SSI exemption issued from time to time with its annual turnover remaining within the threshold limit of Rs.1.5 crores. In pursuant to certain purported intelligence that BPKG has created another unit BPI when about to exceed the limit of exemption to evade payment of the duty even the fact on record show that BPI which was sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir own factory infrastructure, finance, labourers, complying with the VAT, and Income Tax laws maintaining proper accounts and availing the SSI exemption, one was a job working unit and the remaining two trading units. 6.5. The Reasons for clubbing in short are as under : 1. The units had partners or proprietors who are related or friends to the GTP; 2. Maintenance of accounts and preparation of invoices for all the units from a common place viz. at the premises of BPI: 3 Distribution of the raw materials from the premises of BPI for all the units even while admitting that the purchases were made in the name of the individual units 4. Non-payment of coolie or job charges for job work done by the units for one another till the year 2011; 5. Financial accommodation on certain occasions for the only reason of non-payment of interest on the loan provided by one unit to the other. 6.6 BPKG on being initially advised approached the Hon ble Settlement commission and paid the admitted tax of Rs 30 lakhs besides debiting the amount of Rs 1, 51, 332/- lying as balance in the cenvat account of BPI apart from remitting the interest of Rs 9,65,101/-, admitting only to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgments relied in support in a most mechanical manner by merely borrowing the contention in para 11 of the notice by relying upon the statements obtained from the various personals. 6.8. The basic dispute to be resolved in this case is as to whether the clubbing of clearances of all the manufacturing units including one which is duty paying unit which is admittedly independent having their own funds, labour, machinery, factory in different geographical location and the job working unit and the three trading units who are admittedly eligible to avail the benefit of the exemption under Notification No. 83 84 of 1994 which is denied to them for the sole reason that they did not file the undertaking with the jurisdictional authorities as contemplated in the said notification even while not disputing the substantial compliance with the said notification and for the reasons that the units are owned by relatives and friends and that upto the year 2011 certain units have not paid the job charges to the other units even though it involved a stray incidents only and the same being a reciprocal arrangements between the said units and that the units have taken loans from the other with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the firm was different not only defies logic but also the legality of such a demand. 6.13 The charge and proposal to treat Shri K. Ravichandran as the defacto partner of BPKG and his wife R. Rukmani (factual partner) as the dejure partner is basically fallacious since neither the Partnership Act, 1932 nor the Central Excise Act, 1944 recognises the concept of any defacto or dejure partner. It is made to suit the convenience of the revenue but not supported by law and such a proposition by the authorities is not only bad in law but also against the provisions of law leaving no authority for them to make any such proposals. 6.14 The authorities failed to take note of the clear position of the law that partnership business is created by a deed of partnership whether registered or not and the authorities or for that matter no one else are authorised to form a different partnership on the basis of assumption or fiction. Holding a non-partner as a defacto partner is unknown to law and the Revenue is not empowered to create such new partnership contrary to the law and which is not intended or found in the deed for the only reason of somehow fasten the tax liability by denyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h actually ran the business to confirm the demand as proposed is wholly erroneous for the reason that in the first place there was no such allegation in the notice which resulted in the respondent traversing beyond the scope of the notice issued, to affirm the demand. The respondent further failed to take note of the law that a partnership can only be a disclosed one that too by way of a partnership deed and the involvement of any other person tacitly or otherwise cannot change the constitution of the partnership and its liability and as such no demand could be fastened on a partnership firm on the basis of any assumed role of any other person who is not a partner. 