TaxTMI 
TaxTMI 
2023 (9) TMI 180
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....ip firm with the name M/s. Balaji Packaging Industries (BPI). 2.2 On gathering intelligence that BPKG manufactured corrugated cartons and availed SSI exemption provided under Notification No. 08/2003 and when the value of clearances was likely to exceed Rs.1.5 crores, the partners of M/s. BPKG started another firm with the name and style "M/s. Balaji Packaging Industries" (hereinafter referred to as BPI) investigations were conducted. It was noted that when the value of clearances exceeded Rs.1.5 crores, BPI was registered with the Central Excise Department and started paying Central Excise Duty. Further, they started floating different proprietorship/partnership firms keeping themselves as proprietors/ partners or with their relatives as partners. It was also noted by the Department that all these firms manufactured corrugated cartons and cleared the same availing SSI exemption as if they were all independent units. BPKG has floated some trading firms also without having any factory premises and machinery and the corrugated cartons manufactured in such firms, including BPKG and BPI, were cleared under the invoices of these trading firms and thus evaded Central Excise duty. The ....
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....hich they are not entitled • controlled the affairs of trading firms namely SAP, SPP, SBPT, SEP, BIP as admitted by themselves and concerned sleeping partners and diverted Corrugated Carton manufactured in other manufacturing firms on account of these trading firms • started BIP, a proprietary firm with Smt R Rukmani as the pro-prietrix since 2003, which did not possess important machinery namely corrugation machine to manufacture corrugated cartons during the period of demand; the corrugated cartons manufactured in SHP and other manufacturing firms were sold under the invoices of BIP • appellant influenced Shri.K.Gopi (owner of NAGA and job worker for BPKG group of firms) to start a proprietary firm by name SEP with the premises of NAGA being declared as the factory premises and without having any factory premises for itself, the corrugated cartons sold under the invoices of SEP were manufactured in BPKG, Shri Gopi did not know the business activities of SEP and he did not receive any profit from the business activities of M/s Sri Eswari Packs, • they have engaged two job workers namely M/s Naga Packagings and M/s. Sree Pothis Pa....
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....ase order for supply of corrugated cartons, procurement of raw materials and the manufacture of ordered quantity of corrugated cartons was carried out commonly under uniform control without any monetary compensation; that clearances of corrugated boxes/cartons manufactured in one unit was freely done under the invoices of other units, resulting these units being inseparably intertwined with each other from the point of financial control, managerial control, operational control and administrative control. 2.5 It appeared that BPKG and BPI have procured raw materials such as Kraft Paper, Gum Powder and Stitching Coils and engaged in the manufacture of corrugated cartons. They have sent the raw materials to their manufacturing firms namely, SHP KRK, BC and BP and got corrugated cartons, manufactured and sent the same under invoices and delivery notes of other firms prepared at the common office, functioning at the premises of BPL. Show Cause Notice No.26/2014 dated 27.03.2014 was issued for the period from March 2009 to March 2013 alleging - "It appeared that BPKG and BPI have procured raw materials such as kraft paper, Gum powder and Stitching Coils and engaged in the man....
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.... the group firms; though raw materials were sent from BPI and BPKG to all the manufacturing units, no coolie charges have been paid by BPI and BPKG, instead the coolie payments were paid from the account of trading firms as admitted by Shri K. Ravichandran in his statement dated 19-12-2013. From the above it appeared that exchange of raw materials and finished products took place among the units of BPKG group without any monetary consideration; no payment of coolie charge made by the firm which supplied raw materials to the firm which manufactured Corrugated Carton Boxes using such raw material, instead, at times, payments were made from the accounts of the trading firms for money lending among the BPKG group units, interest was not charged on the outstanding amount out of such financial flow. Therefore, it appeared that said three persons have exercised pervasive managerial control, operational control, administrative control and financial control over all the business activities all the firms of BPKG group, they are also the partners (including the de facto partner) of BPKG, which is the first firm started by them. BPKG represented by the group of three persons is the le....
