TaxTMI 
TaxTMI 
2026 (3) TMI 1147
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....manufacturing units in different names for availing exemption, proceedings were initiated and Mahazar was drawn on 12.12.2013. On further investigation, it is found that all the four units belongs to the same family. Accordingly, based on the statements recorded from different persons, show cause notice was issued demanding duty and also demanded duty alleging illegal utilization of CENVAT credit. Thereafter Adjudication authority as per the impugned order dated 22.03.2017 confirmed the demand and also imposed penalty on the appellant. Aggrieved by said order, present appeals are filed. 3. When the appeals came up for hearing, the Learned Counsel for the Appellant submits that appellant was engaged in providing Construction Services and had obtained Service Tax Registration. They were also engaged in manufacture of RMC and clearing the same on payment of excise duty @ 1%/2% in terms of Notification No 01/2011 CE dated 1.3.2011 and manufacturing of Concrete Blocks in separate premises and obtained Central Excise Registration under the Central Excise Act, 1944. The Appellants submits that as per the Partnership Deed dated 01.4.2000, M/s Lancy Constructions, was a Partnership Firm ....
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....tries are available in the ledger account of the other entities. Learned Counsel also draws our attention to the impugned order where summary of various parameters furnished by the Appellant were reproduced by the Adjudication authority as per the following chart. Noticee Lancy Constructions LCN Enterprise Jasmine Enterprise Neleema Enterprise Lanwal Blocks Nature of the entity Partnership Firm Partnership Firm Proprietary Proprietary Partnership Firm Constitution Shri Lancy Mascarenhas Managing Partner, Smt Jascintha Mascarenhas Shri Lancy Mascarenhas Managing Ms Neola Tressa Mascarenhas Mangaing Partner Smt Jascintha Mascarenhas Ms Neleema Mascarenhas Smt Jascintha Mascarenhas Managing Partner, Shri Lancy Mascarenhas Ms Neola Tressa Mascarenas Started Operation 2006-07 2009-10 2009-10 2009-10 2002-03 Location/Factory Shed/Plot No. 309, 312 & 313 Baikampady Industrial Area, Mangalore Plot No. 309, Baikampady Industrial Area, Lancy Mangalore (Rented from Constructions Plot No. 309 Baikampady Industrial Mangalore Area, (Rented from Lancy construction) Plot No. 159B, Baikampady Industrial Are....
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.... to the respondent and it is evident that they have specifically stated that M/s Lancy Construction stopped manufacturing of interlock and blocks since August, 2013. Learned Counsel further submits that the issue was considered by the Hon'ble Supreme Court in the matter of CC, Jaipur Vs. M/s Electro Mechanical Engineering Corporation (2008 (229) E.L.T 321 (SC) where it is held that:- "10, the case of the Department is that these firms have been clubbed together as certain employees of the three firms were common or that their premises are adjoining each other. The Tribunal were setting aside the order of Commissioner, has held that there is no evidence on record to prove that there was mutuality of business interest or there was a flow of fund from one unit to another. The finding recorded by the Tribunal being a finding of fact does not call for any interference". 7. As regarding clubbing of clearance for denying SSI exemption, issue was considered by the Hon'ble High Court of Rajasthan in the matter of Renu Tanon Vs. Union of India (1993 (66) E.L.T 375 (Rajasthan) where it is held that:- "36. The petitioner is a lady entrepreneur and has passed M.Com. She dec....
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....ho is the husband of the petitioner and son of Shri S.K. Tandon and that she has been consuming electric power from M/s. Tandon Brothers. These facts which have been mentioned in the show cause notice, in no way, can give rise to a presumption or even an inference that the two units should be treated as one unit. I have already quoted above the various authorities cited by the learned counsel for the petitioner, of various High Courts and the Tribunal wherein it has been held that the value of clearances of the two units cannot be clubbed together and the two units cannot be treated as one unit merely because of proximity of relationship or the situation of the two factories or because there are some common employees unless there is a clear and specific evidence that there is mutuality of business interest between the two units and that both have interest in the business of each other or they have common funding and financial flow-back. In the present case, the most important aspect about having common funding and financial flow-back is missing and therefore, to withdraw the assessment or club the clearances is wholly unjustified and illegal and without jurisdiction. Reference in t....
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.... (Tri.Mumbai) where it is held that:- "5. The issue for determination is whether the units were, by subterfuge, splitting the clearances on record to avail the benefits of Notification No. 175/86-C.E., and its successor Notification No. 1/93-C.E., to evade duty. Decisions cited by either side have examined some aspect of inter-unit relationship before concluding in favour of either side as to the sufficiency of evidence to sustain the finding. We acknowledge the authority of these decisions with their varied outcomes. However, taking note that commonality is the evaluation of factual matrix of each case to determine the eligibility to avail the exemption notifications, we are required to determine the outcome of the dispute by a similar factual evaluation. 6. That the units are set up by members of a family will not suffice to establish common control for if were to proceed with that approach to incentivise family aggregation, we would be doing great disservice to the spirit of entrepreneurship which is the driving force of economic growth of any community or State. That the units complement the activities of each other is a facet of business that cannot be o....
