TaxTMI 
TaxTMI 
2019 (4) TMI 173
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....Singh S/o Shri Mohinder Singh & Mohinder Singh S/o Shri Bishen Singh; engaged in the manufacture of metal and plastic parts of vertical blinds, Venetian blinds, drapery rods, false ceiling and its parts made of Aluminium/steel from 25.9.1997 to June, 1998 at Plot No.2173A, from 1999 at Plot No.2173 and also having another factory at 2095. In the classification list filed under Rule 173B, they declared that they do not have another manufacturing unit in India. The appellant No.1 unit established in March, 1995 for manufacture of plastic and sheet metal components of blinds and false ceiling of Aluminium and galvanized plain and coated sheet were not then registered with central excise. 2.2 The appellant No.2 i.e. M/s. Glorious Corporation, 77, Village Saran, Faridabad is an unregister unit having partners Shri Jaspal Singh S/o Mohinder Singh and Harvinder Singh S/o Shri Mohinder Singh; were engaged in the manufacture of plastic and metal components of Sofia rods and coated plastic sofia rods under Chapter heading 3925.99. 2.3 The appellant No.3 i.e. M/s. Sonex Industries, 76, Village Saran/2173A, Jawahar Colony, Faridabad is a registered unit with central excise having partner....
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.... 3. Ld. Counsel for the appellants submits that the impugned order is full of contradictions. The adjudicating authority confirmed the demand by clubbing the value of clearances of all the four appellants and imposed penalty on the firms and its directors/partners on the following grounds:- (i) financial flow back, mutual lending and borrowing etc. Amongst the units; (ii) collection of sale proceeds on behalf of each other; (iii) joint control exercised by Shri Harvinder Singh and Shri Jaswal Singh on all the four units; (iv) common managerial control; (v) partners/directors being members of the same family; and (vi) common use of facilities of telephone, fax, computer, office equipment, staff etc. 4. He submits that the benefit of SSI exemption notification has been denied to all four units yet the demand has been confirmed on M/s. M.G. Industries which is wholly contrary to law and facts. There is no allegation in the show cause notice that the other three units were dummy or non existent. Therefore, in the absence of any allegation or evidence in this respect, the confirmation of duty demand against M/s. M.G. Industries is contrary to legal provisions. The d....
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....s length and do not have any nexus with the manufacturing and sales of goods manufactured by the individual firms or company. That in the present case, the Private Limited company, namely, M/s. Sonex Decor (P) Limited, the trading company who purchased the goods from the market and sell them as a trader was also included for denial of benefit of exemption notification. 7. He submits that it was not a case where any clubbing was justified. The adjudicating authority has simply relied on some financial transactions amongst all the units and simply clubbed the clearances. They had explained the various financial transactions and had stated that there could be case of temporary financial accommodations which duly reflected in the books of accounts and were duly returned. This fact could not be made the basis for denying a statutory benefit flowing from statutory notifications which accrue benefit to a small scale unit. 8. He submits that all the units are independent units incorporated/started at different point of time were situated at different premises, were engaged in the manufacture of different products. All the units are separate entities in the eyes of law performing all ....
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....ew Delhi-2003 (159) ELT 909 (Tri.) 3. Rao Industries vs. CCE, Bangalore-2006 (199) ELT 672 (Tri.- Bang.) 11. Heard the parties and considered the submissions. 12. On careful consideration of the submissions made by both sides, we find that first ground for clubbing clearances of all the units is that all are controlled by one family member, therefore, their clearances are to be clubbed. We find that M/s. M.G.Industries is a partnership firm having 3 partners, namely,S/Shri Jaspal Singh S/o Mohinder Singh, Harvinder Singh S/o Shri Mohinder Singh & Mohinder Singh S/o Shri Bishen Singh whereas M/s.Glorious Corporation having partners Shri aspal Singh S/o Shri Mohinder Singh and Shri Harvinder Singh S/o Shri Mohinder Singh and M/s. Sonex Industries, having partners Shri Harvinder Singh S/o Shri Mohinder Singh, Smt. Mohinder Sandha W/o Shri Harvinder Singh and Smt. Manjeet Kaur w/o Shri Jaspal Singh. The allegation of the Revenue is that all three units are partnership firm and having common partners. That cannot be the sole ground to club the clearances of all the units. Moreover, M/s. Sonex Decor Pvt.Ltd., is a private limited company is a separate firm with its Directors, th....
