2016 (10) TMI 477 - AT - Central Excise

Tribunal upholds decision on SSI exemption, dismissing Revenue's appeal

CCE, Chandigarh-l Versus. National Conduit Pipes, National Conduit Pipes, Vivek Steel Tubes, R.M. Steels (P) Ltd., G.C. Spintex, R.S. Steels, National Steel Pipes, R.K. Industries, Ramesh Kumar, Sham Lal, Bimal Kumar, Harish Sharma Vinod Sharma, Sanjay Babbar, Yogesh Kumar, The Truck Operatons Union and Janta Road Carriers

CCE, Chandigarh-l Versus. National Conduit Pipes, National Conduit Pipes, Vivek Steel Tubes, R.M. Steels (P) Ltd., G.C. Spintex, R.S. Steels, National ... Issues Involved:1. Whether the clearances made by the respondents can be clubbed together and the benefit of SSI exemption can be denied.2. Whether the demand can be confirmed on the basis of allegation of clandestine manufacture and clearance of excisable goods by the respondents.Issue-Wise Detailed Analysis:Issue No. 1: Clubbing of Clearances and SSI Exemption DenialThe organizational structure of the six units involved was examined, revealing that they were either partnerships or companies registered under the Companies Act. It was argued by the Revenue that these units were controlled by two individuals, Shri Sham Lal and Shri Ramesh Kumar, and were fraudulently availing of SSI exemption by manipulating the value of clearances. However, it was found that:- Each unit was independently incorporated and registered under the Companies Act, 1956.- All units had separate registrations under Central Excise, Sales Tax, and Income Tax.- They had their own investment of capital, machinery, and workforce.- They maintained separate financial sources, credit facilities, factories, and manufacturing facilities.- They purchased machinery and raw materials from their own resources and paid salaries and wages from their own finances.- Each unit had separate electricity and telephone connections and purchased inputs and sold finished goods independently.The Tribunal found that the facts did not support the Revenue's allegations of common control and mutuality of interest. The units were not dummy entities of each other, and there was no financial flowback or mutual interest that would justify clubbing their clearances. The Tribunal referenced several case laws, including Nova Industries Ltd., Bullows India Pvt. Ltd., and Ennar Cements Pvt. Ltd., which supported the view that separate legal entities with independent operations should not have their clearances clubbed. Consequently, the benefit of SSI exemption could not be denied, and the Tribunal upheld the adjudicating authority's decision.Issue No. 2: Allegation of Clandestine Manufacture and ClearanceThe demand for duty was based on allegations of clandestine clearance of goods, supported by data collected from the ICC of Punjab Government and sales tax records. However, it was found that:- The sales tax assessments for the period in dispute were finalized, and it was determined that there were no clandestine sales.- The demand was based on assumptions and lacked corroborative evidence.- The Revenue failed to provide concrete evidence of clandestine manufacture and clearance, such as excess raw materials, actual removal of unaccounted finished goods, discovery of such goods outside the factory, or statements from buyers.The Tribunal emphasized that for a charge of clandestine manufacture and clearance to be sustainable, there must be tangible evidence rather than inferences or assumptions. The Tribunal cited the decision in Arya Fibres Pvt. Ltd., which outlined the necessity of concrete evidence in cases of clandestine manufacture. Since the Revenue's allegations were based on conjectures and lacked substantial proof, the charge of clandestine removal was not sustainable.ConclusionThe Tribunal concluded that the clearances of the respondent units could not be clubbed together, and the benefit of SSI exemption could not be denied. Additionally, the demand based on allegations of clandestine manufacture and clearance was not sustainable due to the lack of concrete evidence. The impugned order was upheld, and the appeals filed by the Revenue were dismissed.