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....rity vide Order-in-Original No.51/COMMR/CE/2016 dated 13.07.2016, held as under :- "13.01. I hold Shri K. Ravichandran to be the defacto partner of BPKG 13.02. I hold that BPKG controlled and run by Shri. V. Nagaraj and Shri. A Subbiah, the partners, and Shri K. Ravichandran, the de facto partner, representing his wife Smt. R. Rukmani, to be the manufacturer of corrugated cartons in the premises of BPKG, BPI, BC, BP, SHP and KRK and as manufacturer of goods cleared on account of the other trading firms namely SAP, SPP, SBPT, SEP and BIP 13.03. I order that the value of clearances of corrugated cartons manufactured in the factories of BPKG, SHP, BP,BC, KRK and BP1 and also got manufactured from the job workers namely NAGA and SPPI, which were effected under the invoices of those manufacturing firms and the trading firms viz. SAP, SPP, SBPT, SEP and BIP during the period from 2008-09(01.03.2009 to 31.03.2009) to 2012-13, be included together in terms of Para 2(v) and 2(vii) of Notification No.8/2003 CE dated. 01.03.2003, as amended, to determine the aggregate value of clearances of BPKG controlled and run by the 'group of three persons'. 13.04.....
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....me of proprietor/ partner Date of formation Remarks 1. Balaji Packaging [BPKG] 141, Sukkiravarpatti Road, Anaikuttam V. Nagaraj, A. Subbiah & Smt. R. Rukmani (w/o Ravichandran) 08.07.88 SSI unit 2. Balaji Packaging Industries [BPKG] 136, Sukkiravarpatti Road, Anaikuttam K. Ravichandran & N. Devaki (w/o Nagaraj) 11.08.95 Duty paying 3. Balaji Cartons [BC] 144, Muthhunagaiya Puram, Periayur K. Ravichandran, Nagaran & A. Subbiah 14.06.99 SSI unit 4. Balaji Ind Packs [BIP] 141B, Sukkiravarpatti Road, Anaikuttam R. Rukmani (w/o K. Ravichandran) 11.08.03 SSI unit 5. KRK Packaging [KKR] 1/90F Vadamalpuram, TTL-17-11-2009 [RAC] K. Ravichandran 11.11.05 SSI unit 6. Sri Hari Pack [SHP] 1/528, Sivakasi Co. Operative Industrial Estate, Sivakasi S. Raja....
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..... Ravichandran who is either a proprietor or a partner in one or more of the firms. The search resulted in the investigation finding that each unit was comprised of different proprietors or partners and each unit was located at different geographical locations, had its own infrastructure and labourers besides having been registered under the TN VAT Act and remitting the appropriate VAT and filing of returns. Statements were recorded from certain individual showing the line of the investigation. As a sequel, a notice dated 27.03.2014 was issued proposing the clubbing of clearances/sales effected from the various manufacturing and trading units to fasten the demand on BPKG by holding that it was controlled and run by group of three individuals by name S/Shri V. Nagaraj A.Subbiah and K. Ravichandran to be the manufacturers of all the goods besides holding K. Ravichandran as the defacto partner of BPKG in the place of the existing partner namely his wife R. Rukmani. The notice demanded the duty by taking the value of clearances as declared by each of the units in their respective VAT returns. The notice also asked the other manufacturing trading and job working firms to show cause as t....
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....for the month of March 2009 besides claiming the benefit of cenvat credit [para 63 of the settlement commission order at page 392]. However, on the matter being referred to the respondent commissioner he sent a report dated 29.10.2014 strongly opposing to the grant of settlement, except for the value towards inter unit transfer and difference in value for March 2009. The Settlement Commission after hearing both sides passed order No. 97 111/2014 SC dated 24.02.2015 rejecting the application on the ground that the matter involved, complex facts and law and accordingly remitted the case back to the adjudicating authority. 6.7 It was at this time that the appellant engaged the services of the present counsels on record to be advised that the notice issued to them is not sustainable both on fact and law. The counsel for the appellant there after took the matter with the Chief Commissioner for change of adjudicating authority but since his request was rejected twice, he caused the filing of the replies for all the 16 noticees and appeared for the personal hearing before the respondent and made detailed submissions for all the units including the individuals. The appellant submits tha....
