2017 (5) TMI 1337 - AT - Central Excise

Tribunal Upholds Commissioner's Decision on Duty Evasion, Warns Against Fraudulent Schemes

The Tribunal upheld the Commissioner's decision in a case involving alleged evasion of duty liability by two firms operating from the same premises, ... SSI exemption - clubbing of clearances - whether the appellants have played foul of the provisions of 2(vi) of SSI exemption N/N. 8/2002-CE dated 1.3.2002, which was in force during the relevant period? - Held that: - there is no doubt that the Director of Executive Forms and the partner of Honeywell Form connived to fraudulently keep their overall clearance value of the firm within the rupees one crore exemption limit for SSI units. They have embellished this subterfuge by seeking and obtaining registration of the very same premises giving different door number to it. Thus they tried to project that the two firms were operating at different premises and therefore, the benefit of SSI exemption under N/N. 8/2002 can be claimed by each of them separately - the original authority has been considerate generous to the appellants by extending cum-duty benefit and the lower appellate authority has further reduced the penalties on the director/partner considerably - appeal dismissed - decided against appellant. Issues:Alleged evasion of duty liability by two firms operating from the same premises, SSI exemption eligibility, valuation discrepancies, retracted statements, technicalities in investigation.Analysis:The case involved a situation where a private limited firm, M/s. Executive Forms (P) Ltd., was alleged to have ceased production and subsequently a partnership firm, M/s. Honeywell Forms, started operations in the same premises, continuing the manufacture of computer stationery. The Department contended that the aggregate clearances of both units should be clubbed, affecting the eligibility for SSI exemption. A show cause notice was issued proposing a demand of differential duty, interest, and penalties. The original adjudicating authority confirmed the proposals but granted cum-duty benefit, reducing the demand. Penalties were imposed on individuals associated with both firms. On appeal, the Commissioner upheld the duty demand and penalties but reduced the penalties on the individuals. The appellants challenged this decision.During the hearing, the appellants argued that the case was built on retracted statements without issuing summons to concerned persons. They also raised concerns about the valuation method and the lack of consideration for ledger accounts of M/s. Honeywell Forms. The Revenue, on the other hand, presented evidence showing the common premises and machinery usage by both firms. The statements of the director and partner indicated a shared operation and premises.The key issue for decision was whether the appellants violated the SSI exemption provision by operating two firms from the same premises. Despite separate registrations, evidence suggested a common operation. The appellants' reliance on technicalities was noted, and the retracted statements did not provide sufficient proof of separate operations. The investigation's technical shortcomings were addressed, emphasizing the Department's establishment of the appellants' intent to evade duty.Ultimately, the Tribunal upheld the Commissioner's order, dismissing the appeals. The original authority's leniency and the reduced penalties were acknowledged, and no interference with the decision was deemed necessary. The appellants' attempt to claim SSI exemption separately for both firms operating from the same premises was considered a fraudulent scheme to evade duty liability rightfully owed.In conclusion, the judgment highlighted the importance of substantiating separate operations when claiming exemptions and the Department's efforts to establish fraudulent practices in duty evasion cases. The decision upheld the duty demand and penalties, emphasizing the need for compliance with legal provisions and transparency in operations to avoid liability issues.