6.20 A partnership business is based on trust and the liability acquired is unlimited and it is not necessary that in a partnership business every partner has to play an equal role and it is for the partners to decide the role of each one of them. The presence of S/Shri Nagaraj and Subbiah are sufficient to run the business and affairs of BPKG and the muted and passive role of Smt. Rukmani cannot be called in question by others especially the Revenue when the provisions of the partnership act does not authorise or app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing their detailed objections, supported by documentary evidences the respondent had never considered these objections but had proceeded to confirm the liabilities on BPKG run GTP causing gross violation to the principles of natural justice rendering his order unsustainable. 7. The Ld. Counsel put forward the following contentions to argue that the proposal to club clearances is not sustainable on merits also. 7.1 The department has alleged five reasons for clubbing the clearances of all eleven (ii) units detailed in the table. In para 8.03 of OIO dt. 13.07.2016, the original authority had framed three main questions to answer the issues related to clubbing of clearances and confirmation of demand, interest and penalties. These three questions as in para 8.03 are : (i) Whether there exists an undisclosed partnership among the GTP consisting of S/Shri Ravichandran, V. Nagaraj, and A. Subbaiah and if so, whether that partnership can be considered as BPKG, a partnership first established with S/Shri V. Nagaraj, A. Subbaiah and Smt. R. Rukmani, W/o Shri K. Ravichandran as partners ? (ii) If such a partnership exists, whether the same can be considered as the actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court cited therein. The respondent thus without adverting to any of their defence submissions on fact and law merely approved the contentions made in para 11 of the show cause notice totally violating the principles of natural justice besides exposing his bias and non-application of mind. 7.5 The respondent relied upon the statements obtained from the various deponents holding that the same in the absence of retraction or seeking permission to cross examine the officers is admissible in terms of Section 14 of the Central Excise Act and in support of the same judicial pronouncements as recorded in para 09.04 to 09.07 of the order. 7.6 Findings were recorded in para 09.09 relying upon the decisions of the Supreme Court to record that I am afraid that if the contention of the noticees is accepted for the reasons put forth by them then any group of persons can establish any number of units and mis-use the SSI exemption provided under the Excise law . 7.7 In para 10.01 at pg. 79, the respondent again reproducing the various allegations on fact made in the notice had adopted the said versions without any consideration for the objections raised by BPKG as well as by others w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the partners are either related in some way or the other or friends and hence they are not truly independent is bereft of any logic or meaning and is also against the settled position of law. The respondent also failed to appreciate that since liability of partnership firm is unlimited, it is but natural that partnership business is started taking the family members at the first instance as partners and in the second instance like mined and trusted friends as partners. As mutual trust is the back bone of a partnership firm, members of the family and friends becoming partners is nothing strange and the said practice is legally permissible and no objections could have been taken against it. 8.1 With regard to the independent status of the various entities who were either partnership firms or sole proprietor firms, the respondent in para 09.02 09.03 of his order placing reliance on certain decisions of the Apex Court had held that the corporate veil could be lifted or pierced to ascertain true nature of the persons who constitute such entity and their business relationships especially in the matter of tax evasion. There is no qualm on the part of the appellant to appreciate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners and hence the respondent ought to have religiously followed the instructions contained in the said circular which is still valid and existing and also binding on him. failure of which renders his order otiose and redundant. On the other hand, the respondent had placed reliance on the decisions of the Hon'ble SC in the case of Modi Alkalis Chemicals Ltd. reported in 2004 [171) ELT 155 (SC) to get over the above circular which is wholly misplaced. The said decision was rendered in the context of the peculiar facts and circumstances in which the three front companies established were found to be dummy and the directors of the said front companies were either directors or employees of Modi Alkalis and the entire gas produced was sent through pipe lines to the adjacent premises where the three companies existed which were in a common premises with Modi Alkalis and that they merely filled the gas in the cylinders and sold the same, the machinery to fill the gas and the cylinders belonged to the parent company and they had advanced huge capital to the later and the price charged per unit was a mere 0.50 per cylinder whereas the front companies sold the same for Rs.5/- and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ems Vs CCE -2006 (201) ELT CESTAT; 4. CCE Vs Vaspar Concepts - 2006 (196) ELT 95 CESTAT; 5. Coimbatore Engineering Works Vs CCE - 2009 (239) ELT 366. 