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...., one job working unit and the three trading units should not be deemed to be the factories belonging to BPKG and the clearances/sales effected by the said units should not be clubbed for the period from 13.2009 to March 2013 and the SSI benefit availed by them individually should not be denied and consequently the duty amount of Rs2,36,72,410/- short/not paid should not be demanded from BPKG controlled and run by the Group of three persons invoking the larger time limit as per Section 11 A [4] of CEA 1944 is highly improper contrary to law which totally vitiates the impugned notice rendering it ab initio void which requires the consequent order passed to be set aside in liminie for the following: 6.10 The notice is not only unclear in making the above proposal but also made such a proposal in violation of the settled position of law since the revenue had not made it clear as to whether they wanted to sustain the demand and fasten the duty liability on the Group of Three persons (GTP) who were admittedly not the partners of BPKG which is a registered partnership firm, and whether such a proposal is sustainable in law especially under the partnership Act. 6.11 If the revenue w....
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....as a partner without notice to him or her cannot be sustained in law and the said defect is not curable requiring the order passed to be set aside. 6.17 The findings recorded by the respondent in para 07.01 to 07.03 of his order at page 74 in spite of admitting that the above arguments advanced on behalf of the appellant appears to have strong force viewed with the provisions of the Partnership Act alone, had however gone on to record certain frivolous and unacceptable findings and had relied upon two judgments of the Hon'ble Supreme Court permitting the lifting of the corporate veil of the status granted to the companies without being conscious of the fact that the units in question covered by the present dispute are not companies and therefore do not hold any corporate status to require the lifting of the corporate veil thereby his above finding totally devoid of any merits and contrary to law requiring the order passed by him to be set aside as not maintainable in law. 6.18 Again para 10.04 of the impugned order at page 81 had recorded based on the state as well as documentary evidences that it was GTP who were looking after the administrative financial matters of all ....
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.... there were 11 units in all, the notice/order has chosen to fasten the tax liability only on BPKG run and controlled by the GTP and not on any other unit and reasons therefor are not known or disclosed. Even the clearances of the already duty paying unit expose the high handed and arbitrary action of the authorities Failure to identify the principal manufacturer is fatal to the case as has been held in the case of Ghaziabad Organics Ltd Vs CCE, Ghaziabad- 2016 (344) ELT 965 (Tri.-All). 6.23 The intelligence said to have been received and allegation levelled that the GTP created the units at different points of time clearly belies the allegation since the facts on record show that the units were not started only after a particular unit was about to exceed the exemption limit and the notice also did not bring out any contrary fact in support of the said allegation. 6.24 In a nutshell, the above arbitrary and illegal proposal made in the show cause notice to treat BPKG controlled and run by the GTP as the manufacturer of the goods from all the units by itself evidence to the fact that the revenue otherwise was not in a position to sustain the clubbing of clearances of all the un....
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....the Ld. Counsel, that these questions are answered against the appellant by deeming that GTP is an undisclosed partnership consisting of S/Shri K. Ravichandran, V Nagaraj and A. Subbiah that ran this partnership (BPKG) and also established other 10 firms. 7.3 It is thus alleged that the investigation revealed that though BPKG was formed with the three actual partners it was actually GTP who ran the partnership, and thereafter established the other firms one after the other in their name or in the name of their family members or with the members of their families and exercised managerial, administrative and operative controls and financial matters of all the firms. 7.4 The statements obtained from the other persons have admitted to the fact of their not being involved in any of the business activities of the affairs of the said firm whereas contrary to the same they have claimed as independent legal entities with their own funds complying with the requirements of the VAT and Income Tax laws and that the mere common usage of office premises clerical staff and manager to maintain their accounts in the same computer installed with a tally software rendering assistance of the GTP ....
