AI Drafter 
TaxTMI 
TaxTMI 
2016 (10) TMI 477
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....me to time and had been availing the modvat/cenvat credit facility to discharge their duty liability on their final products i.e. ERW pipes. Intelligence was gathered, the DGCEI conducted search on various factory, office, business on 15.11.2000. It was alleged that the manufacturer collectively known as National group were being run, managed and controlled by the two brothers Shri Sham Lal and Shri Ramesh Kumar who are real brothers by relation. However, on papers these units have been shown in the name of different members of their family for the purpose of fraudulently availing SSI exemption for each of these units by manipulating the value of clearances for each these units well below exemption limit. The intelligence further gathered that these units were engaged in the clandestine clearance of ERW pipes without payment of duty which were managed by these two brothers under the cover of bills of M/s National Steel (a trading firm) floated on papers by these two brothers for covering up the clandestine clearance of these manufacturing units of the respondents. Certain records were also seized and panchnama was drawn and after completion of investigation, it was alleged that the....
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.... also relied on the decision of the Apex Court in the case of Calcutta Chromotype Ltd.-1998 (99) 2002 (SC) to lift the corporate veil. He further submits the clearances of the manufacturing units should be clubbed for availment of the benefits of SSI exemption especially when all the units are manufacturing same items for which similar type of inputs and machinery are required and it is only expansion/enhancement of the capacity and in the guise of taking separate registration, the respondents have also attempted to take benefit of exemption notification with malafide intention. He also relied on of the Tribunal in the case of Dhampur Sugar Mills Ltd.-2001 (129) EL& 73 (Tri. Del.). The adjudicating authority has ignored the fact regarding huge amount of cash inflow in the account of parties and the evidences collected show that these units were indulging in clandestine clearances and cash so collected was being shown as deposits made by buyers, who have denied having purchased the goods. He also relied on the decision of the Tribunal in the case of British Scaffolidng India Pvt.Ltd.-2014 (313) ELT 87 (Tri.-DeI.). 5. He further submits that the respondents are a group of industri....
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....he trade by the name of I National' group of Samana) alongwith name of partners/directors given below:- Organization Structure 1. M/s National Conduit Pipes (NCP), Partners (i) Sh. Sham Lal (SL) (ii) Smt. Karuna Garg, W/o Sh. Ramesh Kumar (RK) 2. M/s National Industries (NI) Directors (i) Sh. Ramesh Kumar, (ii) Smt. Aruna Garg w/o Sh. Sham Lal. 3. M/s R.M Steels Pvt. Ltd. (RSML) Directors (i) Sh. Manoj Kumar S/o She Mohinder pal who is brother of Sh. Sham lal & Sh. Ramesh Kumar. (ii) Smt. Karuna Garg W/o Sh. Ramesh Kumar (RK) 4. M/s R.S. Steels (RSI) Partners (i) Sh. Vivek Garg S/o Shu Sham Lal (ii) Smt. Aruna Garg W/o Sh. Sham Lal 5. M/s Vivek Steel Tubes (VST) Partners (i) Sh. Ramesh Kumar (ii) Sh. Lakhpat Rai brother of Sh. Sham Lal & Ramesh Kumar (Shown on paper to be under lease to M/s NL Since 01.04.1999) ....
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.... not directors in M/sR.M.SteeI Pipes Ltd. and M/S Vivek Steel Tubes, Shri Ramesh Kumar his wife and children are not connected with M/s.National Conduit Pipes. Thus, the clearances of various firms are not liable to be clubbed together. 11. He further submits that the partners/director of the various firms are related to each other. However, all of them are "major" i.e. above 18 years of age, are well educated and therefore, fully competent to do their independent business. He further submits that Smt.Karuna Garg W/o of Shri Ramesh Kumar is M.A.,B.Ed. While Smt. Aruna Garg W/o of Shri Sham Lal is M.A. There is no bar against the relatives of a person including the wife and children of a person from having independent business and there is no justification for holding that the various firms/companies are dummy units. In order to hold that the companies/firms are dummy of the other and for clubbing their clearances there should be financial flow back however, no evidence of financial flow back in the present case has been led by the Revenue. Admittedly, all the firms/companies are located on separate plots of land, have separate central excise, sales tax and income tax registratio....
