Separate unit exemption fails where sister concern shares premises and material facts are suppressed, extending limitation

An exemption claim for goods cleared in the name of a sister concern was rejected where both concerns operated from the same factory premises, the second concern had no independent infrastructure, and the record did not establish two separate units for central excise purposes. Misleading declaration details, including a non-existent door number and nondisclosure of use of the appellant's facilities, were treated as suppression of material facts, justifying invocation of the extended limitation period. The duty demand was sustained, while the penalty was reduced because the unit was small and the duty involved was limited.

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Issues: (i) whether the goods cleared in the name of the sister concern were entitled to exemption as manufacture of two separate units; (ii) whether the extended period of limitation was invocable on the basis of suppression of facts and whether the penalty required reduction.

Issue (i): whether the goods cleared in the name of the sister concern were entitled to exemption as manufacture of two separate units.

Analysis: The record showed that the two concerns operated from the same factory premises, the second concern had no independent premises or separate infrastructure of its own, and the facilities of the appellant were being used for the manufacture carried on in the other name. The claimed segregation of premises was not substantiated by reliable evidence, and there was no material showing recognition of two separate units under the relevant factory records. On these facts, the plea that the units were independent for exemption purposes was not accepted.

Conclusion: The benefit of the exemption was not available on the footing that two separate independent units existed.

Issue (ii): whether the extended period of limitation was invocable on the basis of suppression of facts and whether the penalty required reduction.

Analysis: The declaration furnished by the other concern contained a non-existent door number and did not disclose the use of the appellant's manufacturing facilities. The lease arrangement and address particulars were found misleading, and the facts were held to have been suppressed for central excise purposes. The extended period was therefore upheld. At the same time, having regard to the small scale of the unit and the amount of duty involved, the penalty was considered excessive and was reduced.

Conclusion: The extended period of limitation was rightly invoked, the duty demand was sustained, and the penalty was reduced.

Final Conclusion: The appeal succeeded only to the extent of reduction of penalty, while the duty demand and the finding on limitation were maintained.

Ratio Decidendi: A claimed exemption based on separate identity of units cannot be granted where the evidence shows manufacture from the same premises without credible proof of independent existence, and misleading or incomplete disclosure of material facts justifies invocation of the extended limitation period.

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