6. CCE Vs Bombay Neon Signs - 2004 [166] ELT 102 CESTAT, 7. Renu Tanden Vs UOI - 1993 [66] ELT 375 Raj; 8. CCE Hyderabad Vs Beaver Engineering Components -2017 (353) ELT 126; 9. CCE Vs Saron Mechanical Works - 2016 [332] ELT 80 Pun Har; 10. Associated Engg Projects Vs CCE, Meerut - 2019 [370] ELT 756; 11. Jain Pole Industries VS CCE, Jaipur - 2018 [364] ELT 189 Tri Del; 12. CCE Jaipur Vs Electro Mechanical Engg. Corpn - 2008 (229) ELT 321 SC; 8.5 In this case, admittedly, the funds for the establishment of the units for purchase of machineries, working capital, funds for the purchase of raw material and expenses for production having admittedly been met by the respective units from out of their own funds and not provided by others there is absolutely no question of maintaining the allegation that there was Commonality of funds or flow back of funds BPKG was established by obtaining loan from TIC which fact has been stated in the statement of the partners of BPKG Similarly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n -payment of coolie charges for having undertaken the job work by the representative units has been cited as a reason for financial flow back and for the consequent clubbing it is on record @pp 213 that the various unis at different points of time gave raw materials to the job working units such as M/S NAAGAS and Sree Pothis Packaging Industries and got the cartons manufactured by them and paying the appropriate coolie charges to the said job workers and hence the value of such goods cannot be clubbed with BPKG The job working units were independent units doing job work to others as well by the units themselves in case of necessity. It is well settled that conversion of raw materials into finished goods amounted to manufacture and the person who undertakes production is the manufacturer who is answerable for the tax liability on such goods and not the raw material supplier. Hence the value of goods manufactured and removed by the job worker could not at all be clubbed with that of BPKG. The above activities of the job working manufacturers was also exempted vide Notification No.83 84/1994. 8.9 It is on record that the other manufacturing units also at certain points of time d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worked goods value also and hence there can be no objection from the department on this account. 8.11 Without prejudice the notice had also fairly admitted that each of the manufacturing units including that of the job worker have factory premises of their own and they are not either dummy or letter pad companies. [pgs 92 93 of the typed set- para 3.1.5 and 3.1.8 of the notice - para 32 of the reply by BPKG. Only the trading premises were found not having any machineries Trading firms naturally need not have any manufacturing facility as they are mainly supplying raw material and getting the goods converted on payment of the job charges or coolie charges. All the trading units have VAT registration and discharged VAT which fact is not disputed. Similarly, all the manufacturing units have also paid VAT and the authorities had collected the sales figures only from VAT authorities and not even a single transaction was found to have suppressed or unreported 8.12 The allegation that distribution of raw materials was made from the premises of BPI to all the units is factually incorrect: [Reply @ para 46, 49 of BPKG refers] As all the records for the purchase of the units were mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELT 295 CESTAT 3. M/S Alpha Toya Ltd. Vs CCE 1994 (71) ELT 175 CESTAT 10. One other allegation is that accounts of all units were maintained in a common place (at the premises of BPI). It is argued that Maintenance of accounts of several units in a common office for cost conservation and utilisation of the services available in common is permissible in law especially for SSI units which could not result in the units being called non-independent which legal position has been affirmed in the cases reported in (i) 2013 (294) EL1 561 (T), (ii) 2008 [229] ELT 321 (SC), (iii) 2003 (152) ELT 194 (T.-Del), (iv) 2004 [167] ELT 299 [Tri Mum) (v) 2009 (243) EL1 79 (Tri Chennai) and (vi) 1993 (66) ELT 375 (Raj); CESTAT Chennai Final order in appeal Appeal Nos. E/41748, 41748, 41749 41750/2018 DB. The same position prevails for issue of invoices from the common premises. 