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....y unreasonable besides being contrary to the settled position of law. The said authority on the claim made by the appellant that such stray cases are also covered by notification no. 83 & 84 of 94 CE had while not disputing the said fact had denied them the said benefit for the only reason that they did not fulfil the condition of furnishing the undertaking to the jurisdictional authorities citing certain judgments which are distinguishable while also accepting that the said condition is only procedural and not substantive [paras 10.05 10 to 10:05:08 pgs 82 to 83]. 7.9 The respondent further in para 10.03 at page 81 heavily relied upon the judgment of the Supreme Court in the case of Modi Alkalis & Chemicals a case totally distinguishable on fact to hold that the clubbing of clearances for denial of the SSI exemption is permissible on grounds of common managerial /administrative and financial control flow back of money without any interest common maintenance of the books of accounts and all the units had common supplier which is totally improper and incorrect. Placing reliance on the same judgment and another case of Parle Bisleri decided by the Apex Court (para 07.04 to 07 06 p....
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....ersonality conferred on a partnership or proprietorship firms. Partners in a partnership firm are jointly and severally liable for the obligation cast or the liability acquired by the said firm, whereas the Companies Act clothes a limited company with a distinct and separate legal personality of its own and normally the said status confers a legal personality on the company which cannot be called into question and the persons who manages such entity either as directors or managers or even shareholders are distinct and different from that of the company. [Section 9 of the Companies Act of 2013 refers] Hence the doctrine of lifting or piercing of such corporate veil is permitted by the Courts only under certain compelling circumstances like tax evasion etc. That doctrine has no nexus to partnership firms, or proprietorship firms when the liabilities on the individuals are unlimited. The partnership deed clearly discloses the partners and their role, rights and liabilities. Hence the reliance placed on she said proposition supported by the case laws do not at all apply to the case of the appellant. 8.2 The status of the partnership firms have been dealt with in the Section 37 B Cir....
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....urt or withdrawn by the Board makes it valid in lave in fact the board itself was applying the clarification issue to an earlier notification no 176/77 dated 18.06.19978 which had identical wordings In any event, what is relevant to be seen is whether there were complete interdependence and all-pervasive control of one over the other and the answer to the same in this case is a big no. 8.3 The reliance placed on the other decision of Parie Bisleri Pvt Ltd. -2011 (263) ELT 15 (SC) is also distinguishable for the reason that in the said case two limited companies claimed independent status only based on their corporate legal status and on facts there was complete interdependence and all pervasive managerial control of one over the other and the other and the unit was also using the brand of name of the other. 8.4 The appellant respectfully submits that the revenue without establishing the commonality of funding and the financial flow back. (sharing of profit) of the or proving that the units in question are dummies or camouflage which is not the fact in this case ought not to have deemed the units as belonging to BPKG controlled and run by thee GTP The law is also settled....
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....he firm. BPKG was not associated with any other firms as a partner in business and no amount of profit flowed to it There is no commonality of partners between BPKG and the other units. Since the investment and profit belonged to the firm and properly reflected in their books of accounts which have been properly audited the clubbing made is not legally sustainable. By no stretch of imagination the transactions of BPKG were managed by any outsiders and the transactions were only managed by their partners and not the socalled group of three persons as being alleged. There is nothing wrong or illegal among persons who have common interest and trust in each other in joining hands to start a partnership firm. The appellant as a firm has nothing to do with the affairs of the other firms, except maintenance of accounts for all the units in the common office premises of BPI wherein the purchase and sales records of all units were maintained in the tally software. 8.6 On the other hand, the notice had made only two basic allegations for claiming financial accommodation namely that there has been inter unit movement of raw materials resulting in production of goods by one unit for the oth....
