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TMI Blog2009 (1) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... ri J. Sankararaman, Advocate, for the Appellant. Shri M.K.A.K. Mohiddin, JDR, for the Respondent. [Order per : P. Karthikeyan, Member (T)].- This matter arises before us for the second time. In the initial round we had remanded the matter as the order impugned had jointly levied duty on the real and also the alleged dummy unit. The adjudicating authority had been directed to decide which was the real unit and which was the dummy and to decide the unit liable to pay the duty. The impugned order passed by the Commissioner of Central Excise (Appeals), Coimbatore has affirmed the order of the original authority passed following our remand directions. Adjudicating a Show Cause Notice issued on 13 August, 1991, the original authority demanded excise duty amounting to Rs. 4,25,810/- from M/s. Coimbatore Engineering Works (CEW) under Rule 9(2) of the Central 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. Raje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Varadarajan. He stated in addition that they manufactured goods in PC except plating. The electricity connection belonged to his brother Shri R. Narayanaswamy Naidu and electricity charges were "adjusted mutually". The telephone bills were paid by CEW. The figures of debit and credit appearing in the accounts of the units represented the amounts borrowed from each other. No interest was charged for the loan amounts. From the facts ascertained as mentioned above, the original authority concluded that for all practical purposes the management and staff treated both the units as one. He found that the clearances of all switches had undergone finishing process at CEW-II premises and had to be clubbed with the clearances of CEW to determine the SSI exemption admissible. CEW and PC had suppressed the fact of PC completing manufacture of its goods at CEW-II and clearing 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 clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f CEW-II also maintained accounts of PC. The two units shared a single phone. They used the electricity connection of one Shri Rangasamy Naidu, who was brother of Shri R. Doraisamy, partner of CEW and brother-in-law of Lalithamani, partner of PC. The electricity charges were 'adjusted mutually'. The expenditure in running the single generator was met by the two units in alternate months. The two units borrowed money from each other in times of need and did not pay interest. The goods manufactured by PC were subjected to finishing process of plating at CEW-II. 6.1 We find that these are not adequate grounds to justify clubbing of clearances to regulate exemption extended under Notification No. 175/86 dated 1-3-86. PC was in existence and had cleared goods of value above Rs. 3 lakhs in the year 1986-87; CEW-II was set up in the year 1988. It cannot be held that PC was set up to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profit from one company to another, mere use of common premises, electric generators, taking of financial assistance on interest from another unit or being interested in business of each other would not be sufficient for clubbing their clearances. (iv) The Tribunal in the case of Indian Metal Industries v. CCI, Bhubaneswar [1999 (106) E.L.T. 593 (T)] held that the test for holding that one unit is dummy of the other is that there should be a common source of funding and financial flow back from one unit to the other and that even if funding is common, financial flow back is essential for reaching such conclusion. 6.2 We find that clearances of two units can be clubbed if one unit is the real manufacturer and the other a dummy floated to camouflage as an independent unit to divert clearances of the main unit through dummy to remain within SSI exemption. CEW-II and PC manufactured different products. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge that the separate identities of CEW-II and PC are not real. There is no finding that the management of the two units was common. There is no finding that PC was run with funds provided by CEW or that the PC shared its profit with CEW. 6.5 We do not consider that a common phone being used by CEW-II and PC or, some employees being common, put the entitlement of either of the units for SSI benefit in jeopardy. It is found against the two units that they had received power from a mains connection in a third person's name and the liability towards power bill of the two units was settled at the end of the year; the expenses towards common generator were met by the units in alternate months in turn. We do not find that this would in any way disqualify the two from enjoying SSI benefit separately. 6.6 There are no common premises, common partners, common office and common facilities to justify clubbing on a finding of PC being dummy. 6.7 In the case of Renu Tandon v. Union of India [1993 (66) E.L.T. 375 (Raj.)], where two units situated in the same premises, manufactured similar product, having common management, head office and labour and common electric connection, on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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