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....ruments of subterfuge for illicit availment of exemptions. 10. For the above reasons, we hold that the grounds of appeal do not suffice to overcome the detailed findings on fact and law in the impugned order. Hence, the appeal must fail. Cross objection also stands disposed of." 10. As regarding the CENVAT credit, Learned Counsel submits that as per the impugned order, demand against CENVAT credit of Rs. 15,89,316/- was confirmed on the ground that appellant was engaged in manufacture of dutiable Cement Concrete Blocks and Interlocks and exempted RMC cleared on payment of duty @1%/2%. However, such claim can be made as per the notification No 1/2011 CE dated 01.03.2011 subject to the condition that no credit on inputs and input service is taken. Since CENVAT credit had been taken on capital goods on the basis of invoice issued at the address of plot No 159C, where Neleema Enterprises is in existence and invoices issued at the corporate office address and not eligible for credit. In this regard, Learned Counsel submits that when a manufacturer undertakes manufacture of dutiable final products and exempted goods, the provisions the SCN to disallow and demand against ....
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....purpose is only a book entry. It might be utilised later for payment of excise duty on the excisable product. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. It matures when the excisable product is received from the factory and the stage for payment of excise duty is reached. Actually, the credit is taken, at the time of the removal of the excisable product. It is in the nature of a set off or an adjustment. The assessee uses the credit to make payment of excise duty on excisable product. Instead of paying excise duty, the cenvat credit is utilized, thereby it is adjusted or set off against the duty payable and a debit entry is made in the register. Therefore, this is a procedure whereby the manufacturers can utilise the credit to make payment of duty to discharge his liability. Before utilization of such credit, the entry has been reversed, it amounts to not taking credit. Reversal of cenvat credit amounts to non-taking of credit on the inputs. 21. Interest is compensatory in character, and is imposed on an assessee, who has withheld payment of any tax, as and when it is due and payable. The levy of int....
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....ailable. Therefore, the said judgment of the Apex Court has no application to the facts of this case. It is only when the assessee had taken the credit, in other words by taking such credit, if he had not paid the duty which is legally due to the Government, the Government would have sustained loss to that extent. Then the liability to pay interest from the date the amount became due arises under Section 11AB, in order to compensate the Government which was deprived of the duty on the date it became due. Without the liability to pay duty, the liability to pay interest would not arise. The liability to pay interest would arise only when the duty is not paid on the due date. If duty is not payable, the liability to pay interest would not arise. 23. Under these circumstances, we do not see any error committed by the Tribunal in passing the impugned order. Accordingly, the substantial question of law framed is answered against the Revenue and in favour of the assessee. 24. Parties to bear their own costs. 11. Further submits that Hon'ble High Court of Madras in the matter of CC, Madurai Vs. Strategic Engineering Pvt. Ltd. (2014 (310) E.L.T 509 (Mad) also held that:- ....
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....st as well as penalty. Further, as pointed out earlier, the subsequent amendment has given befitting answer to all doubts existed earlier. Since, the subsequent amendment has cleared all doubts existed earlier in respect of Rule 14 of the said Rules, it is needless to say that the argument advanced by the learned counsel appearing for the appellant/Department is erroneous, whereas the argument advanced on the side of the respondent is really having merit and the substantial questions of law settled in the present Civil Miscellaneous Appeal are not having substance and altogether the present Civil Miscellaneous Appeal deserves to be dismissed." 12. Learned Counsel further submits that the findings in the impugned order is also unsustainable since it is made based on the statements without complying the provision under Section 9D(1)(b) of Central Excise Act. This issue was considered by the Tribunal in the matter of M/s Surya Wires Vs. Principal Commissioner, (2025-TIOL-736 CESTAT DEL) and held that:- "28. It, therefore, transpires from the aforesaid decisions that both section 9D(1)(b) of the Central Excise Act and section 138B(1)(b) of the Customs Act contemplate t....
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....r of Central Excise Vs. M/s Vijaya Steels - 2012 (282) ELT 215 (Kar.) "9. For application of the Rule, the condition precedent is any excisable goods which he knows or reason to believe are liable to confiscation under the Act or the Rules, then penalty is leviable under the aforesaid provision." 14. Learned Authorized Representative (AR) reiterated the finding in the impugned order and submits that M/s. Lancy Constructions and M/s. Lanwal Block were two partnership firms with the same set of parters viz., Shri Lancy Mascarenhas and his wife Smt. Jascinta Mascarenhas. The total value of clearance of the two units during 2009-10 was Rs.1,39,07,554/-. As per the exemption scheme for small scale industries under notification No. 8/2003-CE dt 01.03.2003, unit is liable to pay Central Excise duty on crossing threshold exemption limit of Rs.1.5 crores and when the total value of clearances of excisable goods for home consumption exceeds Rs 4 crores during the previous year, they are not eligible to avail exemption under the said notification. In order to avoid crossing of threshold exemption limit and payment of duty, from 2010-2011 onwards, M/s Lancy Constructions has create....