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....at there is no inter-unit transactions if there is transaction these transactions are on principal to principal basis, loans/borrowing from other units were invariably reflected in the income tax returns and the amounts invariably repaid. This shows that there is no free and unconscionable flow of funds between the respondent units hence their clearances are not liable to be clubbed. He relied on the decision of the Tribunal in the case of Sharad Industries-2013 (294) ELT 561 (Tri.-Del.), Vaspar Concepts (P) Ltd.-2006 (196) ELT 95 (Tri.) and Poly Printers- 2002 (139) ELT 295 (Tri.). 13. He further submits that the learned AR relied on the decision of the Tribunal in the case of British Scaffolding India Pvt.Ltd. (supra). The case of the case of the said case are somehow are different from the present case, the same cannot be relied on. He further submits tht in the case of Supreme Washers (P) Ltd.-2003 (151) ELT 14 (SC), the Apex Court has held that clearances of two or more units can be clubbed for the purpose of SSI exemption when they are under common management, there is common procurement of raw material, there is common stock accounting and planning, there is interdependen....
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....er and the benefit of SSI exemption can be denied (ii) Whether the demand can be confirmed on the basis of allegation of clandestine manufacture and clearance of excisable goods by the respondents or not. Issue No.1 20. To deal with the issue of clubbing of clearances, we find that the organisational structure of all six units is as under: Organization Structure (i) M/s National Conduit Pipes (NCI)), Partners (i) Sh. Sham Lal (SL) (ii) Smt. Karuna Garg, W/o Shu Ramesh Kumar (RK) 2. M/s National Industries (NI) Directors (i) Sh. Ramesh Kumar, (ii) Smt. Aruna Garg w/o Shu Sham Lal. 3. M/s R.M Steels Pvt. Ltd, (RSML) Directors (i) Sh. Manoj Kumar S/o Sh. Mohinder pal who is brother of Shu Sham lal & Sh. Ramesh Kumar. (ii) Smt. Karuna Garg W/o Sh. Ramesh Kumar (RK) 4. M/s R.S. Steels (RSI) Partners (i) Sh. Vivek Garg S/o Sh. Sham Lal (ii) Smt. Aruna Garg W/o Shu Sham Lal 5. M/s Vivek Steel Tubes (VST) Partners (i) Sh. Ramesh Kumar (ii) Sh. Lakhpat Rai brother of Sh. Sham Lal & Ramesh Kumar (Shown on paper to be under lease....
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....he units have purchased the machinery owned by them and also all the raw materials required for manufacturing from their own resources; All the salaries, wages are paid by the all the units from their own sources of finance; All the units have their own Sales Tax and Income Tax Registration; All the units had paid their own electricity Bills; All the units have separate electricity and telephone connections. All the units are purchasing inputs separately All the units are selling the finished goods separately. 24. These facts have not been controverted by the Revenue. The only allegation is that Shri Sham Lal and Shri Ramesh Kumar have controlled all the four units having common directors in all the units. In fact as per organisational structure, they are not the directors in all the four respondents company. We have seen that two directors are not related to the directors of other companies. From that, it cannot be said that these units have been managed by Shri Ramesh Kumar and Shri Sham Lal. We have seen that directors of the two companies have related to the other, it does not mea that they are only one and the othe....
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....here was a mutuality of interest and therefore, clearances of one unit cannot be clubbed with the clearance of other unit. 17. We find that this issues has come before the Tribunal in various cases whereas in the case of Bullows India Pvt. Ltd. v. Cc, reported in 2012 (284) E.L.T. 584 (T) (supra) wherein this Tribunal has observed as under: We find that in the present case the issue is whether the appellants are entitled for the benefit of Notification 175/86C.E. and subsequently Notification therefore, the ratio of the above decision of the Hon'ble Gujarat High Court is fully applicable on the facts of the present case. The Hon'ble High Court held that the Revenue has to establish that there was mutuality of interest or financial flowback of the funds and in such cases the clearances of the holding and subsidiary private limited companies can be clubbed. In the present case we find that even in the show cause notice there were no such allegations. In the show cause notice the only allegation is that the holding company has share capital in the subsidiary company. There is no evidence regarding financial flowback on record. In these circumstances and respe....
