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2015 (5) TMI 99

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..... d that there is no financial flow back, therefore, there is no mutuality of interest between the units. Accordingly, clearances of both the units cannot be clubbed together. Case has been made out against the appellant on the basis of the documents resumed from the residence of employees and third party. There were no incriminating documents recovered from the custody of the appellant or Managing Director thereof. On the basis of the investigation conducted, the matter was referred to the Income-tax department also and the Income-tax Department after further investigating the case found that the some parties are manufacturing the duplicate goods and some employees of the appellant were in league with the parties who are manufacturing duplicate goods. On the basis of that investigation, the case booked by the Income-tax Department has been dropped. Cross-examination of Shri Suresh Anand was not granted from whose possession certain records were recovered which were relied upon by the Adjudicating Authority. Moreover, the production capacity of the appellant has not been considered. It has not been proved with supportive evidence that the appellant has used electricity/procure .....

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..... cause notice was issued to deny of SSI exemption notification to both the units and clubbing the clearance of both the units in the name of M/s. Nova Industries Pvt. Ltd and to demand duty on the basis of private records recovered from the residence of employees to allege that goods had been cleared clandestinely without payment of duty. Therefore, duty is demandable along with interest and penalty on all the appellants were also proposed. The show cause notice was adjudicated, benefit of exemption notification was denied. Clearances of both the units were clubbed with the clearance of Nova. The charge of clandestine removal was also confirmed. Therefore, duty of ₹ 3,69,66,630/- was demanded from Nova along with interest and equivalent amount of penalty was imposed and penalties on the co-appellants were also imposed. 3. Aggrieved from the said order, all the appellants are before us by way of these appeals. 4. Sh. Kamaljeet Singh, ld. Counsel on behalf of the appellants appears and submits that the Commissioner has not considered the various contentions raised by the appellant (a) that it does not have the production capacity to produce the quantity alleged to have bee .....

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..... entions relied on the decision of CCE Vs. Sharad Industries reported in 2013 (294) ELT 561 (T), Ennar Cements Pvt. Ltd Vs. CCE reported in 2013 (292) ELT 245 (T), Bullows India Pvt. Ltd. Vs. CCE, reported in 2012 (284) ELT 584 (T), Summerking Electricals Pvt. Ltd. Vs. CCE reported in 2004 (176) ELT 302 (Trib-Delhi), D.M. Gears Pvt. Ltd. Vs. CCE reported in 2002 (141) ELT 514 (T), Superior Products Vs. CCE reported in 2002 (144) ELT 187 (T), Sri Nataraja Industries Vs. CCE reported in 2005 (187) ELT 45 (Trib.Chennai), Unity Industries Vs. CCE 2006 (193) ELT 314, Shree Krishna Minerals Vs. CE reported in 2005 (190) ELT 251, Jindal Steel Fabricators Vs. CCE reported in 2005 (180) ELT 238, International Dye Stuff Mfg. Co. Vs. CCE reported in 1991 (53) ELT 85 (CESTAT), Geeta Valves Engineers (P) Ltd. Vs. CCE reported in 1996 (87) ELT 672 (CESTAT), Padma Packages (P) Ltd. Vs. CCE reported in 1997 ELT 175 (CESTAT). 6. He further submits that the extended period of limitation is not invokable. In this case, as the Revenue was fully aware that Shri D.V. Khanna was the Managing Director of both the companies and both the companies falls under same range and Shri D.V. Khanna was regular .....

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..... medabad-II reported in 2014 (311) ELT 529 (Tri-Ahmd.) 2. CCE Vs. Renny Steel Castings (P) Ltd. reported in 2013 (288) ELT 45 (P H) 3. Kuber Tobacco Products Ltd. Vs. CCE reported in 2013 (290) ELT 545 (Trib.), 4. Suntrek Aluminium P. Ltd. Vs. CCE reported in 2013 (288) ELT 500 (Guj.) 5. Shree Nathiji Industries Vs. CCE reported in 2011 (267) ELT 241 (Tribunal) 6. Resha Wires Pvt. Ltd. Vs. CCE reported in 2006 (202) ELT 332 (Tribunal) 7. Vishwa Traders Pvt. Ltd. Vs. CCE reported in 2012 (278) ELT 362 (Tribunal) which was upheld by the Hon ble High Court reported in 2013 (287) ELT 243 (H.C.) and by the Apex Court reported in 2014 (303) ELT A24 (SC). 8. CCE Vs. Dhariwal Industries Ltd. reported in 2012 (283) ELT 113 (CESTAT) 9. Commr. Vs. Shri Narottam Udyog Pvt. Ltd. reported in 2003 (158) ELT 40 (CESTAT) 10. Sharma Chemicals Vs. CCE reported in 2001 (130) ELT 271 (Trib) 11. CCE Vs. Universal Polythene Industries reported in 2001 (130) ELT 228 (Trib) 9. He further submits that there were some units located in or around Delhi and Chandigarh and manufacturing sanitary items clandestinely and using the brand name of the appellant and DSA unauthorisely wi .....

