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2022 (8) TMI 830
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....tigation was initiated. 2. The officers conducted simultaneous searches on various premises on 07.08.2013. Incriminating documents along with CPUs/laptop were seized under mahazar drawn at the respective premises. As a follow up action searches were also conducted at the premises of few dealers. The CPUs seized from the factory of M/s.VPPL and other CPUs / laptop / note pad / pen drive which were seized from various other places as mentioned in office letter dated 30.08.2013 (Annexure-A20) were handed over by DGCEI to Central Forensic Laboratory (CFL), GEQD at Hyderabad for retrieval of documents. The laboratory furnished printouts of documents retrieved vide their letter dated 28.09.2015. On the basis of documents retrieved / seized from the premises and also after recording statements of various persons, it appeared that M/s.VPPL was evading Central Excise Duty by clandestinely clearing the goods in the name of other firms and thus suppressing their actual sales turnover. It also appeared that M/s.VPPL and their group firms were claiming discount @ 20% mostly upto December 2012 and @ 37.8% from January 2013 onwards in their invoices issued to the customers without actually pas....
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....s Section 11A (10) of Central Excise Act, 1944. 7. I order that M/s.Karthi Fire Works, M/s.Revathi Fireworks Industries, M/s.Vadivel Flame Factory, M/s.Venus Fire Works, M/s.Vadivel Pyro Park shall also liable to pay the appropriate interest under Section 11AA of the Central Excise Act, 1944 on the amount demanded from them as above. 8. I impose a penalty of Rs.95,58,702/- (Rupees Ninety five lakh fifty eight thousand seven hundred and two only) on M/s.Karthi Fire Works under Section 11AC(1)( c) of the Central Excise Act, 1944." 2.3 Separate penalties were imposed on the Managing Director Shri V. Arumugasamy and his son Shri A. Vasant Vikas, Director as under : "25. I impose a penalty of Rs.86,58,453/- (Rupees Eighty six lakh fifty eight thousand four hundred and fifty three only) under Rule 26 of CER, 2002 on Shri.V.Arumugasamy, Managing Director of M/s.Vadivel Pyrotech Private Limited, Sivakasi. 26. I impose a penalty of Rs.86,58,453/- (Rupees Eighty six lakh fifty eight thousand four hundred and fifty three only) under Rule 26 of CER, 2002 on Shri.A.Vasanth Vikas, S/o.Shri V.Arumugasamy, Director of M/s.Vadivel Pyrotech Private Limited, Siv....
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....P Ltd during 2013 3 M/s.Venus Fire Works Partnership firm: V.Arumugasamy Athiban (son) Sujatha (daughter in law) Merged with M/s.Vadivel Pyrotech P Ltd during 2013 4 M/s.Karthi Fire Works Partnership firm: V.Arumugasamy Athiban (son) Merged with M/s.Vadivel Pyrotech Park in 2013 5 M/s.Vadivel Pyro Park Partnership firm: V.Arumugasamy Vasantha Vikas (son) Sujatha (daughter in law) Athiban (son) M/s.Karthi Fire Works merged in 2013 Prior to merger, all these small units were availing SSI exemption and consequently not discharging Central Excise duty. 4. Learned counsel submitted that the period of dispute is from 2011-12 to 2014-15. He submitted that though the small units were formed by family members of Shri V. Arumugasamy as partners, the existence of the units were independent. Prior to merger, none of the units were dependent on one another and there were no inter-unit transactions. Each unit had separate factory premises on their own with infrastructure equipment and capital to run the units and were not sharing any profits among them. There was no flow of funds for purchase of raw material or clearance of goods between these units. The....
