AI Drafter 
TaxTMI 
TaxTMI 
2020 (1) TMI 374
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....est. ii) I hold that extended period under proviso to Section 11A(1) of the Central Excise Act, 1944 is invokable for demanding Central Excise duty from them. iii) I hold that M/s JPPL being an extended arm of M/s PPI, was created on papers in order to avail the benefit of SSI exemptions and thus it is a dummy unit of M/s PPI. iv) I confirm and order recovery of demand of Central Excise duty of Rs. 61,44,952/- (BED Rs. 59,90,792/- + Education Cess Rs. 1,19,816/- + S.H.E. Cess Rs. 34,344/-) for the period 2005-06 to 2009-10 (Upto February 2010) against M/s PPI under the proviso to Section 11A (1) of Central Excise Act, 1944. Amount of Rs. 5,00,000/- already deposited by the party vide entry No. 11 dated 21.7.2009, is appropriated against the duty demand confirmed above. v) I also confirm interest demand on the duty not paid which may be recovered under Section 11AB of the Central Excise Act, 1944. vi) I impose a penalty of Rs. 61,44,952/- upon M/s PPI, Faridabad under Section 11AC of the Central Excise Act, 1944. Penalty payable under Section 11AC shall be reduced to twenty five percent of the amount of duty so determined, if the amount o....
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....aving machinery to manufacture corrugated boxes and the finished goods i.e. corrugated boxes valued at Rs. 2,35,220/- were also detained by the visiting staff. Various statements of the employees of JPPL and appellant were recorded during the investigation. It was noticed in the investigation that both the companies were owned by family of two sons of Mr. J.L. Garodia i.e. Shri Sushil Garodia and Shri Ramesh Garodia (since deceased). (iv) On the basis of investigation a Show Cause Notice dated 26.04.2010 was issued to the appellant and M/s JPPL jointly and separately proposing to club the clearances of the appellant and M/s JPPL for determining the aggregate value of clearances under Notification No. 8/2003. It was proposed to demand Central Excise duty amounting to Rs. 59,90,792/- from both the companies calculated on the value of clearances of finished goods done by M/s JPPL for the period 2005-06 to February 2010 by alleging that M/s JPPL was not entitled to SSI exemption. The Show Cause Notice also proposed for imposition of penalties upon the appellant as well as JPPL and also against directors of appellant and JPPL. (v) The main allegation in the Show Cause ....
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....ial made sales and received sale proceeds in their own bank account. f) M/s JPPL was established in July 1989 g) The JPPL was separately registered with Sales Tax Department on 17.05.1996 and also got registered as small scale industry on 03.08.1992. h) When JPPL was established, there was no duty on corrugated boxes and the duty came in year 2001-02, thus, it could not have been established to evade payment of duty. i) JPPL filed declarations to Central Excise department on 05.05.1992, 18.03.1994 and 18.08.1994. a further declaration was filed on 16.04.2001 regarding information that there turnover was less than SSI limit. In year 1992, the factory of the JPPL was visited for verification by Central Excise department. j) M/s JPPL has separate PAN No. and it files separate Income Tax Returns by showing its income from sale of final products. k) The JPPL is also registered separately under Factories Act. l) M/s JPPL is independently registered with Registrar of Companies and is filing its return under Companies Act. Also separate balance sheets are prepared as per the Companies Act. (iii) That the above mentione....
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....re or machinery to manufacture the final product. Infact, it is specifically admitted that the JPPL had machinery and was manufacturing final product in their factory. In such a case, the JPPL cannot be treated as dummy unit (CCE Vs. Jagatjit Agro Industries, 2014 (309) ELT 301 AND CCE Vs. Saron Mechanical Works, 2016 (332) ELT 80 (P&H)). (viii) That since both the companies are separate legal entities and are registered with various statutory authorities separately, the unit cannot be treated as one and the clearances cannot be clubbed. [M/s D.S. Doors (I) Ltd. Vs. CCE Final Order No. 62829-62831/2018 dated 28.08.2018 AND Nova Industries (P) Ltd. Vs. CCE, 2015 (327) ELT 103.] (ix) That the finding regarding declaring JPPL as dummy unit is erroneous and without any basis. It is not disputed that JPPL was established in 1989 and since then it is continuing its manufacturing operations. The duty on corrugated boxes came in year 2001-02. In such a case, when there was no duty on final product it cannot be said that JPPL was established to evade the payment of duty. (x) That the effect of clubbing of clearance of two separate private limited companies does no....
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....also, we find that the individuals have given money on loan to the units and if other unit is required money, the same is returned by the other unit to the individual who further give the loan to that unit and on all the transactions interest has been paid. In these circumstances, we cannot say that there was flow of funds between the both units and these types of transactions cannot be the reason for clubbing the clearances. 10. Moreover, another allegation is that both units are managed by the family members or one person, the same cannot be the reason to club the clearances. 11. A similar issue has been examined by this Tribunal in the case of Nova Industries (P) Ltd. vs. CCE-Chd 2015 (327) ELT 103 (Tri.-Del.) wherein this Tribunal has observed as under:- "14. We find that in this case demands have been confirmed against the appellants on two accounts: (a) by clubbing the sales of M/s. DSA in the account of M/s. NOVA and (b) Goods have been removed clandestinely without payment of duty. 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 alleg....
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....upra) 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 175/86-C.E. and subsequently Notification 1/93-C.E., 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 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 (29....
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....upra) 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, 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 Cir....
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....agement, 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-C.E. 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 in terms of agreement between them - Clubbing of clearances of units not justified in absence of conclusive evidence of financial flow back 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....