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....t of job charges gets squared up and in any event the cost of conversion is quite small when compared to the price of carton boxes having no substantial liabilities whereas such charges even if added gets subsumed into the extent of the exemption provided. In any event those transactions have been properly accounted for in their books and job work by one SSI Unit to another SSI unit is permissible under the erstwhile Notification no 8384/1994 and it is legally permissible so long as the unis properly account for the same In this case, all those transactions have been properly captured and accounted for in their respective turn over [para 40-43 of the reply by BPKG] The respondent had denied the benefit for the only reason no undertaking was filed which is contrary to the decisions reported in 2007 (218) ELT 405 (Tri-Chennai), 2009 (246) ELT 561 (Tri-Ahmd.), 2014 (308) ELT 546 (Tri-Del.), 2014 (310) ELT 200 (Tri-Bang.). 8.10 The allegation made in the notice that the corrugated cartons manufactured in the appellant's unit were cleared under the invoices of other firms is out rightly denied The appellant had cleared only those goods which were manufactured in their respective ....
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....cedure was followed for ease of transportation, and accounting but has been blown out of proportion alleging that all the materials were purchased by BP and distributed to others in fact, it is on record that individua units have placed orders for the supply of materials, paid for the material and got the material delivered to them for further production and sale. There is no evidence to show that BP) or BPKG had placed orders for the raw materials required for all the units and paid for them from out of their funds Distribution of raw materials from the premises of BPI for ease of proper accountal and transportation only which does not show any malafide or sinister move had been wrongly projected by the revenue for reasons best known to them 9. In regard to the allegation that loans were given for which no interest was paid the Ld. counsel explained that temporary loans and advances given by unit to the other in case of necessity which were not regular or substantial have duly been accounted and paid back as reflected in the financial records of the concerned units. From 20102011 onwards, the units have started collecting the interest if any even for a small loan advanced which....
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.... Balaji Packagings 141, Sukkiravarpatti Road, Anaikuttam, Sivakasi V. Nagaraj, A. Subbiah & Smt. R. Rukmani (w/o Ravichandran) 8/7/1988 33186000558 2. Balaji Packaging Industries 136, Sukkiravarpatti Road, Anaikuttam, Sivakasi. K. Ravichandran & N. Devaki (w/o Shri Nagaraj) 11/8/1995 33186001140 3. Balaji Cartons 144, Muthhunagaiya Puram, Periayapulampatti (P.O), Peraiyur K. Ravichandran, Nagaraj and A. Subbiah 14/6/1999 33275041809 4. Balaji Ind Packs 141B, Sukkiravarpatti Road, Anaikuttam, Sivakasi R. Rukmani (w/o K. Ravichandran) 11/8/2003 33576001944 5. K.R.K Packagings 1/90F Vadamalpuram, TTL-17-11-2009 [RAC] K. Ravichandran 11/11/2005 133136002186 6. Sri Hari Packs 1/528, Sivakasi Co.-Op.Industr....
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.... was noted by the department that this firm has not obtained central excise registration for manufacturing activity. The invoices issued by SAP for BPI showed the address as 725/HI, Virudhunagar, Thiruthangal when officers visited this address, on 05.12.2012, it was seen that one Srinivasan claimed to e owner of the premises who was running hotel as 'Rajkamal'. On being asked about SAP he categorically stated that no such firm was in existence in the said address, and that the room was rented out to employee of BPI for accommodation for a short span. It is thus clear that no factory or machines was in existences in the name of M/s. Sri Andal Packaging. The corrugated cartons cleared under the invoices issued by SAP were I fact manufactured by M/s.BPI. The electricity consumption details of M/s.SAP was also obtained. On examination of the sales turnover as disclosed to commercial taxes and electricity, it appeared that SAP have declared to Commercial Tax Authorities a huge amount of sale proceeds without consuming any electricity which appeared to be sales turnover from trading. 13.2 Further on examination of the Despatch Register Sl.No.97 (enclosed in Sl.No.54 of Annexure ....
