TaxTMI 
TaxTMI 
2009 (1) TMI 233
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....al Excise Rules, 1944 (CER) read with Section 11A of the Central Excises and Salt Act, 1944 (the Act). He imposed a penalty of Rs. 50,000/- on CEW under Rule 9(2), 52A, 173Q and 226 of the CER and imposed a penalty of Rs. 5,000/- on Smt. Lalithamani under Rule 209A of CER. A penalty of Rs.1500/- each was imposed on S/Shri C. Rajendran and D. Udayakumar under Rule 52A and 209A of the CER. In the impugned order the Commissioner (Appeals) rejected the appeal of CEW and allowed the appeal filed by Smt. Lalithamani by vacating the penalty imposed on her. 2. Facts of the case in brief are that CEW manufactured limit switches classifiable under Chapter sub-heading 8536.90 in its two units, Unit I (CEW-I) and Unit II (CEW-II). CEW is a partnership firm comprising S/Shri R. Balasundaram, R. Doraisamy and R. Dhamodaraswamy as partners. CEW-II was registered in the year 1988. M/s. Pneumatic Controls (PC) is an another partnership firm comprising Mrs. B. Lalithamani wife of Shri R. Balasundaram and Mrs. D. Rajaveni wife of Shri R. Doraisamy as partners. PC manufactured limit switches and pressure switches. Limit switches manufactured by CEW were tailor made for M/s. Lakshmi Machine Works, Coi....
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....earing the same therefrom with intention to enjoy the SSI exemption separately for both the units. Accordingly he found justification to invoke Section 11A(1) of the Act. 4. In the impugned order, the Commissioner (Appeals) found the presence of the following circumstances, which justified clubbing of the value of clearances of CEW and PC to determine the SSI exemption available to clearances of CEW. (i) There was common fund and financial flow back from one unit to another. (ii) The availability of goods bearing labels of PC and labels of PC in the premises of CEW-II when the officers had visited the premises of CEW-II. (iii) Inadequate infrastructure at the premises of PC and the availability of finished switches at the premises of CEW-II with the labels of PC. (iv) Mrs. Lalithamani and Mrs. Rajaveni were unaware of the details of the functioning of PC. They had no role in the affairs of the unit floated by their husbands. The Commissioner (Appeals) rejected the contention of the appellants that the ownership of the land or factory could not be a ground for clubbing the clearances of CEW with the clearances of PC. PC was not paid rent for the CEW-II factory occupying its la....
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.... divert and clear goods of CEW-II in order that it could avail SSI benefit otherwise not admissible. PC belonged to a partnership comprising spouses of two partners of CEW. All the persons involved belonged, to the same family. These partners acted in the interest of both the units; it cannot be a ground to deny each of them the SSI exemption separately if otherwise admissible. The transactions found by the lower authorities to hold against the partner ships were only commercial in nature and did not violate any of the conditions of the Notification No.175/86 for each of them to avail benefit of that notification. Dismissing the appeal filed by the Commissioner of Central Excise, Mangalore in the decision reported as CCE, Mangalore v. Sushil Chemicals reported in 2008 (230) E.L.T.117 (Tri.-Bang), the Tribunal made the following observation. "To put it differently mutuality of interest among two units or several units of a group of family members cannot be a reason for clubbing of clearances. Moreover, the law does not prohibit family members from establishing different proprietary and partnership concerns and working for the common benefit of the group. The group itself is not a l....
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....ts. CEW produced limit switches whereas PC made limit switches and pressure switches. Switches manufactured by CEW were custom made for LMW whereas switches made by PC were sold all over the country. As per the judicial authorities cited the following circumstances are necessary to justify clubbing. (1) Mutuality of interest of the units has to be established. (2) Finanancial flowback and distribution of profit has to be established. (3) "Separate entity-only a facade" has to be proved. (4) Common management. In this case the CEW-II and Pneumatic Controls are units belonging to two partnerships. There was no common funding. There was no profit sharing between the units. Financial flow back between the units was not found. On the basis of statements recorded from an employee of CEW-II and a partner of CEW the two units were found to extend financial accommodation to each other by lending money when needed without interest. We find that borrowing funds in need is not barred between two units eligible for SSI benefit and the arrangement was mutual. There are no details of money borrowed to see the volume of transactions and if the transactions were not on commercial basis. CEW-II....