2009 (6) TMI 32 - HC - Central Excise

High Court Upholds Tribunal Decision on Separate Business Entities

The High Court upheld the Tribunal's decision, dismissing the Revenue's appeal. The Court found that the two manufacturing units were separate entities ... SSI Exemption – Clubbing of Clearance – Two partnership firms – one partner was common and remaining partners where different – all the partners were relative - both the respondents had independently taken loans from the Banks. They had also submitted their separate declarations about the production. Independent account books were maintained by them Both the units were not situated on the same property. – held that Merely because both the firms were dealing in the same type of production and because one of the partners in both the firms was same, it could not be concluded that respondent no.2 was a dummy unit of respondent No.1. In view of these reasons, the Tribunal rejected the contention of the Revenue and allowed the appeals by majority of two against one. The findings of the Tribunal are clearly based on facts. In view of some of the salient facts noted above, it is impossible to hold that the findings of fact given by two of the Members are perverse. Issues: Whether the Tribunal's order is contrary to the evidence on record regarding the independence of two units of the respondents.Analysis:1. The case involved a dispute regarding the independence of two manufacturing units, respondent No.1 and respondent No.2, both entitled to benefits under the Small Scale Industries (SSI) Notification for free clearance of goods up to a certain limit.2. The Revenue alleged that respondent No.2 was a dummy unit of respondent No.1, leading to the clearance of goods exceeding the permissible limit. Subsequently, duty and penalty were imposed on both units and certain individuals associated with them.3. The Judicial Member of the Tribunal rejected the Revenue's claim, stating that there was no evidence to support the assertion that respondent No.2 was merely a front for respondent No.1. The majority opinion of the Tribunal favored this view, leading to the dismissal of the duty and penalty imposed.4. The High Court carefully examined the facts, noting that both firms were separate entities with distinct operations, locations, and financial dealings. Despite a common partner, the firms had maintained separate accounts and had shifted manufacturing operations independently.5. The Court held that the findings of the Tribunal were based on factual evidence and not perverse. It concluded that no legal question arose from the case, leading to the dismissal of the Revenue's appeal.6. Ultimately, the High Court upheld the Tribunal's decision, emphasizing the independence and legitimacy of both manufacturing units, thereby dismissing the Revenue's appeal.7. The judgment highlights the importance of factual evidence in determining the independence of business entities and upholding their entitlement to statutory benefits under relevant notifications.