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TMI Blog2019 (4) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... artners/directors being members of the same family; and common use of facilities of telephone, fax, computer, office equipment, staff etc - We take note of the fact that all the units located at different locations having separate income-tax, sales tax, central excise registration. All units are having electricity connection, their own machinery and plant to manufacture their final products and maintaining their separate records such as manufacturing, purchasing, sale etc. The appellants are having bank accounts separately. There are some instances where some payments have been received by another person on behalf of the other but the same has been transferred to their respective account and during the course of their business if they have taken any money from the other company the same has been repaid. These facts have been recorded in the impugned order. Similar issue was examined by Hon’ble Supreme Court in the case of Rollatainers Limited vs. CCE, Delhi-III [2004 (7) TMI 92 - SUPREME COURT OF INDIA], where it was held that clearances of two factories within the same premises, same owner and common balance sheet with common boundaries but having separate staff, separate manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Mohinder Singh, Smt. Mohinder Sandha W/o Shri Harvinder Singh and Smt. Manjeet Kaur w/o Shri Jaspal Singh; were engaged in the manufacture of coated fabric of polyester viscose yarn, vertical blinds, venation blinds and drapes. In the classification list under Rule 173B, they had declared that they do not have any other manufacturing unit in India. The appellant unit was taken over by appellant No.1 w.e.f.1.04.2001. 2.4 The Appellant No.4 i.e. M/s. Sonex Decor Pvt.Ltd., K-38-A, Kalkaji, New Delhi is an unregistered firms, is a private limited company with Directors S/Shri Harvinder Singh and Jaspal Singh both sons of Shri Mohinder Singh; came into existence in October, 1999; were engaged in the manufacture of vertical blinds and venation blinds and also in the trading of sofia rods, drapery rods manufactured by appellant No.1 and No.2 and of other manufacturers. Prior to this they had been working under the name and style of M/s. Euro Decor at the same premises under the proprietorship of Shri Jaspal Singh. 2.5 All the partners of three units (appellant No.1 to 3) at Faridabad and Directors of the unit at Delhi are related and residing at 2093. The machinery installed at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be quashed on this ground alone. 4. He further submits that the imposition of penalty on the three units i.e. Glorious Corporation, M/s. Sonex Industries and M/s. Sonex Decor (P) Ltd. under Rule 173Q read with section 11A and 38 of Central Excise Act, 1944 and under Rule 25 of Central Excise Rules, itself would prove that the department itself has considered these units to be manufacturer of excisable goods. When the department itself is treating these units as manufacturing units, the demand of duty only from M/s. M.G. Industries and imposing penalties on the other manufacturing unit is contrary to law. Al the units have time and again contended that they are independent and separate units having separate existence, carrying on separate manufacturing activity and are registered separately with various statutory authorities. Therefore, it was not proper on the part of the adjudicating authority to club the clearances of these units into clearances of M/s. M.G. Industries for demanding duty. 5. He further submits that the adjudicating authority failed to appreciate that in the show cause notice there was a proposal to deny the benefit of exemption notification to all units. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions separately. Therefore, they were rightly entitled for the benefit of SSI exemption notification issued from time to time. Even assuming for arguments sake that there were certain financial transactions amongst these units, the same were duly accounted in the books of account by each unit. Mere fact that some amounts were borrowed by one unit from other without payment of interest cannot be made the sole basis for clubbing the clearances of all the units. In the present case one unit is trading unit at New Delhi which has also been clubbed which clearly shows that the department has not applied its mind properly. The adjudicating authority failed to take note of the judgements which were squarely applicable in their case and cited by them in their reply to show cause notice. The adjudicating authority has relied on some judgements which were not applicable to the facts of the present case. There were certain financial transactions which were duly explained and were duly recorded in the books of account. Even assuming that some entries remained unexplained, that itself was not sufficient to deny the SSI benefit to them. 9. He further submits that the majority of the duty dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be the ground to club the clearances of all the units. Other reason for clubbing of clearances of all the units are having financial flow back, mutual lending and borrowing etc. amongst the units; collection of sale proceeds on behalf of each other; joint control exercised by Shri Harvinder Singh and Shri Jaspal Singh on all the four units; common managerial control; partners/directors being members of the same family; and common use of facilities of telephone, fax, computer, office equipment, staff etc. 13. We take note of the fact that all the units located at different locations having separate income-tax, sales tax, central excise registration. All units are having electricity connection, their own machinery and plant to manufacture their final products and maintaining their separate records such as manufacturing, purchasing, sale etc. The appellants are having bank accounts separately. There are some instances where some payments have been received by another person on behalf of the other but the same has been transferred to their respective account and