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..... ot manufactured and removed goods clandestinely. None of the transporters was produced for cross-examination. Therefore, the statement of transporters cannot be relied upon. He further submits that on the basis of search carried out by the Central Excise Department on 28/10/1999, the proceedings were initiated by the Income-tax Department wherein the CIT (appeals) arrived at the conclusion that the cash found in the premises of the appellant was fully accounted for and also held that there were no unaccounted sales by the appellant. Against the said order, the CIT filed an appeal before the ITAT and the Hon ble ITAT vide its order dated 30/01/2006 was pleased to dismiss the appeal filed by the Income-tax Department. He also submits that before arriving at the conclusion by the CIA (appeals) or alleging charges against the appellant, Income-tax Department has further examined the matter and thereafter, found that case is not sustainable against the appellant, therefore, charge of clandestine removal is not sustainable. 10. In the light of these submissions, he submits that the clearance of both the units cannot be clubbed together. Therefore, both the units entitled for SSI exemp .....

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..... dar and Phagwara of both the units who was shown as employee of NOVA. He submits that not only the ownership of both the units were same but there was a common staff, same common advertisement, maintenance of common records of clandestine operations at the residence of their employees. Therefore, both the units under cover of two limited companies were colourable device adopted to defraud to the Revenue to obtain SSI exemptions. 12. On the charge of clandestine removal, he submits that the parallel invoices handwritten/ typed slips were recovered from the residential premises of Shri Suresh Anand, Shri Harbans Lal and Shri Sunil Sharma. They disclose that these records were maintained on the direction of Shri D.V. Khanna and the entries of excisable goods removed without payment of duty. One of the dealers have admitted that he has made the payment of DSA through the account of Shri Ratan Singh and the said draft was payable at Vysya Bank Limited-Chandigarh. The same has been confirmed by the Bank and the accounts in the name of Shri Ratan Singh was opened on 25/3/1998 and closed on 30/10/1999, two days after the raid was conducted. No person named as Shri Ratan Singh was found .....

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..... ious banks accounts were used for receipt and withdrawal of sales proceeds of clandestinely removed goods. Therefore, the charge of clandestine removal has been proved against the appellants. Moreover, the Adjudicating Authority has passed the impugned order after following the principle of natural justice. Therefore, the appeals are to be dismissed. 13. Heard both the sides and considered submissions in detail. 14. We find that in this case demands have been confirmed against the appellants on two accounts: (a) by clubbing the sales of M/s. DSA in the account of M/s. NOVA and (b) Goods have been removed clandestinely without payment of duty. 15. First, we will deal with the issue whether the clearance of M/s. DSA can be clubbed with the clearance of M/s. NOVA. In the impugned order, the allegation against the appellant is that both the companies were promoted by Shri D.V. Khanna himself as Managing Director of both the companies and Director in both the companies are same. It is also found that by the Adjudicating Authority, the salesman/dealers to be decided mutually and marketing of both the companies were commonly and salary of employee of M/s. Nova was paid from .....

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..... ue 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 appeals are allowed. The cross objections filed by the Revenue are disposed off accordingly. 18. Further, we find that, in the case of CCE Vs. Sharad Industries reported in 2013 (294) ELT 561 (T) this Tribunal again observed as under: We, after appreciating the submissions of both the sides find that there is not much dispute on factual position. It is not the Revenue s case that two units owned by Smt. Kamlesh Gupta and her husband Shri Avdesh Kumar Gupta not complete units having all the necessary machines and infrastructure for manufacture of their final product. Both the uni .....

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..... 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 each unit is entitled to a separate limit (under the SSI exemption notification) as per the Board s Circular No. 6/1992, dated 29-5-1992. I have perused the Circular No. 6/1992, dated 29-5-1992 [issued from F. No. 213/15/92-CX-6] issued by the Central Board of Excise and Customs, New Delhi in the context of SSI exemption Notification No. 175/86-C.E., dated 1-3-1986. In the said Circular, the board had, inter-alia, clarified that the limited companies, whether public or private, are separate entities distinct from the shareholders composing it and hence, each limited company is a manufacturer by itself and would be entitled .....

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..... rances 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 No. 83/83, dated 1-3-1983, No. 85/85, dated 17-3-1985 and No. 175/86, dated 1-3-1986. 23. We also find that the activity of the appellants were in the knowledge of the department as they were registered with the Central Excise Department and units are located in the same range, therefore, extended period of limitation is also not invokable for clubbing the clearance of DSA with NOVA. 24. From the analysis of the above decisions and the facts of the case before us, we find that both the units are separately located having separate registrations and dealing separately. We also find that there is no financial flow back, therefore, there is no mutuality .....

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..... ory of production; etc. 28. Admittedly, in this case, the cross-examination of Shri Suresh Anand was not granted from whose possession certain records were recovered which were relied upon by the Adjudicating Authority. Moreover, the production capacity of the appellant has not been considered. It has not been proved with supportive evidence that the appellant has used electricity/procured excess raw material, etc. In rebuttal, there is an evidence on record that some parties are manufacturing duplicate goods under the brand name of NOVA/ DSA are owned by the appellant. The case looked by the Income-tax Authority has been dropped for clandestine removal of goods, also supports the case of appellants. No efforts were made to comply with tests laid down by this Tribunal in the case of Arya Fibres (P) Ltd. (Supra). Therefore, as discussed above and in view of the decision of Arya Fibres (P) Ltd. (Supra), the charge of clandestine removal is not sustainable against the appellant. Accordingly, demands confirmed against the appellant on the account of clandestine removal, is not sustainable. Therefore, the same is set aside. 29. As demand of duty is not sustainable on both the char .....

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