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....s, etc. cannot be held to be sufficient to club the clearances of the units, who have different registration in al/ the departments and in the absence of any financial flow back. 19. We further, analyse the decision of Ennar Cements Pvt. Ltd v. CCE reported in 2013 (292) E.L.T. 245 (T) (supra) wherein this Tribunal has observed as under : "We have gone through the records of the case carefully. The appellants are two Private Limited Companies, They have separate existence. The investigation reveals that the clearances of one unit were done with the other and vice versa in order to remain with the exempted limit and thereby evading payment of Central Excise duty. If that is the case, the investigation ought to have decided the real clearances of each unit and demanded the duty accordingly in respect of each unit. However, in the present case, the duty has been demanded collectively from both the units. If the Department feels that out of the two units, one unit is dummy, teen the dummy unit should have been identified In that case, the value of the clearance of dummy unit could have been clubbed with the clearance of the real unit and duty demanded. This has not be....
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....tification No. 175/86-C.E., dated 1-3-1986 - Section 5A ibid. 21. In the case of Renu Tandon v. Union of India reported in 1993 (66) ELT, 375 (Raj.) Exemption - SSI Exemption - Clubbing of clearances - Two units situated at same premises, manufacturing similar product, having some common management, office and labour and common electric connection - One unit owned by father-in-law and the other by daughter-in-law and work of both units looked after by her husband - In absence of evidence of common finding and financial flow back, two units not treatable as one and their clearances not clubbable Notification No. 175/86-CE dated 1-3-1986. 22. In the case of Vivomed Labs. (P) Ltd. v. Collector of C. Ex, reported in 1991 (53) E.L.T. 152 (Tribunal) Exemption to SSI Units - Clubbing of clearances - Units registered separately under Income-tax Act, Sales Tax having separate Central Excise Licenses and also financed through separate application for loan from financial institutions Shareholders in all the firms not the same group of persons Tie up with medly Pharmaceuticals for marketing purposes explained inasmuch as the services rendered being paid for ....
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....uty. With a view to unravel the truth Director General of Anti-Evasion (for short DGAE') searched the factory and office premises of MACL and the three front companies on 27-9-1996. It was found that all the three bottling units were located in one single shed and were separated from each other' by small brick walls of about 4 ft. height. The Directors of the three front companies were employees of either MACL or other Modi Group of companies and they were frequently changed. They had common staff for maintenance of records, and operation of the units, The main plant and machinery i.e. cylinders had been supplied only by MACL and the total finance was provided by MACL as unsecured loans or had been arranged by finance companies whose whereabouts were not even known to the Directors of the three front companies. Marketing of the products was done by one Ritesh Beotra, a so-called Director of SCGCPL who was working as Deputy Manager (Marketing) in M/s Modi Gas & Chemicals Sales Depot at Delhi. He was marketing various gases manufactured by a Modi group concern and was answerable as an employee of MACL. It was, therefore, concluded that MACL had control over Hydrogen ove....
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....dustries, Shri Hari Industries revealed that all the partners and/or Directors are members of the Shah family and they had mutual interest in the business of each other and that Heemanshu traders was controlling the overall activities of manufacture and sales of these unites. The Department was of the view that Heemanshu Traders had by recourse to fraud, wilful mis-statement and suppression of facts evaded payment of duty in respect of 12285 Kgs. of M.S. Scrap seized from the Truck, did not account for the day to day production of M.S. Scrap in R.G. 1 register, cleared 12323 Electric Horns during the period from 4-4-88 to 7-4-88 without debiting the duty in PLA/RG 23A and that all the units above mentioned along with Shri Vishnu Industries, M.C. Industries and D.G. Auto Industries affixed the brand name of M/S, Heemanshu Traders on Electric Horns and C.B. Points, worked under the directions and instructions issued by Heemanshu Traders from Head Office for production and sale, transferred raw materials and finished products to each other units, made cash flow to each other units for their administration and that the aggregate value of clearance exceeded the exemption limit of Rs. 1.....
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.... the period in dispute after verifying the data recovered from the ICC and it has been held that there is no clandestine sale of the finished goods, therefore, through the trading firm as no sales took place as per sales tax assessment and there is no corroborative evidence to allege that clandestine removal of the goods by the respondents, moreover, the demand on clandestine clearance is made on assumption and presumption. No calculation has been given and the demand was sought to be distributed in all four respondents manufacturers equally which is against the judicial discipline. Further, as no corroborative evidence to support the allegation of clandestine manufacture, therefore, in the light of the decision of the Arya Fibres Pvt.Ltd. (supra), wherein this Tribunal has observed as under: 40. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be....