during the course of their business if they have taken any money from the other company the same has been repaid. Thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise registration as provided under Rule 174(3) of the Central Excise Rules, 1944. No portion of the manufacturing process of Paper Board Factory was ever carried on in Shed No. 3 wherein exclusively Specialty Paper Factory operations were carried out. The registrations issued to the Paper Board Factory and the Specialty Paper Factory were premises specific as stipulated under Rule 174(3) which reads as under: Every registration certificate granted shall be in the specified form and shall be valid only for the premises specified in such certificate. In the said case, the Hon ble Supreme Court has observed as under:- 7. There is no two opinion that both the factories are near to each other and it is owned by the same owner and the common balance sheet is maintained. But, by this can it be said that both the factories are one and the same? The definition of the factory as defined in Section 2(e) of the Central Excise Act, 1944, reads as under : (e) factory means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availing the Modvat/Cenvat credit facility to discharge their duty liability on their final products. Based on intelligence gathered, DGCEI conducted raid on various factory, office, business, godown and residential preemies of the respondents on 29-11-2001. Furtherance to investigation, the show cause notices were issued to the respondents on account of that the clearances of four units should be clubbed together and the benefit of SSI exemption should not be given and demanding duty on account of clandestine manufacture and clearance of excisable goods by the respondents. The matter was adjudicated, the Commissioner in the impugned order set aside charges alleged against the respondents and dropped the proceedings initiated through the show cause notices. Aggrieved with the said orders, the Revenue is in appeals before this Tribunal. In the said case, this Tribunal has observed as under:- 18. Therefore, on organisational structure, it cannot be held that all the units are controlled by one person. All the units are independent separately incorporated private limited companies under the Companies Act, 1956; All the units are separately registered under the Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mon. Sometimes, money was given to each other but nothing was shown in the balance sheet. Therefore, clearance of both the units are to be clubbed as the same are managed by Shri D.V. Khanna, Managing Director in the clearance of NOVA. 16. We also find that in this case, both the units are private limited and registered with the Registrar of Companies and both the units are having their units separately located with a distance in some industrial area but there is no common gate for both the companies. Further, both the companies are registered with Income-tax Department, Sales-tax Department, Central Excise Department, Director of Industries, etc. as separate units. The registration of Central Excise was granted to both the units although the documents were signed by Shri D.V. Khanna for filing returns or correspondence with the department but they were never objected to. We also find that in this case although both the companies are having different brand names of their product such as NOVA/DSA. The units are having their own separate machinery having manufacturing the goods and same have been cleared on payment of duty by availing SSI exemption of both the units separately. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o her husband to look after the job of her unit, by itself cannot be held to be a ground for holding both the units as one. Admittedly, husband and wife are entitled to their own business and if the husband is looking after the business of the wife that will not make the unit owned by the wife as a dummy unit. The prime requirement, for dubbing the clearance of two units is not having complete independent machinery and infrastructure to manufacture the goods. If both the units are complete by itself, capable of manufacturing the goods without any help from the other unit, it has to be held that both the units are independent units. The various decisions of the Tribunal referred to and relied upon by Commissioner (Appeals) in his impugned order are applicable to the facts of the present case. It stands held in precedent decision that financial flowback and financial intertwining between the two units is the main reasons for reflecting upon the fact of their being independent or not. One such reference can be made to in decision of the Hon ble High Court in the case of M/s. RenuTandon v. Union of India - 1993 (66) E.L.T. 375 (Raj.); Similarly, in the case of M/s. Electro Mechani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ories. Taking various facts into account I have already held in my findings on (i) above that the management [of both the units] is one and the same and both the units are not independent to each other, thereby they are to be treated as a single manufacturer having more than one factory. Hence, the clarifications given by the Board in the said Circular dated 29-5-1992 are not applicable to the facts of the present case. On perusal of the above findings of the learned Commissioner, it is clearly stated that each appellant s company is separate. In respect of the Board s Circular, the clearances of the limited companies cannot be clubbed. The Commissioner has clubbed it and demanded duty collectively. This is not legal and correct and it is contrary to the Board s Circular. 20. We further find that in the case of Alpha Toyo Ltd. v. CCE, New Delhi reported in 1994 (71) E.L.T. 689 (Tribunal) this Tribunal has observed as under : SSI exemption - Clubbing of clearances common Managerial Control, a few common directors and advancing of interest free loans by main unit to other units not sufficient to make other units as dummies when they are having independent control or mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not sustainable and the same is set aside. 