1999 (9) TMI 274 - AT - Central Excise

Order set aside due to time limitation under Section 11A(1) of Central Excise Act. Appeals allowed with relief.

The Tribunal set aside the order on the grounds of limitation, finding that the demand was time-barred as the proviso to Section 11A(1) of the Central ... SSI Exemption - Value of clearances - Demand - Limitation Issues Involved:1. Dummy Units and Evasion of Duty2. Limitation and Suppression of FactsDetailed Analysis:1. Dummy Units and Evasion of Duty:The Commissioner of Central Excise held that M/s. Hirusah Cosmetics was the real manufacturer of Lavanya Talcum Powder and that nine other units were dummy units created to evade duty by exploiting the SSI exemption under Notification No. 140/83-C.E., dated 5-5-1983. The assessable value was determined based on the price adopted by Hirusah Cosmetics for the sale of the Talcum Powder. The value of clearances of the nine units was clubbed with that of M/s. Hirusah Cosmetics, resulting in a demand of duty of Rs. 1,49,48,158/- confirmed by invoking the extended period under proviso to Sub-Section 1 of Section 11A of the Central Excise Act. A penalty of Rs. 20,00,000/- was imposed on M/s. Hirusah Cosmetics and Rs. 25,000/- each on the nine units under Rule 209A.The appellants contested the order on merits, arguing that each manufacturing unit had entered into agreements with Hirusah Cosmetics on a principal-to-principal basis, with no financial flow back or evidence of dummy operations. Each unit had separate premises, machinery, and staff, and had filed independent declarations with the Central Excise Authorities claiming SSI exemption. The use of a common brand name was permissible under the SSI Notification, and there was no relationship between the proprietors/partners of the units and M/s. Hirusah Cosmetics. The appellants cited several case laws to support their argument that the units were not dummies and their clearances could not be clubbed.2. Limitation and Suppression of Facts:The appellants also contested the order on the grounds of limitation. They argued that they had filed yearly declarations as required by law, fully disclosing all relevant facts, including their agreements with Hirusah Cosmetics. The department had accepted these declarations for the years 1991-92 and 1992-93, and no further queries were raised until investigations began in 1994, after the units had closed operations. The show cause notice was issued in 1996, more than two years after the investigations began, and the appellants argued that there was no suppression of facts to justify the extended period.The Tribunal found that the extended period could not be invoked as there was no suppression of facts. The declarations filed by the appellants were accepted by the department, and detailed information was provided in response to queries from the department. The department had not raised any further queries or conducted investigations for over a year after accepting the declarations. The Tribunal concluded that the appellants had not suppressed any information with the intent to evade duty, and the demand was hit by the limitation of time bar.Conclusion:The Tribunal set aside the order impugned on the grounds of limitation, finding that the demand was hit by the time bar as the proviso to Section 11A(1) of the Central Excise Act could not be invoked. The appeals were allowed with consequential relief, if any.