11. In regard to the appeal filed by department it is submitted that the notice issued for the clubbing of clearances of the manufacturing units for the subsequent period on being confirmed by the original authority the same was vacated by the learned Commissioner of Central Excise (Appeals] Madurai vide her ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Balaji Pack 136B, Sukkiravarpatti Road, Anaikuttam, Sivakasi. K. Ravichandran, R. Rukmani (w/o K.Ravichandran) and Smt. N. Devaki (w/o V.Nagaraj) 1/2/2009 33546001718 31/12/2011 8. Sri Balaji Pack Tech 1/363, Sukkiravarpatti Road, Anaikuttam V. Nagaraj 14/10/2009 33156002854 31/12/2011 9. Sri Andal Packagings 725/H-1, Virudhunagar Road, Thiruthangal, Sivakasi K. Kanakaraj, M(Brother of K. Ravichandran) 19/11/2009 33046002866 31/12/2011 10. Sri Padmavathi Packs 1/17, North Street, M. Alagapuri, Meesalur (PO), Sivakasi Smt. K. Devaki 7/10/2010 33895782385 31/12/2011 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale proceeds without consuming any electricity which appeared to be sales turnover from trading. 13.2 Further on examination of the Despatch Register Sl.No.97 (enclosed in Sl.No.54 of Annexure B) seized from the premises of BPKG under mahazar dated 04.12.12, it appears that it contains despatch details of corrugated boxes manufactured at BPKG; The details includes Name of the customer, No. of bundles, No. of boxes, Vehicle no. used for transporting the consignment and the name of the firm under whose invice the consignment was sold. On examination of dispatch entries contained therein, it appears that there were despatches of Corrugated Carton Boxes which were manufactured at BPKG but cleared under the invoices of SAP; for instance. i. (860 +225+65) Nos. of corrugated boxes were despatched from BPKG to M/s.Thiyagarajar Mills Nilakottai, under the Invoices No.537 dated 02-03-2010 of SAP through vehicle No.TN67L0183 and the same is found tallied with he respective invoice found in the Invoice file bearing Sl.No.28 (Enclosed in Sl.No.28 of Annexure-B) containing the invoices of SAP recovered from the premises of BPI under mahazar dated 04.12.2012. On further examination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms as per their direction. 13.4 All the above established that SAP was a fictitious firm which did not have factory premises, machinery, workers and the corrugated cartons were manufactured at BPKG BC. Further all invoices and accounts were maintained by all firms at common office at BPI premises and maintained and monitored by single person Shri Kasivishwanath. Thus the value of clearance/sales effected under the invoices of SAP have rightly been clubbed / included with the value of clearances of M/s.BPKG. 13.5 The verification of details of M/s. Sri Padmavathi Packs (SPP) also revealed that the address given in the sales invoices of SPP was a residential premises. Sri Devaki, the proprietor of Sri SPP said that it is a residential building and not a factory. It was stated by her though she is the proprietor of M/s.SPP, the business activities are looked after by her husband Sri V. Nagaraj and Sri R. Ravichandran. It was also stated by her that it started on 17.09.2010 and was closed on 31.12.2011. It can be seen that M/s.SPP was a trading firm and the corrugated boxes sold by M/s.SPP vide invoices was manufactured in the factory of BPI. On comparing the details of sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and without consuming electricity, SBPT has declared huge sales turnover before CTA which appeared to be from trading. The production registers seized from the factory premises of M/s.Sri Hari Pack (SHP) it contained details of dispatch of corrugated boxes. It was seen that despatches of SHP were made under invoices of SBPT. For eg. In case of despatch of 700 nos. of corrugated boxes; it doesn t mention any corresponding invoice by SAP, whereas the same quantity of corrugated boxes are shown cleared under the invoice of SBPT on the said date. Sri K. Ravichandran admitted that boxes manufactured from other units were cleared in the name of M/s.SBPT. Thus M/s.SBPT was fictitious fir and corrugated boxes sold under invoices of M/s.SBPT are manufactured by M/s.BPKG. 14. Ld. A.R adverted our attention to discussions in para 4.4 in regard to certain fictitious firms which though had machines was not carrying out any manufacturing activity. On examination of Registration Certificate (CTA) of M/s.Sri Eswari Packs (SEP) the office address was at Sukkiravarpatti Road, Thiruthangal. The factory address was at SIDCO, Kappalur, Madurai. When officers visited the factory premises, the factor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Sri Hari Packs (SHP) though had machinery etc. for manufacturing boxes were clearing their goods under the invoices of other firm of the BPKG Group. On examination of the Reel Receipt note bearing Sl.No.11 73 (Enclosed in S1.No.41 of Annexure-B)) recovered from the factory premises of BC, it appears that BC had received kraft paper in reel form rom BPI for the manufacture of corrugated boxes. Shri D.Murugan, Supervisor of BC has stated in his statement dated 4.12.2012 (Enclosed in si.No.22 of Annexure-A) that the plain kraft paper and printed kraft paper were received from BPI through the transport vehicle Van; the corrugated cartons manufactured at BC were cleared, to Britannia Industries under the invoices of BC prepared at BPI and sent through the transport vehicle van. On examination of the deliver