2003 (9) TMI 185 - AT - Central Excise

Tribunal rules in favor of Elemec Industries for SSI exemption eligibility

The Tribunal held that the clearances of three units could not be clubbed with M/s. Elemec Industries as the findings in the Collector's Order became ... SSI Exemption Issues Involved: Whether the value of clearances of all the units is to be clubbed for the purpose of levying and collecting Central Excise duty and whether penalties are imposable on all the Appellants.Issue-wise Analysis:1. Clubbing of Clearances for Central Excise Duty:The primary issue was whether the clearances of the four units (M/s. Elemec Industries, M/s. Shree Electricals, M/s. Anand Auto Electricals, and M/s. Shree Stampings) should be clubbed for the purpose of levying Central Excise duty. The initial show cause notice dated 2-6-1992 alleged that the clearances from April 1987 to March 1992 should be clubbed, rendering the firms ineligible for SSI exemption under Notification No. 175/86-C.E.The Collector, in Order-in-Original No. 40/CEX/1993 dated 26-5-1993, dropped the proceedings against all four firms, holding that the Department's allegations of deliberate fragmentation and mutual financial interest lacked concrete evidence. The Collector's findings included:- The Department had not provided quantified details of financial flow between units.- Allegations of mutual financial interest were unsubstantiated.- No facts were concealed with intent to avail SSI exemption, thus the extended period of limitation was not invocable.2. Appeal and Remand:The Department filed an appeal only against M/s. Elemec Industries under Section 35E of the Central Excise Act. The Appellate Tribunal, in Final Order No. 873/2000-B dated 8-6-2000, remanded the matter to the Commissioner to reconsider the issue of clubbing on merits. Subsequent to this, eleven further notices were issued for the period from April 1992 to September 2000.3. Confirming Duty Beyond Notices:The learned Counsel argued that the Adjudicating Authority cannot confirm duty more than what was demanded in the show cause notices. The Commissioner confirmed a duty amount far exceeding the amounts initially demanded, which was seen as traveling beyond the notices. The Counsel emphasized that since no appeals were filed against the other firms, the Collector's findings in favor of these firms became final, and the Commissioner could not reconsider their eligibility for SSI exemption.4. Independent Units and SSI Exemption:The learned Advocate contended that the Commissioner erred in holding that the appellants were not eligible for SSI exemption. He argued that the units were established independently and not to avail SSI exemption. The Board's Circular No. 6/92 clarified that different firms with only some common partners are entitled to separate exemptions. The Counsel also highlighted that the units had been operational independently for years before the SSI exemption was availed.5. Department's Argument:The Departmental Representative argued that the firms were managed, financed, and controlled by two brothers, indicating mutuality of interest. The Tribunal had remanded the matter for re-adjudication, reviving the show cause notice. The Department maintained that the duty demand was rightly confirmed against M/s. Elemec Industries as the main firm.6. Tribunal's Decision:The Tribunal held that the clearances of the three units (Appellant Nos. 2 to 4) could not be clubbed with M/s. Elemec Industries as the findings in the Collector's Adjudication Order No. 40/93 had become final for these units. The Tribunal emphasized that the Adjudication Order attains finality unless challenged in appeal, and since no appeals were filed against the other units, their clearances could not be clubbed. Consequently, M/s. Elemec Industries was eligible for SSI exemption based on its clearances alone. The Tribunal set aside the impugned Order and allowed all the appeals, thus not considering other issues such as time-bar and confirmation of the entire duty against M/s. Elemec Industries.