2017 (6) TMI 996 - AT - Central Excise

Tribunal Upholds Clubbing of Clearances, Sets Aside Clandestine Charge

The Tribunal upheld the clubbing of clearances of two separate firms based on evidence of interdependence and financial flow between them, despite the ... SSI exemption - clubbing of clearances - mutuality of interest - Held that: - the picture which emerges is that Mr. Pawan Jain is the proprietor of Mr. Jain and is also the de facto owner of ASC. The suppliers and buyers considered Mr. Jain as the owner of both funds. The evidences also indicate all the pervasive Role of Mr. Pawan Jain in the affairs of ASC. The free flow back of finance between the two firms establishes that there was mutuality on interest between the two firms and that the two were inter joined in their management and flow of funds - the correct vale of clearances intended to nil rate of duty should include the value of clearances of one arm factory belonging to the same manufacturer. In the facts and circumstances of the present case, we are inclined to upholding the findings of the adjudicating authority that the clearance of two firms are to be clubbed for the period 2006-2007 to 2008-2009 and the benefit of SSI exemption is to be determined barringly. Clandestine removal - goods were being cleared without payment of duty on the basis of only delivery challans/ kachi purchis - Held that: - the total demand for central excise duty has been calculated by including the value of clearances evidenced by the kachi parchis in addition the turnover of both firms have been clubbed. The impugned order is set aside and remanded to the original adjudicating authority with the direction to re-quantify the demand by excluding those attributable to clandestine clearance. The clubbing of the value clearances of both the firms is upheld - appeal dismissed - decided against appellant. Issues:1. Clubbing of clearances of two separate firms.2. Allegations of clandestine clearances without payment of duty.Clubbing of Clearances:The case involved appeals against an order passed by the Commissioner of Central Excise, New Delhi, proposing to club the clearances of two firms based on the interdependence and financial control between them. The appellant argued against the clubbing, emphasizing the separate nature of the firms with independent legal existence, separate workers, and operations. The Revenue contended that one person, allegedly controlling both firms, indicated a mutuality of interest. The Tribunal examined the evidence, including statements from suppliers and buyers, financial transactions, and the role of the alleged controller. Citing Supreme Court precedents, the Tribunal upheld the clubbing of clearances, finding evidence of interdependence and financial flow between the two firms.Allegations of Clandestine Clearances:The case also addressed allegations of clandestine clearances without payment of duty, based on statements from employees and buyers. The appellant challenged the evidentiary value of these statements, citing lack of officer signatures, denial of cross-examination, and criticism by the Hon'ble ACMM. The Tribunal noted the serious observations regarding the recording of statements and the need for competent officer verification. Ultimately, the Tribunal set aside the charge of clandestine clearances, emphasizing the lack of evidentiary value in the statements. The case was remanded for re-quantification of the demand, excluding the attributed clandestine clearances while upholding the clubbing of clearances between the two firms.This judgment provided a detailed analysis of the issues surrounding the clubbing of clearances and allegations of clandestine clearances without payment of duty, highlighting the legal principles, evidentiary considerations, and precedents applied in reaching the decision.