2017 (11) TMI 706 - CESTAT MUMBAI

SSI exemption - clubbing of units - mutuality of interest - the proposal to club the units are based upon allegations that both the companies were owned by family members of Shri B.N. Khurana and Shri B.N. Khurana was the over-all authority - Trade Notice dt 24.9.1992 and Board Circular 213/15/92-CX.6 dt 29.5.1992 - Held that: - The adjudicating authorities has viewed the transfer of funds for few days from one concern to the other to save themselves from crossing the bank overdraft limit or to meet the short-term financial needs as indicator of both the units being one. However we are of the view that such short terms transfer of amount for few days from one unit to another and which has been properly accounted for cannot lead to the conclusion that there is mutuality of business interest or has common funding. The interest free loan for a short period cannot be held as a ground to club both the units as a single entity.

In case of M/s Rollatainers Limited [2004 (7) TMI 92 - SUPREME COURT OF INDIA] the Hon’ble Supreme Court held that two factories located within the same premises, owned by same owner, common boundaries and common balance sheet, but having separate staff, separate management, separate passage, separate entrance with separate central excise registration and producing different end products, cannot be treated as one and the same factory and, hence, are two factories separately eligible to exemption.

In present case we do not find any factor to club the units such as common procurement of raw materials or common stock of raw material. Neither there is any inter-dependence in manufacturing operations, common use of machinery or free flow of finance between two units. Thus in absence of such factors we do not find any reason to club the clearances of the Appellant Units. The value of clearances of independent and separate units and that too of limited companies cannot be clubbed only for the reason that the units belong to same family, controlled by same family members or use of certain common amenities or interest free loans when both have separate set ups. It is pertinent to note that the persons/share holders of the company are different from company which is an artificial legal person. Hence even same family members are looking after affairs of two companies, both companies have independent legal entities - M/s NCPL and M/s NEPL cannot be considered as single entity and their clearances cannot be clubbed. We, thus, set aside the demands and penalties imposed upon M/s NCPL and M/s NEPL.

Time limitation - Held that: - the demands are also time barred as there is no suppression facts or mala-fide intention.

Penalties - Held that: - since no case for demand of duty is made out, consequentially there is no reason to impose penalty upon him.

Appeal allowed - decided in favor of appellant.