20. We find that learned AR relied on the decision of the Apex Court in the case of Modi Alkalies Chemicals Ltd. [ 2004 (171) E.L.T. 155 (S.C.)]. In the said case, the facts were as under: Respondent no. 1 - M/s. Modi Alkalies Chemicals Ltd. (in short MACL ) is engaged in the manufacture of caustic soda of which Hydrogen gas is a by-product. The Central Excise Authorities noticed that in reality MACL was engaged in the manufacture of Hydrogen gas falling under sub-heading 2804.90 of the schedule of the Central Excise Tariff Act, 1985 (in short Tariff Act ). But with a view to evade payment of excise duty it floated three front companies, namely, respondent nos. 2 to 4 i.e. M/s. Mahabaleshwar Gas Chemicals Pvt. Ltd. (for short MGCPL ), Shri Chamundi Gas and Chemicals Pvt. Ltd. (for short SCGCPL ) and M/s. Nippon Gas and Chemicals Pvt. Ltd. (for short NGCPL ). All the three front companies were in vicinity of the factory of MACL. What in reality happened was that through pipelines Hydrogen gas was sent to the three front companies for compressing and bottling the gas. The sole object was to avail benefit of exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of exemption notification is not available and were fraudulent intention to evade the benefit of SSI exemption. The said facts are not in the case in hand, therefore, the said decision is not applicable to this case. 16. We further take note of the fact that in the case of Nova Industries Pvt.Ltd.-2015 (327) ELT 103 (Tri.-Del.) wherein the facts of the case are as under:- 2. The facts, in brief, are that M/s. Nova and M/s. Deluxe Sanitary Appliances Pvt. Ltd. (DSA) were engaged in the manufacturing of sanitary appliances. The factory premises and residence of the employees were searched by the Revenue Officers on 28-10-1999. Certain records were recovered from the factory and the residence of the employees showing clearances of goods without payment of duty. During investigation, it was found that both the units were controlled by one, Shri. D.V. Khanna. Therefore, Adjudicating Authority clubbed the clearances of both the units on the ground that both the units belong to one family and denied the benefit of SSI exemption notification on the ground that clearance of previous financial year exceeds the limit of clearance provided under SSI exemption notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of other unit. 17. We find that this issues has come before the Tribunal in various cases whereas in the case of Bullows India Pvt. Ltd. v. CCE, reported in 2012 (284) E.L.T. 584 (T) (supra) wherein this Tribunal has observed as under: We find that in the present case the issue is whether the appellants are entitled for the benefit of Notification 175/86-C.E. and subsequently Notification 1/93-C.E., therefore, the ratio of the above decision of the Hon ble Gujarat High Court is fully applicable on the facts of the present case. The Hon ble High Court held that the Revenue has to establish that there was mutuality of interest or financial flowback of the funds and in such cases the clearances of the holding and subsidiary private limited companies can be clubbed. In the present case we find that even in the show cause notice there were no such allegations. In the show cause notice the only allegation is that the holding company has share capital in the subsidiary company. There is no evidence regarding financial flowback on record. In these circumstances and respectfully following the decision of the Hon ble Gujarat High Court, the impugned order is set aside and the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the departments and in the absence of any financial flow back. 19. We further, analyse the decision of Ennar Cements Pvt. Ltd v. CCE reported in 2013 (292) E.L.T. 245 (T) (supra) wherein this Tribunal has observed as under : We have gone through the records of the case carefully. The appellants are two Private Limited Companies. They have separate existence. The investigation reveals that the clearances of one unit were done with the other and vice versa in order to remain with the exempted limit and thereby evading payment of Central Excise duty. If that is the case, the investigation ought to have decided the real clearances of each unit and demanded the duty accordingly in respect of each unit. However, in the present case, the duty has been demanded collectively from both the units. If the Department feels that out of the two units, one unit is dummy, then the dummy unit should have been identified. In that case, the value of the clearance of dummy unit could have been clubbed with the clearance of the real unit and duty demanded. This has not been done. The learned Commissioner in the impugned order has given the following findings : - 70 (ii) Whether eac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption - SSI Exemption - Clubbing of clearances - Two units situated at same premises, manufacturing similar product, having some common management, office and labour and common electric connection - One unit owned by father-in-law and the other by daughter-in-law and work of both units looked after by her husband - In absence of evidence of common finding and financial flow back, two units not treatable as one and their clearances not clubbable - Notification No. 175/86-C.E. dated 1-3-1986. 22 . In the case of Vivomed Labs. (P) Ltd. v. Collector of C. Ex . reported in 1991 (53) E.L.T. 152 (Tribunal) Exemption to SSI Units - Clubbing of clearances - Units registered separately under Income-tax Act, Sales Tax having separate Central Excise Licenses and also financed through separate application for loan from financial institutions - Shareholders in all the firms not the same group of persons - Tie up with Medly Pharmaceuticals for marketing purposes explained inasmuch as the services rendered being paid for in terms of agreement between them - Clubbing of clearances of units not justified in absence of conclusive evidence of financial flow back among them - Notification N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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