2018 (10) TMI 17 - AT - Central Excise

Tribunal overturns clubbed clearances decision, deems Central Excise Duty demand unsustainable.

The Tribunal ruled in favor of the appellants, determining that clubbing clearances for Small Scale Exemption Notification was unjustified due to the ... SSI exemption - clubbing of clearances - dummy units or not? - N/N. 8/2003-CE dated 01.03.2003 - Held that:- All the three units were independent of each other and they did not have common funding and financial flow-back - Reliance placed in the case of RENU TANDON VERSUS UNION OF INDIA [1992 (1) TMI 126 - HIGH COURT OF JUDICATURE FOR RAJASTHAN], where it was held that Mere blood relationship or sharing of staff, some temporary common employment, similarity of product is also not sufficient to draw an inference that the two units should be clubbed together. In the present case clubbing of clearances was not justified - appeal allowed - decided in favor of appellant. Issues:1. Clubbing of clearances for eligibility of Small Scale Exemption Notification2. Demand of Central Excise Duty and Service Tax3. Imposition of penalty under Rule 26 of Central Excise Rules, 2002Clubbing of Clearances for Small Scale Exemption Notification:The case involved three units engaged in similar activities but operating independently. The Revenue attempted to club their clearances to deny Small Scale Exemption Notification benefits. However, the appellants argued that the units were separate entities with distinct PAN numbers, registrations, accounts, and agreements. They emphasized the absence of common funding and financial flow-back among the units. Citing legal precedents, including a ruling by the Rajasthan High Court and a Tribunal's Final Order, the appellants contended that clubbing clearances without evidence of financial interdependence was unjustified. The Tribunal agreed, noting the independence of the units and the lack of common financial ties, leading to the decision that clubbing clearances was not warranted. Consequently, the Central Excise duty demand based on the clubbing was deemed unsustainable.Demand of Central Excise Duty and Service Tax:The Revenue had raised demands for Central Excise Duty and Service Tax based on the clubbed clearances and job work charges. The appellants challenged the sustainability of the service tax demand, arguing that the Revenue failed to prove that the job work charges did not amount to manufacture. They contended that if the job work constituted manufacturing, service tax was not applicable. Additionally, they asserted that the loans given to other units were temporary and did not indicate financial flow-back. The Tribunal, after considering the arguments, found in favor of the appellants, setting aside the impugned order and allowing both appeals with consequential relief.Imposition of Penalty under Rule 26 of Central Excise Rules, 2002:One of the appellants faced a penalty under Rule 26 of the Central Excise Rules, 2002. However, since the Tribunal ruled in favor of the appellants regarding the demands and clubbing of clearances, the penalty imposed on the appellant was also deemed unsustainable. The Tribunal's decision on the clubbing issue influenced the outcome of the penalty imposition as well.In conclusion, the Tribunal's judgment addressed the issues of clubbing clearances for Small Scale Exemption Notification eligibility, the demand of Central Excise Duty and Service Tax, and the imposition of penalties under Rule 26 of the Central Excise Rules, 2002. The decision highlighted the independence of the units, the lack of common financial ties, and the insufficiency of evidence to support the demands and penalties imposed by the Revenue. The Tribunal set aside the impugned order, allowing both appeals and providing consequential relief to the appellants.