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....s own set of plant and machinery, staff and workers, raw material and utilities like electricity, water etc. Prior to May, 1998, the Specialty Paper Factory was situated at Dharuhera with accumulated stock of finished goods. The appellant decided to transfer such finished stock of Specialty Paper Factory to Paper Board Factory and dispose of the accumulated stock of finished goods under the Central Excise registration issued to Paper Board Factory. The ground plan of the Paper Board Factory prior to May, 1998, showed Shed No. 3 as a godown for storage of its raw material, namely waste paper. Thereafter, the ground plan was amended in May, 1998, to show the Specialty Paper Factory in Shed No. 3 for storing the finished goods manufactured at Dharuhera and clearing them on payment of duty. Accordingly, classification list was also filed for the purpose of clearing the stock manufactured at Dharuhera. Subsequent to erection of the plant and machinery of Specialty Paper Factory shifted from Dharuhera to Shed No. 3, Narela Road, Kundli and manufacture of paper in such separate premises by separate staff and workers who were earlier employed at Dharuhera, were engaged and the appellant ap....
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....e are of the opinion that the view taken by the Tribunal does not appear to be well-founded and likewise, the view taken by the Commissioner, Central Excise. Accordingly, we allow both these appeals, set aside the order of the Tribunal passed on June 7, 2002 as well as the order passed by the Commissioner, Central Excise, New Delhi-III on September 28, 2001 in both the appeals. No order as to costs." It has been held by the Hon'ble Supreme Court that clearances of two factories within the same premises, same owner and common balance sheet with common boundaries but having separate staff, separate management, separate passage, separate entrance with separate central excise registration and producing different end products, cannot be clubbed together. 15. We further take note of the fact that similar issue came up before this Tribunal in the case of Dirba Pipes Pvt.Ltd.-2017 (347) ELT 529 (Tri.-Chan.) wherein the facts of the are as under:- "2. The facts of the case are that the respondents are engaged in the manufacture of ERW pipes and registered with the Central Excise department. They are availing SSI exemption benefit under various Notifications as applicable from time-....
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....rectors are not related to the Directors of other three companies. From that, it cannot be said that these units have been managed by Shri Ashok Kumar and Shri Meghraj. We have seen that Directors of the two companies have related to the other, it does not mean that they are only one with other companies are dummy as held by in the case of Nova Industries Pvt. Ltd. (supra) wherein this Tribunal has observed as under : 15. First, we will deal with the issue whether the clearance of M/s. DSA can be clubbed with the clearance of M/s. NOVA. In the impugned order, the allegation against the appellant is that both the companies were promoted by Shri D.V. Khanna himself as Managing Director of both the companies and Director in both the companies are same. It is also found that by the Adjudicating Authority, the salesman/dealers to be decided mutually and marketing of both the companies were commonly and salary of employee of M/s. Nova was paid from M/s. DSA and commission of employees of M/s. NOVA was paid from M/s. DSA's account. The annual incentives were given to the dealers on the basis of combined sales of both the units. Moreover, the shareholding in both the units by the ....
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....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 respectfully following the decision of the Hon'ble Gujarat High Court, the impugned order is set aside and the appeals are allowed. The cross objections filed by the Revenue are disposed off accordingly. 18. Further, we find that, in the case of CCE v. Sharad Industries reported in 2013 (294) E.L.T. 561 (T) this Tribunal again observed as under : We, after appreciating the submissions of both the sides find that there is not much dispute on factual position. It is not the Revenue's case that two units owned by Smt. Kamlesh Gupta and her husband Shri Avdesh Kumar Gupta not complete units having all the necessary machines and infrastructure for manufacture of their final product. Both the units have separate Sales Tax Registration, Industries Registration, Income Tax Registration, Electricity Connection, Telephone Connection & ESI Registration, etc. Merely because there is a door between th....
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....h the units. If the Department feels that out of the two units, one unit is dummy, then 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 been done. The learned Commissioner in the impugned order has given the following findings:- "70(ii) Whether each unit is entitled to a separate limit (under the SSI exemption notification) as per the Board's Circular No. 6/1992, dated 29-5-1992. I have perused the Circular No. 6/1992, dated 29- 5-1992 [issued from F. No. 213/15/92-CX-6] issued by the Central Board of Excise and Customs, New Delhi in the context of SSI exemption Notification No. 175/86-C.E., dated 1- 3-1986. In the said Circular, the board had, inter alia, clarified that the limited companies, whether public or private, are separate entities distinct from the shareholders composing it and hence, each limited company is a manufacturer by itself and would be entitled to a separate exemption limit. It is not in dispute that M/s. Ennar Cements and M/s. Seshashaila Cements are private limited companies registered separately unde....