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....office premises of BPI under mahazar dated 4-12-2012, that the invoices of SAP were prepared at the office premises of BPI. Shri R. Kasi Viswanathan, the Manager of BPI has inter alia stated in his statement dated 20-12-2013(Enclosed in Sl.No. 17 of Annexure-A) that he has been looking after the entire business activities of Balaji Packaging Industries and other allied units namely Balaji Packagings, Balaji Cartons, Sri Hari Packs, KRK Packagings, Balaji Packs, Balaji Ind Pack, Sri Andal Packgaings, Sri Pathmavathi Packs, Sri Balaji Pack Tech and Sri Eswari Packs and he also added that no associate firms has office except the common office functioning at the premises of BPI. Shri.K.Ravichandran, Partner of BPI vide his statement dated 19-12-2013, Shri.V.Nagaraj partner of BPKG vide his statement dated 18-12-2013 and Shri.A.Subbiah, partner of BPKG vide his statement dated 15-11-2013 have admitted that Shri.R.Kasi Viswanathan has been looking after the business activities of all the firms as per their direction. 13.4 All the above established that SAP was a fictitious firm which did not have factory premises, machinery, workers and the corrugated cartons were manufactured at BPKG....
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....r the invoices of SPP, On examination of ledger folio under the head "INTER UNITS" (Enclosed in S1.No.61 of Annexure-B) for the period 2011-12, it appears that there were financial flow from one firm to other firms of BPKG group and no interest was paid to those firms, in the ledger folio under the head "TDS"; on examination of P&L for the years 2009-10 to 2011-12 of BPKG(Enclosed in S1.No.61 of Annexure-B) no income under head "interest" was shown. 13.7 In the case of M/s.Sri Balaji Pack Tech (SBPT) the address given in the sale invoice, as provided for obtaining commercial tax registration was a residential premises owned by Sri V. Nagaraj. He stated that he purchased raw materials such as Kraft paper, Gum etc. and send the same to BPI for the manufacture of corrugated boxes. SBPT was a trading firm and there is no requirement of workers and electricity. The details of sales turnover of SBPT was obtained from CTA. On examination, it was found that without having factory premises, machinery and without consuming electricity, SBPT has declared huge sales turnover before CTA which appeared to be from trading. The production registers seized from the factory premises of M/s.Sri Ha....
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....EP were manufactured by M/s.BPKG. 15.2 On scrutiny of details collected from CTA in regard to M/s.Balaji Industries Pack (BIP), the Proprietor Smt. R. Rukumani, the address was Anakuttam, Thiruthangal. On comparison of electricity consumption with sales turnover, it appeared to be disproportionate. Where there was high turnover and less electricity consumption. Sri Ravichandran, her husband said that they did not possess important machinery called "Corrugated Machine" which consumes huge electricity. Sri Kasi Vishwanathan stated that BIP did not have machinery and corrugation was done at BPI. Thus it is evident that boxes cleared from BIP was were not manufactured by BIP. Thus BIP was only a dummy firm without sufficient machinery to manufacture products. 16. The Ld. A.R submitted that the firm viz. M/s.Balaji Cartons (BC) M/s.Balaji Packs (BP), M/s.Sri Hari Packs (SHP) though had machinery etc. for manufacturing boxes were clearing their goods under the invoices of other firm of the BPKG Group. On examination of the Reel Receipt note bearing Sl.No.11 73 (Enclosed in S1.No.41 of Annexure-B)) recovered from the factory premises of BC, it appears that BC had received kraft pape....
