2016 (6) TMI 403 - AT - Central Excise

Tribunal overturns duty demand due to unclear identification of principal manufacturer and dummy units.

The Tribunal set aside the orders confirming a Central Excise duty demand on multiple manufacturing units due to the lack of clarity in identifying the ... SSI Exemption - Clubbing of clearance of 3 manufacturing units - duty demand alongwith interest and equal amount of penalty - mis-utilisation of SSI benefit provided in Notification No.8/2001 (CE) dated 01.l03.2001, by not accounting for the clearance value of its other units M/s. Manish Garments and M/s.Manish Apparels in its books of accounts - Held that:- Adjudicating authority has not specified that out of the 3 appellants, who is the principal manufacturer and who are the dummy units of the principal manufacturer. In absence of clear specifications with regard to the principal manufacturer, in whose turn over, the clearances of dummy units have to included, it is not only difficult but imposible to recognise as to who is the principal manufacturer, on whom the duty liability can be fastened. The operative portion in the adjudication order fixing the liability for payment of duty and penalty by all the appellants, jointly and severally, clearly shows that the Revenue has recognised implicitly all the appellants as independent units. Hence, without categorically specifying or bifurcating as to who is the principal manufacturer and who are the dummy ones, floated with a view to conceal clearance of principal manufacturer, confirmation of duty demand will not stand for judicial scrutiny. The SSI exemption provided under Notification No.01.03.2001 cannot be denied on the ground that the said Notification specifies the manufacturer and not the manufacturers for the purpose of getting SSI benefit. Thus find support from the decision in the case of Shiva Exim Enterprises (2005 (2) TMI 294 - CESTAT, NEW DELHI ) cited by the ld. Advocate for the appellant, wherein it has been held by the Tribunal that clubbing of clearance of 2 Units can be ordered only if one unit is the principal unit while the other is a dummy one, which had been floated with a view to camouflage clearance of the principal unit. Though the Revenue has filed Civil Appeal against the decision of Tribunal in the case of Shiva Exim Enterprises (supra), the Hon'ble Supreme Court have dismissed the same holding the view taken by the Tribunal that there could not have been the clubbing of the two units. - Decided in favour of assessee. Issues involved:Clubbing of clearances of multiple manufacturing units for Central Excise duty calculation.Detailed Analysis:Issue 1: Clubbing of clearancesThe appeals were against an order confirming a Central Excise duty demand on three manufacturing units - Manish Dresses, Manish Garments, and Manish Apparel - for not accounting for the clearance value of all units. The duty demand was based on the mis-utilization of the SSI benefit provided in Notification No. 8/2001. The appellant argued that the duty demand was confirmed without specifying the principal manufacturer and the dummy manufacturers, making it unclear who should bear the duty liability. The appellant relied on a Tribunal decision and a Supreme Court judgment to support their argument.Issue 2: Adjudication OrderThe adjudicating authority had not clearly identified the principal manufacturer and the dummy units, leading to confusion regarding the duty liability. The order fixed the duty and penalty liability jointly and severally on all appellants, indicating that the Revenue treated all appellants as independent units. The lack of clear specifications on the principal manufacturer made it impossible to determine the duty liability correctly. The order was found to be inconsistent with statutory provisions and lacked clarity on the clubbing of clearances.Issue 3: Legal PrecedentsThe Tribunal's decision in the case of Shiva Exim Enterprises was cited, emphasizing that clubbing of clearances can only occur if one unit is the principal unit and the others are dummy units created to conceal the principal unit's clearances. The Supreme Court upheld the Tribunal's decision, stating that clubbing cannot be done without clear identification of the principal and dummy units. This legal precedent supported the appellant's argument against the confirmation of duty demand without specifying the principal manufacturer.Conclusion:The Tribunal found no merit in the impugned orders due to the lack of clarity in identifying the principal manufacturer and dummy units for clubbing clearances. The orders were set aside, and the appeals were allowed in favor of the appellant based on established legal principles and precedents.