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....company and that the data forms part of the ordinary business transactions of the company. For these reasons, the documents are vitiated and void. He relied upon the following decisions : (i) Premium Packaging Pvt. Ltd. Vs CCE Kanpur 2005 (184) ELT 165 (Tri.-Del.) (ii) Surya Boards Ltd. Vs CCE Rohtak 2014 (312) ELT 282 (Tri.-Del.) (iii) Ambica Organics V s CCE& Cus. Surat-I - 2016 (334) ELT 97 (Tri.-Ahmd.) confirmed by Gujarat High Court reported in 2016 (334) ELT A67 (Guj.) (iv) S.N. Agrotech Vs CC, New Delhi - 2018 (361) ELT 761 (Tri.-Del.) (v) Vishnu Kumar Traders (P) Ltd. Vs CC Chennai-IV 2019 (369) ELT 1070 (Tri.-Chennai) (vi) CCE Delhi Vs Jindal Nickel & Alloys Ltd. 2020 (371) ELT 661 (Del.) 7. In para-26 of the SCN, the appellants have been called upon to show cause jointly and severally. Further, in sub-para (b) of para-26 of SCN, the appellants have been called upon to show cause why all the units should not be treated as single financial entity constituting one single manufacturer and why their clearances should not be clubbed together to demand duty. It can be seen that though department alleges that clearances of ....
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....nvoices recovered from 3 upcountry dealers and ledger entry of two of the upcountry dealers pertaining to 31 invoices as against 313 invoices seized from the 3 upcountry dealers. It is held by adjudicating authority that since the same details appeared in File No.109/1, it is authentic and does not need any corroboration by the said dealers as to purchase of goods clandestinely. Such observation is erroneous. Even though the department conducted searches on the premises of raw material supplier and transporters, no incriminating evidence was brought out to prove excess production to support the allegation of clandestine removal. The excess receipt of raw material or consideration has not been alleged or established by the Department. 10. After investigation, common show cause notice has been issued to all the units wherein the proposal is to demand duty jointly and severally. Such demand made against the appellant jointly and severally cannot sustain when the allegation is to club the clearances of all the units alleging that some of the units are dummy units. 11. The Ld. Counsel submitted that reason for alleging that appellant M/s.VPPL has clandestinely cleared the goods to....
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....erged with M/s.VPPL for the period 2012-13 and each of the above units were well within their exemption limit prior to merger. The total value of clearances effected by them during 2012-13 are detailed below : Sl.No. Year Name of the firm Value of clearances 1 2012-13 RFW 29,41,555/- 2 2012-13 VFW 61,670/- 3 2012-13 VFF 11,08,713/- 14. The above units are separate legal entities and they have separate premises/sheds to produce crackers. They have foreman and other workers in their factory to produce fire crackers. The raw materials were produced out of their funds and sales proceeds of finished products were realized by cash and cheque which was accounted properly. The workers have been paid wages from their own funds. There was no common funding or sharing of profits with any of the firms of the Vadivel Group or with VPPL. These units were registered with the Director of Industries as a Micro unit producing fire crackers. Each unit had separate VAT and CST registration. So also, they have separate PAN issued by the Income Tax Department. The amount of each unit had been properly audited by the statutory auditors and Income Tax ret....
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.....109/1 would fully tally with each other. So also, the documents retrieved by the Central Forensic Laboratory, Hyderabad (GEQD) which is an authentic agency of the Government of India, from the CPU seized at their factory on 07.08.2013 contained sales details of the above firms which corroborated with the details in file No.109/1. Again, the printouts contained the ledger of various parties and showed details of invoices of M/s.VPPL and other firms of Vadivel group. The amounts under column "Bill amounts, Sales, Total and Receipts" were deliberately shown in two digit less in order to evade payment of tax. The date wise sales details of the firms namely, Karthi Fire Works, Revathi Fire Works Industries, Vadivel Flame Factory, Venus Fire Works and VPPL for the period 2012-13 and 2013-14 were found in the said file No.109/1. The ledger print outs in the nature of bill amounts were corroborated with the total amount mentioned against respective firms. 20. Countering the argument of Ld. Counsel that computer printouts contained in File No.109/1 and the hard disc etc. are not admissible evidences, he adverted to the discussions of the adjudicating authority in para 41.8. 21. Ld. A....
