2005 (10) TMI 26 - AT - Central Excise

CESTAT Bangalore Upholds SSI Exemption for Joint Venture despite High Turnover

The Appellate Tribunal CESTAT, Bangalore rejected the Revenue's appeal against dropping demands confirmed by the Additional Commissioner. The Tribunal ... SSI exemption – Not. 8/01 – Respondent an independent, registered unit – Merely because another unit have 74 % (majority) of the share in the respondent company, not makes both the units as one and the same – No financial flow back except flow of dividend – Exemption not deniable Issues: Revenue's appeal against dropping demands confirmed by Additional Commissioner based on eligibility for Notification No. 08/2001 due to joint venture ownership structure and turnover exceeding Rs. 300 lakhs. Analysis of ownership of immovable properties, financial flow between companies, and applicability of relevant legal citations.Ownership of Immovable Properties Analysis:The Revenue contested the benefit of SSI Notification due to a joint venture structure with 26% stake by the Government of India and 74% by M/s. HLL. The Commissioner (Appeals) found no evidence supporting the lower authority's conclusion that immovable properties belonged to M/s. HLL. The Share Purchase Agreement indicated ownership by M/s. Modern Food Industries Ltd. with equity held jointly. Mere business interest by HLL did not merge the companies, and financial flow was limited to dividends, not constituting a flow back to the holding company. The respondent was not a front company of HLL, and majority shareholdings did not imply financial flow.Eligibility for Notification No. 08/2001:Revenue argued that as HLL exceeded the turnover limit, the SSI exemption could not apply to the respondent due to HLL's 74% shareholding. However, the impugned order found no fault, noting the respondent as an independent unit with its brand. Shareholding alone was insufficient to deny the Notification's benefit, as per relevant legal precedents cited in the Commissioner (Appeals)'s order.Applicability of Legal Citations:The Commissioner (Appeals) correctly analyzed the case, emphasizing the independence of both M/s. HLL and the respondent under Notification No. 8/2001. Legal citations like CCE v. Gammon Far Chems Ltd. were distinguished as not applicable to the present scenario. The Apex Court's judgment in Supreme Washers (P) Ltd. v. CCE, Pune, regarding financial flow between units, was deemed distinguishable from the current case. As there was no merit in the appeal, it was rejected by the Appellate Tribunal CESTAT, Bangalore.This detailed analysis of the judgment highlights the key issues of ownership structure, eligibility for the SSI Notification, and the application of relevant legal citations in determining the outcome of the Revenue's appeal.