notes contained in the File bearing Sl.No.143 (Enclosed in Sl.No.42 of Annexure-B) recovered from the premises of BPI under mahazar dated 04.12.2012, it appears that BPI had sent raw materials to the sister concerns of BPI including BC for the. Manufacture of corrugated cartons. When these delivery notes contained in the said file was shown to Shri K.Ravichandran, partner of BC, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding in the account of other firm did not receive any Interest for such outstanding amount, a fact admitted by Shri.R.Kasi Viswanathan in his statement dated 20-12-2013 (Ref:Ans.to Q.No. 10). It appears that it is obligatory on the part of the debtor to deduct TDS from the interest amount payable to the creditor on the Outstanding amount; the ledger folios under the head TDS (Enclosed in S1.No.6lof Annexure-B) showing payments of coolie charges and interest paid to the Bankers indicate that while there were entries for payment of conversion charges to NAGA and SPPI for the job work of manufacturing corrugated cartons, interest paid to City Union Bank and other cooly charges paid to other job workers such as Lami Coats, Reka Cutting Works etc.; but no payment of conversion charges were indicated in the said account folios Viz. CONVERSION CHARGES PAID |Enclosed in SI.No.61 of Annexure-B) among the BPKG group units/ firms such as BC, SHP or KRK; no payment of interest on the outstanding amount was made in the, said account folios for the period April 2009 to January 2013 (Enclosed in S1.No.61 of Annexure B) among the group firms as creditors. From the above, it appears that thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of goods manufactured by job workers Naga and SPPI and also sales turnover of SAP, SPP, SBPT, SEP and BIP in terms of para 2 (v) and 2 (vii) of notification 8/2003. 19.2 The relevant para of Notification 8/2003 reads as under : Para 2(v) where a manufacturer clears 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 Para 2/vii) the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories or from a factory by one or more manufacturers, does not exceed rupees four hundred lakhs in the preceding financial year 19.3 At the outset, it has to be stated that the department is a bit confused as to the provisions of Notification 8/2003 which have been invoked in the SCN. Para 2(v) speaks about the situation for calculation of aggregate value of clearances for exemption limit (Rs.1.5 crore) when a manufacturer has one or more factories. It states that for the purpose of calculating the value of aggregate clearances the value of clearances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld like to reproduce the relevant part of the impugned order passed by Commissioner (Appeals) in regard to the demand for the subsequent periods. The discussions read as under : The department had not conducted any investigation to ascertain that the same modus operandi that existed at the time of investigation by DGCEI continued to exist during the subsequent period for which the impugned notices were issued. There is nothing on record to show that the same practice continued even after the period for which the first notice was issued. The charges of clandestine removal cannot be proved on conjectures and surmises. The Tribunal and Courts, in the various cases, has held that the charge of clandestine removal is to be established by the department and that the burden to prove the clandestine removal lies solely and exclusively on the department and is required to be discharged by concrete and clear evidence. Mutuality of interest, financial integrity among various units and unit o! control are sine qua non for clubbing of clearance of units involved. The CESTAT, South Zonal Bench, Chennai in the case of Commissioner Of C. Ex., Chennai-IV Versus B.K. Office Needs (P) Ltd. (2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal against this order of Commissioner (Appeals). 22. In the case of Studioline Interior System (P) Ltd. Vs CCE Bangalore-I 2006 (201) ELT 250 (Tri.-Bang.) it was held that mere presence of common directors / partners cannot be reason for clubbing of clearances. The interest of parties directly or indirectly in the business of each other and flow back of profit of one unit to another has to be proved. When units belong to a group of persons, occasional financial accommodations may not be uncommon. When each unit is registered with Central Excise / State authorities there should be clear evidence to treat them as dummy units. The Hon ble Supreme Court in the case of Attire Industries 1995 (17) ELT 323 (SC) observed that Mutuality of Interest means both the companies mutually got benefited with each other by sharing profit and losses. 22.1 The decision of the Apex Court in the case of CCE New Delhi Vs Modi Alkalies Chemicals Ltd. 2004 (171) ELT 155 (SC) has been relied by the adjudicating authority in para 10.3 and 10.4 of the order. The facts, in the case of M/s.Modi Alkalies Chemicals show that all the three bottling units were located in one single shed and were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tore room for raw materials could not be reason for clubbing of clearances. 