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....irms were the group of Balaji firm, they had to resort to manufacture of corrugated boxes in one firm and clear the same under the invoices of another firm. 16.3 The Ld. A.R adverted to the table in para 10.1.2 of the OIO to argue that Shri K. Ravichandran, Shri V. Nagaraj, Sri A. Subbiah had exercised managerial, operational and administrative control of all 11 firms. BPKG was constituted in 1988 and later all other firms were floated to evade payment of excise duty. They had common office and common staff for maintenance of accounts at the premises of M/s.BPI. Further, from examination of Ledger folio of each group firms under the head SISTER CONCERN"(Enclosed in S1.No.6 1of Annexure-B), it appears that there was frequent financial lending from one unit/ firm to other unit/ firm during the material period; that the firms whose amount stand as outstanding in the account of other firm did not receive any Interest for such outstanding amount, a fact admitted by Shri.R.Kasi Viswanathan in his statement dated 20-12-2013 (Ref:Ans.to Q.No. 10). It appears that it is obligatory on the part of the debtor to deduct TDS from the interest amount payable to the creditor on the Outstanding ....
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....essee appeals may be dismissed and department appeal may be allowed. 17. We have heard the detailed arguments of both sides and perused the records carefully. 18. The moot point for consideration is whether the clubbing of clearances of the 11 units in terms of para 2 (v) and 2 (vii) of Notification No.8/2003-CE dated 01.03.2003 can be sustained or not. 19.1 Notification 8/2003 grants exemption from payment of excise duty in case of Small Scale Industrial units whose value of clearances does not exceed Rs.1.5 crores. This exemption is subject to certain conditions. The SCN dt. 27.03.2014 alleges that the aggregate value of clearances made by Balaji Packagings (BPKG) for the period 2008-09 (01.03.2009 to 31.03.2009) to 2012-13 should be calculated by clubbing the clearances of the clearances made by factories BPKG, SHP, BP, BC, KRK and BPI and also value of goods manufactured by job workers Naga and SPPI and also sales turnover of SAP, SPP, SBPT, SEP and BIP in terms of para 2 (v) and 2 (vii) of notification 8/2003. 19.2 The relevant para of Notification 8/2003 reads as under : Para 2(v) "where a manufacturer clears specified goods from one or more factories. th....
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....n accepted by the adjudicating authority. The duty liability raised in SCN is Rs.2,43,82,782/-. Taking into consideration the duty paid by BPI (Rs.16,60,246/-) the amount confirmed was reduced by the adjudicating authority to Rs.2,27,22,336/- (para 11.01 of OIO). Though it is accepted that BPI is a duty paying unit, it is considered as a dummy unit and the clearances are clubbed. The demand is confirmed against BPKG partnered by GTP. Thus, the concession of duty already paid by BPI is given to BPKG partnered by GTP. A unit holding Central Excise registration and paying duty without availing SSI exemption benefit is now considered to be a dummy unit. 20. Apart from the confusion in invocation of provisions of notification 8/2003, we also find the conclusion arrived by department to be moving away from provisions of law. Before going into this discussion, we would like to reproduce the relevant part of the impugned order passed by Commissioner (Appeals) in regard to the demand for the subsequent periods. The discussions read as under : "The department had not conducted any investigation to ascertain that the same modus operandi that existed at the time of investigation by....
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....d, the department has to prove with fresh evidence that the assessee is not eligible for SSI exemption limit for the subsequent period also. In the absence of such evidence, the above view taken by the Commissioner (Appeals) according to us is legal and proper. It is also observed that the burden to prove clandestine removal of goods is on the department. In case of clubbing of clearances of different units to deny the SSI exemption benefit there should be concrete evidence of mutuality of interest, financial flow among the units. The decision in the case of CCE Chennai IV Vs B.K. Office Needs (P) Ltd. - 2015 (418) ELT 288 (Tri.-Chennai) was relied wherein it was held that mere common partners, common staff, common managerial control is not enough to hold that there is flow back of funds and mutuality of interest so as to club the clearances. The department has filed appeal against this order of Commissioner (Appeals). 22. In the case of Studioline Interior System (P) Ltd. Vs CCE Bangalore-I - 2006 (201) ELT 250 (Tri.-Bang.) it was held that mere presence of common directors / partners cannot be reason for clubbing of clearances. The interest of parties directly or indirectly in....