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....yees were working in all the units of the group depending on the orders. Therefore, it is clear from the above facts that all the units has common management operating from either plots Nos. 309,312 and 313 or plot Nos. 154-C and 159-B which were in possession of the family with same set of machineries and with common employees/workers. As regarding reliance of the appellant in the decisions referred in the matter of Associated Engineering Products (supra) and Mayur Printers (supra), on free flow of finance among the units, Learned AR submits that there is free flow of money both in cash and in kind in this case. M/s Lancy Constructions had extended loans to other group companies. In his statement dated 19.06.2015, Shri Lancy Mascarenhas, Managing Partner, M/s Lancy Constructions has inter alia stated that since the other firms did not have any assets, they could not get bank loans and therefore M/s Lancy Constructions advanced loans to other firms as and when required by charging interest of 12% per annum. However, as mentioned in the show cause notice / impugned order no entries are forthcoming regarding repayment of loans in the balance sheet. Similarly, though it is claime....
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....Jasmine Enterprises and there were no documents for clearance of RMC to M/s Jasmine Enterprises. Verification of the seized records reveals that there are clearances of large quantity of RMC by M/s. Lancy Constructions, R.M.C. Unit to M/s. Lancy Constructions and M/s. Neleema Enterprises, with purpose of transport marked as 'not for sale, our own site. However, Shri Lancy Mascarenhas, Managing Partner, M/s Lancy Constructions in his statement dated 19.06.2015 stated inter alia that they had not supplied any RMC to M/s Jasmine Enterprises. He further stated that they were only mixing the materials like cement, jelly supplied by Neelma Enterprises in their plant and supplying to them; that they were charging only mixing charges; that Neelma Enterprises has a common yard to store raw materials at M/s Lancy Consructions RMC Unit located at plot No.309,312 and 313 and they have no documentary evidence for transfer of materials. Therefore, in the facts and circumstances of the case, the Adjudication Authority rightly held that M/s. Lancy Constructions (RMC Unit), owned by M/s. Lancy Constructions, have cleared RMC to their own sites viz M/s Lancy Constructions, M/s Neleema Enterprise....
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....t of SSI Exemption. We also find that main appellant M/s. Lancy Constructions was closed in August 2013 and in the absence of any clearance / sales during the period 2014-15 and 2015-16, the proposal for adding the clearances of other firms and to allege non-payment of excise duty on main appellant is unsustainable. Therefore, we find that denial of benefit of SSI Exemption to the appellant is unsustainable and impugned order is liable to be set aside. 16. As regards the CENVAT Credit, demand against alleged ineligible Cenvat Credit of Rs.15,89,316/-, we find that the details of the CENVAT taken on capital goods which had been rented out to other units are not furnished to deny CENVAT credit. Further we find that the entire credit taken during the period from April 2013 to September 2013 is reversed/deposited without utilization even if it is held as ineligible, as held by the Hon'ble High Court of Karnataka in the matter of Bill Forge Private Limited (supra), once the credit had been reversed without being utilized, the manufacturer is restored to the position of having not taken the credit. Thus the said demand is also unsustainable. Thus, penalty imposed on appellant und....
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....erlocks 2010-11 2011-12 2012-13 2013-14 2014-15 Lo-Block-Unit Sales 5.5% 1554034 397509 LC Interlok Unit Sales @ 5.5% 9650010 4635847 Lc-Block Unit Sales 5% 5525759 2718420 1034357 LC Interlok Unit Sales @ 5% 8436142 14708028 5640134 TOTAL 13961901 17496448 17868575 5037356 54364280 2 Lanwal Blocks Sales 5% 14485173 1736:018 3348235 . Sales 5.5% 3487514 10558073 9308620 TOTAL 14485173 12361018 6835749 10558073 9308620 53588633 L.C.N. Enterprises - Sales Accounts 2782117 Sales 5% 8827044 4129630 Sales 5.5% 4999990 6065835 4515365 TOTAL 2782117 8327044 9129620 6065838 4515365 31323984 4 Jasmine Enterprises Sales 5%% 4500514 2554933 Sales 5.5% 2464774 5422732 3637795 TOTAL 4500514 5019707 5422732 3637795 18580748 5 Neleema Enterprises Blocks sales @5%% 6258196 1435925 1003950 Sales 5.5% 2249210 4030301 5676586 TOTAL 6258196 5435925 3333160 4030301 5676586 24734168 GRAND TOTAL 37487387 48620949 42186811 31158300 23138366 182591813 Year CONSOLIDATED FIGURES AS PER SALES SUMMARY of M/s Lancy Constructions & others (Amount In Rs) 1 2 13+ Malady अधà....