22.5 The Tribunal in the case of Associated Engineering Projects Vs CCE ST Meerut-I - 2019 (370) ELT 756 (Tri.-All.) had occasion to consider the issue of clubbing of clearances. It was held that merely because the units are run by some family members and books of accounts maintained by accountant in one common office it cannot be held that there is mutuality of interest or financial flow back. In absence of such evidence, the clearances cannot be clubbed. 23. With this background, let us now proceed to examine the facts and evidence of the case before us. The three issues analysed by the adjudicating authority to arrive at the conclusion to club the clearances of all units is already noticed in para 7.1 of this order. In fact, all the eleven units are held to be dummy units by the department and the demand of duty is raised against a new unit i.e. BPKG run and operated by GTP. The unit BPKG has three partners viz. Smt. R. Rukmani, V. Nagaraj Sri A. Subbiah. As per the statement given by Smt. R. Rukmani that her husband is looking after the business of the firm, the department has removed her from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharge of responsibilities imposed by it. Also in this case, the SCN, based on the investigation conducted has proposed to deny the SSI exemption availed by the group units in respect of the Corrugated Cartons and Pads accounted as their manufacture or got manufactured on job work basis by treating the proposed GTP consisting of S/Shri. K. Ravichandran, V. Nagaraj, and A.Subbaiah as the actual manufacturer of the goods and to assess them accordingly to the duty payable under the Central Excise Act. In view of the legal position explained above, I consider that there is nothing wrong in the proposal made in the Notice and the noticees are bound to meet the charges framed against them in order to enjoy the privileges conferred by the SSI exemption Notification and thus I over rule their preliminary objection and hold the same as not maintainable . 23.2 The discussion is continued in para 07.03 and 07.04 wherein the adjudicating authority has relied upon the decision of Hon ble Apex Court in the case of New Horizons Ltd. Vs UOI - 1995 SCC (1) 478 (SC) and held that by the process of lifting the veil the law can go behind the corporate personality or ignore the separate person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o receipt of raw material they cannot be treated as manufacturing unis to club the sales turnover with manufacturing units. 25. The Ld. Counsel for assessee has relied on Board Circular No.6/92 dated 19.05.1992 issued under Section 37B of Central Excise Act, 1944 to argue that Board has given instructions that different firms have to be treated as different manufacturers for the purpose of SSI limit. The said circular reads as under : The question whether different partnerships having common partners, are treatable as separate manufacturers of the same manufacturer, would be a question of fact in each case to be determined on the basis of such factors among other, like composition of the partnership, existence of the factory, licence, nature of goods manufactured etc. Different firms will be treated as different manufacturers for the purpose of exemption limit. But if a firm consisting of certain partners say A.B. C. has got more than one factory, all these factories should, of course, be combined. Limited companies whether public or private, are separate entities distinct from the shareholders composing it. Hence each limited company is a manufacturer by itself and will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. separately. We do not find any evidence indicating mutuality of interest. 28. The department has also alleged financial accommodation between the firms and that interest was not paid. The Ld. Counsel submitted that temporary loans were given by one unit to another in case of necessity which is nothing irregular. These loans have been properly accounted and paid back as reflected in their financial records. The non-collection of interest for temporary loans itself cannot be a ground to consider the units as dummy units. Except for the allegation that some financial accommodations were made by one unit to another for which no interest was paid, there is no allegation of major funds being transferred by way of routing the income from all units to a single unit. 29. The non-payment of job work charges is another allegation for clubbing the clearances. According to appellant Sri Easwari Pack / formerly known as Naga Packing of which K. Gopi is Proprietor is a job work unit. The Ld. Counsel submitted that, job working units were independent units doing job work to others as well. All the transactions have been properly accounted. In terms of notification 83-84/1994 job work by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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