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....n two grounds. Firstly, that M/s.VPPL had suppressed the value of sales turnover by clandestinely removing the finished products through their other firms namely M/s.Revathi Fireworks Industries, M/s.Venus Fire Works, M/s.Vadivel Flame Factory, M/s.Karthi Fire Works and M/s.Vadivel Pyro Park and thereby wrongly availed the small scale exemption under Notification No.8/2003-CE dated 01.03.2003. 27. The relevant part of the Notification No.8/2003-CE which gives SSI exemption reads as under : "In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) (herein after referred to as the Central Excise Act) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 8/2002-Central Excise, dated the 1st March, 2002, published in the Gazette of India vide number G.S.R. 129(E), dated the 1st March, 2002, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts clearances, specified in column (2) of the Table below (hereinafter referred to as the said Table) for home consumption of excisable goods of the description....
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....g particulars, namely :- (a) name and address of the manufacturer; (b) location/locations of factory/factories; (c) description of inputs used in manufacture of specified goods; (d) description of specified goods produced; (e) date from which option under this notification has been exercised; (f) aggregate value of clearances of specified goods (excluding the value of clearances referred to in paragraph 3 of this notification) till the date of exercising the option; (iii) the manufacturer shall not avail the credit of duty on inputs under rule 3 or rule 11 of the CENVAT Credit Rules, 2002 (herein after referred to as the said rules), paid on inputs used in the manufacture of the specified goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified in the said Table does not exceed rupees one hundred lakhs; (iv) the manufacturer also does not utilise the credit of duty on capital goods under rule 3 or rule 11 of the said rules, paid on capital goods, for payment of duty, if any, on the aforesaid clearances, the aggregate value of first clearances of....
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....veral other units (as dummy units) and the clearances of main unit would be diverted or accounted as clearances of the dummy units. In the present case, the department does not allege that goods produced by M/s.VPPL were accounted as clearances of the other units. So also, there is no allegation that raw material was purchased and accounted in the name of the small units and thereafter used for manufacture of goods by M/s.VPPL. 30. On perusal of page 274 of SCN, the allegation is that all the small units have to be treated as a single financial entity constituting one single manufacturer and their value of clearances should be clubbed together as they have wrongly availed the SSI exemption. The demand of duty is seen to have been raised separately on all the 6 units. Thus, though it is alleged that the value of clearances have to be clubbed, the duty demand has been raised separately on all the units which indicate that the department considers all these units to have independent existence. In other words, though department alleges that M/s.VPPL was using other units as dummy units for clandestinely removing their finished products, they in fact admit that these units have indep....
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....ratory. It is also seen that the Department of Income Tax had conducted a search/survey at the premises of the appellant and had seized some documents. In para 11 of the SCN, it is stated that vide letter dt. 10.10.2013, the photocopies of such documents seized by the Income Tax Department were forwarded to the investigating officers of this case. It is alleged that the sales details in the printouts seized by the Income Tax Department and contained in File No.109/1 matched with the details available in the printouts retrieved from the hard disc of the CPU seized at the factory premises of M/s.VPPL. Para 4.1.3 of the SCN reads as under : "4.1.3 Similar all sales details of 2012-2013 and 2013-2014 (upto 9/7/2013) were observed in the Printouts of documents retrieved by GEQD, Hyderabad from the CPU seized at the factory premises of VPPL. Pages Nos.491 to 737 contains printouts captioned "All Sales Details for All" - Period from 01/04/2012 to 31/03/2013 (Annexure A-24) and from Pages No.738 to 899 contains printouts captioned "All Sales Details for All" - Period from 01/04/2012 to 09/07/2013. (Annexure A-25). Details available in the printouts retrieved by GEQD, Hyderabad fou....