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.... 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 in terms of agreement between them - Clubbing of clearances of units not justified in absence of conclusive evidence of financial flowback among them - Notification No. 83/83, dated 1-3-1983, No. 85/85, dated 17-3-1985 and No. 175/86, dated 1-3-1986. 23. We also find that the activity of the appellants were in the knowledge of the department as they were registered with the Central Excise Department and units are located in the same range, therefore, extended period of limitation is also not invokable for dubbing the clearance of DSA with NOVA. 24. From the analysis of the above decisions and the facts of the case before us, we find that both the units are separately located having separate registrations and dealing separately. We also find that there is no financial flowback, therefore, there is no mutuality of interest between the units. Accordingly, clearances of both the units cannot be clubbed toget....
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....eting) 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 gas even after the stage of bottling till it was sold to the customers. The Balance-sheets and other financial statements of the three units revealed that whatever income they earned had gone to MACL in the form of lease rent of cylinders. One Mr. Sita Ram Goswami, Accountant of MACL and Mr. Ashok Kumar, Chief Operating Officer of MACL admitted that some amount of cash was also collected by MACL over and above the invoice prices of Hydrogen gas supplied by three companies. It was noted that while front companies were being supplied gas by MACL @ 0.50 per unit, till August, 1996, the same gas was sold by the three companies @ Rs. 5/- per unit. Keeping in view all these factors the authorities were of the view that MACL had created the three companies with the fraudulent intention to avail benefit of exemption granted under Central Excise Notification No. 1/93, dated 28-2-1993 and has mis-declared the assessable value in the invoices with the intention t....
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....s case, both the units are private limited and registered with the Registrar of Companies and both the units are having their units separately located with a distance in some industrial area but there is no common gate for both the companies. Further, both the companies are registered with Income-tax Department, Sales-tax Department, Central Excise Department, Director of Industries, etc. as separate units. The registration of Central Excise was granted to both the units although the documents were signed by Shri D.V. Khanna for filing returns or correspondence with the department but they were never objected to. We also find that in this case although both the companies are having different brand names of their product such as NOVA/DSA. The units are having their own separate machinery having manufacturing the goods and same have been cleared on payment of duty by availing SSI exemption of both the units separately. The only allegation is that sometimes, salary of one of the employees was paid by the other firm or they are managed by one person. Moreover, the dealers get the commission on the combined sales of both the companies. These things cannot constitute that there was a mut....
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....make the unit owned by the wife as a dummy unit. The prime requirement, for clubbing the clearance of two units is not having complete independent machinery and infrastructure to manufacture the goods. If both the units are complete by itself, capable of manufacturing the goods without any help from the other unit, it has to be held that both the units are independent units. The various decisions of the Tribunal referred to and relied upon by Commissioner (Appeals) in his impugned order are applicable to the facts of the present case. It stands held in precedent decision that financial flow back and financial intertwining between the two units is the main reasons for reflecting upon the fact of their being independent or not. One such reference can be made to in decision of the Hon'ble High Court in the case of M/s. RenuTandonv. Union of India - 1993 (66) E.L.T. 375 (Raj.). Similarly, in the case of M/s. Electro Mechanical Engg. Corporation v. CCE, Jaipur - 2003 (152) E.L.T. 194 (Tri.), Girish Electricals Industries v. CCE, Mumbai - 2004 (167) E.L.T. 299 (Tri.) it was held evidence of common office premises, common staff and common maintenance of records, etc. cannot be held to be ....
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....ufacturer having more than one factory. Hence, the clarifications given by the Board in the said Circular dated 29-5-1992 are not applicable to the facts of the present case." On perusal of the above findings of the learned Commissioner, it is clearly stated that each appellant's company is separate. In respect of the Board's Circular, the clearances of the limited companies cannot be clubbed. The Commissioner has clubbed it and demanded duty collectively. This is not legal and correct and it is contrary to the Board's Circular." 20. We further find that in the case of Alpha Toyo Ltd. v. CCE, New Delhi reported in 1994 (71) E.L.T. 689 (Tribunal) this Tribunal has observed as under : SSI exemption - Clubbing of clearances common Managerial Control, a few common directors and advancing of interest free loans by main unit to other units not sufficient to make other units as dummies when they are having independent control or money flow back to the main unit - Clearances not clubbable - Situation not to be confused with that of related person concept under Section 4(4)(c) of Central Excises & Salt Act, 1944 - Notification No. 175/86-C.E., dated 1-3-1986 - Section 5....