Two Independent Units in the same premises whether clubbing provisions will apply or not, Central Excise

[Prem Bajaj]

Dear Experts,

Two Independent Partnership firm are located in the one premises only separate records are maintained

Generally Clubbing should be applied for the purpose of calculating the turnover(SSI units) But i read the judgement of CCE v. Standard Watch Co. P ltd. - 2000(119) ELT 703(Cestat) = 2000 (1) TMI 277 - CEGAT, NEW DELHI In this case it is clearly stated that Clubbing will not apply.

I am confused, Please advice

Thank you in advance.

Posts / Replies

[KASTURI SETHI]

Sh.Prem Bajaj Ji,

There are so many factors for clubbing the clearances of two SSI units. Only one premises cannot be ground for clubbing. One latest judgement is appended below:-

SSI Exemption - Clubbing of value of clearances of two factories owned by same manufacturer though registered separately and manufacturing different products, permissible in view of consolidated balance sheet and combined Income-tax statement

The Madhya Pradesh High Court Bench at Indore comprising Hon’ble Mr. Justice P.K. Jaiswal and Hon’ble Mr. Justice D.K. Paliwal on 27-10-2014 dismissed the Central Excise Appeal No. 8 of 2014 filed by Parag Fans and Cooling Systems Ltd. against the CESTAT Final Order No. 57136/2013(PB), dated 18-7-2013 as reported in 2013 (297) E.L.T. 235 (Tri. - Del.) = 2013 (11) TMI 689 - CESTAT NEW DELHI (Commissioner v. Parag Fans and Cooling Systems Ltd.). While dismissing the appeal, the High Court passed the order dated 27-10-2014, the relevant portion of the said order are as under :

The Appellate Tribunal in its impugned order had held that clubbing of clearances of two factories having same proprietorship even though both registered separately and manufacturing different products, was permissible when nexus and interlinking of assets and liabilities of both concerns was proved by the Department by providing consolidated financial statement/balance sheet and combined Income-tax statement of both the factories.

[Parag Fans and Cooling Systems Ltd. v. Commissioner - 2015 (321) E.L.T. A154 (M.P.) = 2014 (10) TMI 875 - MADHYA PRADESH HIGH COURT]

[CS SANJAY MALHOTRA]

Dear Mr. Bajaj,

Nicely presented and elaborated by Sh. Kasturi ji. No need to ad further.

[Prem Bajaj]

Dear Sir,

I could not relate this with my query, kindy elaborate if you can.

My query is If two units is in the same premises i.e. independent units means first unit is on first floor and second one is on 2nd floor. And now in the normal course Turnover of both concerns will be added for computation of 150 lakhs.

But in CCE v. Standard Watch Co. P ltd. - 2000(119) ELT 703(Cestat) = 2000 (1) TMI 277 - CEGAT, NEW DELHI stated that Clubbing will not apply.

Is there any criteria to check because two persons have cleared goods without clubbing provisions and now i am searching lacuna in this case, kindly refer above ruling.

Thanks

[CS SANJAY MALHOTRA]

Dear Mr. Bajaj,

Important is the constitution of the business. If Proprietor opens up different units, the clearances will be clubbed as the Registration will be first of all PAN Based.

In your case, please review Partnership constitution. If one Balance Sheet is prepared, partners being the common in both the units, clearance will be clubbed.

[Prem Bajaj]

Dear Sir,

Units are totally independent neither partners are common the firm two different person is there balance sheet is totally separate

Then Sir will clubbing provisions will apply, please suggest.

Thank you..!!

[CS SANJAY MALHOTRA]

Dear Mr. Prem,

Clubbing provisions will not attract in your case. You may refer to definition of "Factory" as defined under Central Excise Act.

[KASTURI SETHI]

I fully agree with the views of SH. SANJAY MALHOTRA, Sir, in respect of both replies dated 1.2.2016. In addition to these views. I intend to add some points as additional information.

It is not a cake walk for the department to club the value of clearances of two SSI units who are separately registered with Central Excise, Income Tax, VAT, Import-Export, Banks, Industries department etc.It is an uphill task for the department.However, other points to be noted are:-

1. There must not be common funding and financial flow-back between the two SSI units.

2.. There must not be common financial as well as management control between the two SSI units.In other words no financial and management inter-dependence.