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....er enlarged or not); or (b) a facsimile copy of a document; or (c) a statement contained in a document and included in a printed material produced by a computer (hereinafter referred to as a "computer printout"), if the conditions mentioned in sub-section (2) and the other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be also a document for the purposes of this Act and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible. (2) The conditions referred to in sub-section (1) in respect of a computer printout shall be the following, namely :- (a) the computer printout containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; (b) during the s....
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....the appellant was not afforded an opportunity to cross examine any of the witnesses. As per Section 9D of the Central Excise Act, 1944, the statement can be relied only if the person is examined. Again, on perusal of records, there is no documentary evidence to show that two sets of invoices have been recovered by the department. The department has relied upon the statement of Accounts Manager Shri Gopinath. In absence of examination/cross examination his recorded statement is of no evidentiary value. 38. One other ground for clubbing the clearances is that M/s.VPPL has been maintaining the accounts of all other units. As already seen from the above decisions, merely because one unit is maintaining the accounts of the other units, it cannot be said that the other units are dummy units. In para-10 of SCN, the account details obtained from various banks have been reproduced. However, there is no discussion that the amounts were paid to raw material suppliers for purchasing raw material in the name of dummy units so as to facilitate clandestine clearance in the name of the main unit. After discussing various bank details, in para 10.11 of the SCN, it is stated that Vadivel Group of....
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.... same manufacturer which is to be taken in to consideration for the purpose of interpreting the exemption notification." It is clear from the circular that all the units have to be treated differently and each firm is eligible for the exemption of notification separately even if the partners in the different units are one and the same. 40. The Hon'ble High Court of Rajasthan in the case of Renu Tandon Vs Union of India - 1993 (66) ELT 375 (Raj.) held that in the absence of evidence of common funding and financial flow back two units cannot be treated as one and the clearances cannot be clubbed. 41. The Tribunal in the case of Coimbatore Engineering Works Vs CCE Coimbatore - 2009 (239) ELT 366 (Tri.-Chennai) held that borrowing funds in need is not a bar between two units eligible for SSI benefit. 42. In the case of CCE Kanpur Vs Sharad Industries - 2013 (294) ELT 561 (Tri.-Del.), it was observed that husband and wife are entitled to do their own business and if husband is looking after the business of wife, it would not make the unit owned by wife as dummy unit. The prime requirement, for clubbing the clearance of two units is that both the units do not have any indepen....
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....bove facts, the officers concluded that the value of clearances of both the units must be clubbed together. Accordingly, two Show Cause Notices for the different periods dated 22-4-1999 & dated 29-11-1999 were issued to both the Units proposing therein total demand of Rs. 9,32,114/- and penal action for the Appellants. The said notices were, later on, adjudicated by the Joint Commissioner, Central Excise, Kanpur vide his said Order-in-Original dated 31-10-2000 by confirming the demand of Rs. 9,32,114/- & penalty of Rs. 9,32,114/- & Rs. 25,000/- upon the Respondent No. 1 on the following ground :- "the two firms are owned by husband and wife and general Power of Attorney is with the husband to run the business which is in wife's name and the products are with the Brand name which is admittedly belonging to their family therefore prima-facie it appears that the benefit of both the units is accruing to the same set of persons constituting a family. Merely because they are having separate records for the requirement of Trade Tax Act etc, the two cannot be considered separate. The acid test in such case is recipient of the benefit. Unless the wife or husband are professional an....
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....or not. One such reference can be made to in decision of the Hon'ble High Court in the case of M/s. Renu Tandon v. 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 sufficient to club the clearances of the units, who have different registrations in all the departments and in the absence of any financial flow back." From the discussions made above, we do not find that the department has been able to establish sufficient grounds for clubbing the clearances of each unit or for confirming duty against all the 6 units. 43. The second duty demand is with respect to the allegation that M/s.VPPL has not passed on the discount to their customers and has thus suppressed their actual sales turnover. It is submitted by the Ld. Counsel that clearances made by all the units were totally accounted in their books. Though the department has obtained invoices and sales ledgers in regar....