TaxTMI 
TaxTMI 
2018 (3) TMI 174
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....re also engaged in the manufacture of corrugated cartons and were not registered with the department as on 20.5.2003, thus availing SSI exemption limit. Based on intelligence, M/s. SG are clearing corrugated cartons without payment of central excise duty. The officers visited the unit on 20.5.2003. They found two machines in the premises of M/s.SG, Puducherry such as (i) stitching machine without motor and (ii) punching machine installed with electricity connections. Some stock of corrugated board partitions and corrugated carton board waste were found strewn around. Some stock of corrugated carton board waste materials were found dumped over the stitching machine. A mahazar was drawn on the same date. The premises of M/s. SG was again visited on 23.5.2003. The officers also recorded statements from the Managing Director of these private limited companies. On inquiries, it appeared that M/s. SPP and M/s. SG are both engaged in the manufacture of corrugated cartons. M/s. SPP which is a private limited company has Shri V.V. Raghavulu as its Managing Director and Smt.M.P. Jayanthi as the Director. Shri V.V. Raghavulu is the Managing Director of M/s. SG and Shri J. Govindarajulu, his n....
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.... records pertaining to the receipt of corrugated cartons after job work from M/s. SPP which were sent under delivery challans of M/s. SPP. The clearances made under invoices of M/s. SG was also available. The entire movement of the goods, that is, receipt of goods after job work and clearance of finished goods was stated to have been made under their own transport. However, no documents in this connection were made available. > With regard to sales tax returns, M/s. SG unit was under exemption of sales tax for 10 years and has not paid any sales tax. > Verification of job charges showed that the entries in the ledger account of both the companies did not give any reference to job work charges raised in labour bills. Instead, the amounts have been charged through journal entries as on 23.5.2003. No vouchers were available for payments / receipts. There was no agreement between the two units as to the nature of job work to be done on a principal-to-principal basis and for the rate agreed for the said job work. > With regard to common funding, it was seen that both the units have a practice of common purchasing. In the case of M/s. SG, purchases have been made separately. Howe....
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....ing separate manufacturing premises. They had separate machinery and separate working capital besides having separate work force. 4.4 M/s. SG, Puducherry was having a unit at Hosur as well as Puducherry. Both these units obtained centralized excise registration. 4.5 M/s. SG, Puducherry was having one punching machine and one stitching machine. These were operated using a generator. At the time of visit, the stitching machine was under service and therefore the officers have recorded that it is lying in dismantled condition. With regard to the allegation that there was no high tension electricity connection to M/s. SG, ld. counsel submitted that the machines were operated using a generator set. 4.6 The other allegation is that there is no sufficient evidence to show that proper job charges were paid by M/s. SG to M/s. SPP. Further, that it is also alleged that the contention of the appellant that raw materials were sent from M/s. SG to M/s. SPP for job working was only afterthought and made only after the investigation conducted by the officers. He submitted that M/s. SG purchased the raw material on its own account and some were either sent directly from the supplier or from the....
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....eir premises and M/s. SG was only dummy to fragment the clearances of M/s. SPP. The Director Shri Govindarajulu stated that in the job work documents, the goods returned are mentioned as corrugated boxes and not semi-finished boxes. The version of the appellant that they have sent raw materials from M/s. SG to M/s. SPP and received semi-finished goods for further processing of final product is not substantiated by any material evidence. There is no document to support the contention that materials for job work were transported from M/s. SG to M/s. SPP and semi-finished goods were transported from M/s. SPP to M/s. SG. Whereas there is enough evidence of mutuality of interest and financial flow back between both the companies. It is sufficiently established that M/s. SG is a dummy unit of M/s. SPP created on paper as a fagade for the purposes of bifurcating the value of clearances in order to wrongly avail SSI exemption benefit. That the demand made is legal and proper. 6. Heard both sides. 7. The allegation is that M/s. SG is a dummy unit of M/s. SPP created on paper for the purpose of fragmentation of value of clearances of both the units so as to wrongly avail SSI exemption. 8.....
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....n the ledger account of these units. Further, the job work charges reflected in the ledgers is totally disproportionate to the value of clearances. The original authority has noticed that although sales to the extent of Rs. 97.66 lakhs was made during the period 2002 03, the job charges shown was meagre and disproportionate to the quantity of clearance made. It is noted that the entries in the ledger accounts of both the units do not give any reference to job work charges raised in the form of labour bills nor was there any vouchers available for payment / receipts. Instead the amounts have been charged merely through journal entries as on 23.5.2003. Thus, only after the visit of the departmental officers, the appellants have made journal entries so as to make it appear that the goods have been sent to M/s.SPP for job work process. The documents with regard to the return of the goods from M/s. SPP to M/s. SG showed that what was returned was finished goods namely corrugated carton boxes and not semi-finished goods which require any further process. This strongly suggests that the entire manufacturing activity is carried out in the premises of M/s. SPP and no further process were do....