2017 (11) TMI 143 - AT - Central Excise

Tribunal overturns duty demand & penalty, stresses need for evidence.

The Tribunal ruled in favor of the appellant, setting aside duty demand and penalty based on SSI exemption denial. The decision emphasized the necessity ... SSI exemption - Clubbing of clearances - dummy units - the Managing Director of the main appellant is functioning as proprietary concern involved in similar activity and as such the SSI exemption claimed by the main appellant was sought to be denied by combining the turnover of all the three units - Held that: - there is no discussion or finding regarding overreaching financial control, flow back of benefits among the three units. The location of units in the same premises by itself shall not make any of the unit as a dummy unit. Corroborate evidences are required to establish such unit's existence as dummy - Admittedly, all the three units are duly registered with District Authorities, Income Tax and Sales Tax Authorities. To establish a unit dummy or only existing in paper, sufficient corroborate evidences are to be produced which will mainly relate to financial control, functional independence and manufacture of items which are same and various other facts - In the present case, the evidences available are not leading to such conclusion. Demand set aside - appeal allowed - decided in favor of appellant. Issues:Appeals against duty demand and penalty based on SSI exemption denial due to combining turnover of three units.Analysis:In the present case, the main appellant, engaged in manufacturing Cabin Assemblies and Air Curtains, faced a dispute regarding SSI exemption denial due to the Managing Director's involvement in a similar activity through a proprietary concern. The main issue revolved around whether the turnover of all three units should be combined to determine SSI exemption eligibility.The first proceedings involved notices issued to the main appellant and the Managing Director only, without involving the other two units considered as dummy units. The impugned orders confirmed the main appellant as the real manufacturer, holding that SSI exemption applicability should be based on the combined turnover of all three units, resulting in duty demand and a penalty on the Managing Director.The appellant's counsel argued that the proceedings against the alleged dummy units without issuing notices to defend their case were legally unsustainable. Additionally, the basis for clubbing turnover, i.e., the units' functioning in the same premises, did not prove questionable existence. The Revenue lacked evidence of financial control by the main appellant over the other units, which were separately registered and maintained separate accounts.The Revenue contended that the Managing Director had significant control over all three units, suggesting they were virtually managed by him. However, the Tribunal found insufficient evidence of overreaching financial control or dummy unit existence. The decision referenced a similar case and emphasized the need for corroborative evidence to establish dummy units, highlighting the units' proper registration and functioning since 1978 and 1994.In the second set of proceedings, although notices were issued to all three units, the impugned order confirmed turnover based on similar grounds without substantial evidence of financial control. The Tribunal emphasized the necessity of corroborative evidence to prove dummy unit existence, ultimately setting aside the impugned orders and allowing the appeals due to lack of merit.In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the importance of proper evidence to establish dummy unit claims and rejecting the imposition of duty demand and penalty based on combined turnover without sufficient proof of financial control or dummy unit existence.