1994 (4) TMI 158 - AT - Central Excise

Tribunal modifies order on exemption limit, penalties reduced, firms deemed single entity

The Tribunal partially modified the lower authority's order, granting exemption under Notification 175/86 for the first Rs. 15 lakhs of clearances for the ... SSI Exemption - Value of clearances Issues Involved:1. Eligibility for exemption under Notification 175/86.2. Mutuality of interest among the firms.3. Validity of SSI certificate for different firms.4. Time-barred demand.5. Imposition of penalties on partners.Issue-wise Detailed Analysis:1. Eligibility for Exemption under Notification 175/86:The appeals challenge the order demanding duty from two appellant firms, M/s. Spring Haven and M/s. Rajamanicka Nadar Industries, for exceeding the exemption limit under Notification 175/86. The Additional Collector held that M/s. Rajamanicka Nadar Industries was a dummy set up by M/s. Spring Haven to evade duty in 1986-87. For 1987-88, M/s. Rajamanicka Nadar Industries was found to have set up another dummy, M/s. Pagalam Narayana Saraswathy, to continue availing the exemption. The clearances from these firms were aggregated to Rs. 20,70,056.30, and penalties were levied under Rule 209A of the Central Excise Rules, 1944.2. Mutuality of Interest Among the Firms:The firms were found to be constituted with partners from the same family, indicating mutuality of interest. The Tribunal noted that the manufacturing operations were shifted between firms to avoid crossing the exemption limit. The firms shared the same premises and machinery, and the SSI certificate remained in the name of M/s. Spring Haven. The Tribunal concluded that the firms were not independent entities but operated as a single entity to exploit the exemption limit.3. Validity of SSI Certificate for Different Firms:The Tribunal held that the SSI certificate issued to M/s. Spring Haven could not be valid for M/s. Rajamanicka Nadar Industries or M/s. Pagalam Narayana Saraswathy. The certificate's validity required the firm's constitution to remain unchanged, which was not the case here. The Tribunal emphasized that the benefit of Notification 175/86 could not be extended to different entities based on a single SSI certificate.4. Time-barred Demand:The Tribunal addressed whether the demand was time-barred. It was noted that the appellants had engaged in a scheme to lease the factory to new partnership concerns formed by family members to avail the small-scale exemption without disclosing the mutuality of interest. The Tribunal held that the appellants' actions justified invoking the extended time limit under Section 11A of the Central Excises & Salt Act, 1944.5. Imposition of Penalties on Partners:Penalties were imposed on various partners of the firms. The Tribunal considered the appellants' malafide intention in setting up the firms and concluded that the penalties were maintainable. However, the penalties were reduced to Rs. 25,000 on Shri P.N.R. Suriyanarayanan, Rs. 10,000 on Smt. R.S. Sudhamathy, Rs. 5,000 on Smt. R.V. Poonkodi, and Rs. 2,000 each on Shri P.N.R. Vijayan and Smt. N.R. Parameswari Ammal.Conclusion:The Tribunal partially modified the order of the lower authority concerning the demand for the year 1987-88, granting the benefit of the Notification for the first Rs. 15 lakhs of clearances. The penalties were reduced but otherwise upheld. The appeals were dismissed with these modifications.