2023 (6) TMI 191 - AT - Central Excise

Tribunal Upholds Clubbing of Clearances in Related Business Units

Orkay Gears, Dhirubhai C Patel, Dhanikbhai J Patel and Jivrajbhai C Patel Versus C.C.E. -Ahmedabad-I

Orkay Gears, Dhirubhai C Patel, Dhanikbhai J Patel and Jivrajbhai C Patel Versus C.C.E. -Ahmedabad-I - TMI Issues Involved:1. Evasion of duty by M/s Orkay Gears and associated units.2. Eligibility for SSI Exemption under Notification No. 8/2003-CE.3. Clubbing of clearances from multiple units.4. Imposition of penalties on the appellants.Summary:Issue 1: Evasion of DutyThe case originated from intelligence suggesting that M/s Orkay Gears (Appellant No.1) was evading duty. A search revealed that none of the four units involved had the full machinery needed for manufacturing Gears, Gear Boxes, and Parts. It was found that the manufacturing process was completed across the units, indicating that these units were not independent and were created to avoid duty liability.Issue 2: Eligibility for SSI ExemptionThe department argued that the four units were not separately eligible for the SSI Exemption under Notification No. 8/2003-CE. The clearances shown by the other three units should be clubbed with M/s Orkay Gears to determine eligibility for the exemption. The adjudicating authority confirmed the demand for central excise duty and imposed penalties, which was upheld by the Commissioner (Appeals).Issue 3: Clubbing of ClearancesThe appellants contended that each unit operated independently, purchasing raw materials, selling products, and maintaining separate accounts and registrations. They cited various case laws to argue against clubbing based on common administrative facilities and relationships. However, the department's investigation showed that the units shared machinery, labor, and financial resources, and were managed by blood relatives, justifying the clubbing of clearances.Issue 4: Imposition of PenaltiesThe appellants argued that the show cause notice was only issued against M/s Orkay Gears, not the other units. They cited case laws to support their position that all units should have been issued notices. The department maintained that the units were created on paper to avail SSI exemption fraudulently.Judgment:The Tribunal found that the four units were related by blood and shared resources, machinery, and labor. The units were under common management and financial control, warranting the clubbing of clearances. The Tribunal upheld the findings of the adjudicating authority and dismissed the appeals, affirming that the units were not functioning independently and were created to evade duty. The cited case laws by the appellants were found distinguishable based on the facts of the present case.Conclusion:The appeals were dismissed, and the impugned orders were upheld, confirming the clubbing of clearances and the ineligibility for SSI exemption under Notification No. 8/2003-CE. The penalties imposed on the appellants were also upheld.