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.... three job workers was alleged by department. It was held that as all three job worker units were separate legal entities registered with statutory authorities including central excise department. The units were located in different places, having separate machineries, independent accounts and doing job work for their parties, the exemption of SSI benefit (earlier notification 16/97-CE dt. 1.4.1997) cannot be denied. 22.4 In the case of CCE Vs Saron Mechanical Works - 2016 (332) ELT 80 (P&H), it was held that clubbing of clearances cannot be done without declaring one unit as the dummy unit. The unit which was already working for almost six to seven years could not be said to be a dummy of another unit which is yet to come into existence. Mere quoting of statements of proprietors and employees was not enough. Also use of common electricity connection, accountant, store room for raw materials could not be reason for clubbing of clearances. 22.5 The Tribunal in the case of Associated Engineering Projects Vs CCE & ST Meerut-I - 2019 (370) ELT 756 (Tri.-All.) had occasion to consider the issue of clubbing of clearances. It was held that merely because the units are run by some fa....
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.... the Ld. Counsel for assessee that these units are separate legal entities and their partnership concern cannot be disturbed by reconstituting a new entity of three persons by the department. The discussion made by adjudicating authority in this regard is as under : "07.01...... Their arguments appear to have strong force when viewed with the provisions of Partnership Act alone. But a business concern is not regulated by a single Act such as Partnership Act, Companies Act, Labour Act. On the other hand, each activity of it is governed by one or more laws to confer certain rights on it while vesting certain responsibilities to be fulfilled by it. Each law requires it to conform/comply with certain requirements to enjoy the rights conferred by it. It is thus clear that if one desires to enjoy certain rights conferred by a law, one needs to comply with its requirements or discharge of responsibilities imposed by it. Also in this case, the SCN, based on the investigation conducted has proposed to deny the SSI exemption availed by the group units in respect of the Corrugated Cartons and Pads accounted as their manufacture or got manufactured on job work basis by treating the pr....
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....by CTA shows residential premises / wrong address etc. Interestingly, the sales turnover of these firms are compared with the electricity consumption data obtained from electricity department and various conclusions have been arrived to club the sales turnover with the clearances of the manufacturing firms. The Trading units do not come under SSI exemption limit. We do not understand why the sales turnover of trading units also have been clubbed with clearances of manufacturing units. In para 4.2.4 with regard to the discussions made on SPP, it is found that the corrugated cartons sold under the invoices of SPP, another trading firm, were manufactured by BPKG. There is no evidence of receipt of raw materials by these trading firms to manufacture corrugated boxes. Being trading firms they have raised invoices for the goods manufactured by other firms. When there is no machinery, workers, no receipt of raw material they cannot be treated as manufacturing unis to club the sales turnover with manufacturing units. 25. The Ld. Counsel for assessee has relied on Board Circular No.6/92 dated 19.05.1992 issued under Section 37B of Central Excise Act, 1944 to argue that Board has given in....
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....ara 7.4 that only when firms & companies maintain their status as separate legal entities and when amenable to piercing the corporate veil the circular will not be applicable. All these units are firms and not companies. We find the conclusion arrived by adjudicating authority to be untenable in law. 27. Another main allegation is that Sri Kasi Viswanath was the accountant common to all firms who was maintaining the accounts. So also that all firms had common office premises at BPI. It has been held in various decisions that merely because the accounts were maintained at a common office, or the workers were same, it cannot be said that there is mutuality of interest. To establish mutuality of interest there should be some evidence to show that the profits of all the firms are taken by one or few persons only. In the present case, all the units are filing sales tax return, income tax return etc. separately. We do not find any evidence indicating mutuality of interest. 28. The department has also alleged financial accommodation between the firms and that interest was not paid. The Ld. Counsel submitted that temporary loans were given by one unit to another in case of necessity ....