Two judgements are appended below:

(1) SSI Exemption - Clubbing of value of clearances - Limited companies whether public or private, of same manufacturer not entitled to exemption separately - C.B.E. & C. Circular No. 6/92, not valid in law (2) SSI Exemption - Clubbing of value of clearances - Units/companies of same assessee not entitled to exemption separately on crossing specified limit of aggregate value of their clearances even if value of their individual clearances well within threshold limit - Notification No. 175/86-C.E. (3) SSI Exemption - Clubbing of value of clearances - Units/companies of same assessee liable to pay duty separately on crossing specified limit of aggregate value of their clearances and questions of identification of main and dummy unit does not arise (4) SSI Exemption - Clubbing of value of clearances - Value of clearances of units owned by different companies and firms to be clubbed if same are financially controlled and managed by one person being actual beneficiary of their activities

The Supreme Court Bench comprising Hon’ble Mr. Chief Justice H.L. Dattu, Hon’ble Mr. Justice Arun Mishra and Hon’ble Mr. Justice Amitava Roy on 3-8-2015 after condoning the delay dismissed the Civil Appeal Diary Nos. 21203 of 2015, 21199 of 2015, 21219 of 2015, 21221 of 2015, 21222 of 2015, 21250 of 2015, 21195 of 2015 and 21213 of 2015 filed by Euro Scaff (India) Ltd. against the CESTAT Final Order Nos. A/57780-57797/2013-EX-(DB), dated 1-10-2013 as reported in 2014 (313) E.L.T. 87 (Tri.-Del.)= 2013 (11) TMI 1019 - CESTAT NEW DELHI (British Scaffolding India Pvt. Ltd. v. Commissioner). While dismissing the appeals, the Supreme Court passed the following order :

“1. Delay condoned.

2. We have heard Shri S.K. Bagaria, learned senior advocate appearing for the appellant(s) and carefully perused the material available on record. In our considered opinion, we do not see any good ground to interfere with the judgment(s) and order(s) passed by the Customs, Excise and Service Tax Appellate Tribunal. Accordingly, the Civil Appeals are dismissed.”

The Appellate Tribunal in its impugned order had held that the C.B.E. & C. Circular No. 6/92, dated 29-5-1992 clarifying that the limited companies whether public limited or private are separate entities and each such limited company is a manufacturer by itself and would be entitled for SSI Exemption separately, had no existence in law as this Circular had not considered the principle of lifting of corporate veil in cases where different corporate entities appear to be just colourable devices for tax evasion.

It was also held that the aggregate value of clearances of all the excisable goods for home consumption by the manufacturer from one or more factories during preceding financial year should not exceed specified threshold limit and if it does, none of the limits would be eligible for SSI Exemption even if value of clearances for home consumption of all the excisable goods made by each individual limit during the preceding financial year is well within the threshold limit. In such situation, duty can be demanded separately from each unit and the question of identifying main and dummy units and demanding duty only from the main unit does not arise. Identification of the main and dummy unit is required only when investigation showed that only one unit was functioning and others were non-functional fake units established just to show the bogus production and clearances in their name.

It was further held that the units owned by different public limited companies, private limited companies or partnership firms are to be treated as the units of only one manufacturer who is having comprehensive financial and management control over them and is also actual beneficiary of their activities.

[Euro Scaff (India) Ltd. v. Commissioner - 2015 (323) E.L.T. A124 (S.C.) = 2016 (2) TMI 131 - SUPREME COURT]

 

2011 (264) E.L.T. 414 (Tri. - Ahmd.) = 2010 (11) TMI 161 - CESTAT, AHMEDABAD

IN THE CESTAT, WEST ZONAL BENCH, AHMEDABAD

[COURT NO. II]

Ms. Archana Wadhwa, Member (J) and Shri B.S.V. Murthy, Member (T)

COMMISSIONER OF C. EX., AHMEDABAD

Versus

S.C. PATEL

Final Order Nos. A/1841-1844/2010-WZB/AHD, dated 9-11-2010 in Appeal Nos. E/3412-3415/2005

_______

So it depends upon case to case depending upon facts and circumstances.

 

 

[Prem Bajaj]

Thank you so much Kasturi Sir and Sanjay Sir, Got your points.

[Mahir S]

Query already settled hence no need to add further to it. Nicely elaborated.