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M/s. Nova Industries (P) Ltd. Versus CCE- Chandigarh

2015 (5) TMI 99 - CESTAT NEW DELHI

SSI Exemption - Clubbing of clearances - Clandestine removal of goods - Held that:- 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 M/s. DSA and commission of em .....

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ted having separate registrations and dealing separately. We also find 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 .....

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ranted 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 .....

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on the account of clandestine removal, is not sustainable. Therefore, the same is set aside. - Decided in favour of assessee. - Appeal No. E/394-399/2007-EX [DB] - Final Order No. 50917-50922/2015 - Dated:- 30-3-2015 - Hon ble Shri Rakesh Kumar, Member (Technical) And Hon ble Shri Ashok Jindal, Member (Judicial),JJ. For the Appellant : Shri K.J. Singh, Advocate For the Respondent : Shri R. K. Khanna, DR. ORDER Per: Ashok Jindal The appellants are in appeals against the impugned order wherein dut .....

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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. During the course of s .....

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ore, 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. Aggriev .....

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er produced by the appellant regarding their production capacity has not been rebutted, (d) that in 1993, the Central Excise Preventive Staff had recovered some duplicate parts of sanitary appliances bearing the brand name of DSA from the premises of a transporter at Chandigarh, (e) that DSA was in existence even prior to 1988 and was manufacturing sanitary goods only, hence, it could not have been treated as a dummy unit of the appellant which was set up in 1988 and (f) that the shareholding pa .....

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the ld. Commissioner while denying the exemption availed to give the benefit of CC/Modvat credit available to the appellant during the impugned period of input and input services. He submits that the clearance of NOVA and DSA cannot be clubbed as (a) Both are private limited companies, (b) only some of the Directors are common, (c) shareholding pattern is different, (d) both were set up in different times, (e) both units are located at separate plots of land, (f) separately registered under Cen .....

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st and these loans were invariably been paid up. Therefore, they were not reflected in the audit balance sheet. Merely, some of the Directors of two companies are common or related to each other, it is no ground of clubbing to support these contentions 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 .....

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3) 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 regularly signing the correspondence of both the companies mai .....

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not find any excess stock of raw material which establishes that the appellant was not engaged in clandestine manufacture and removal of goods. The records on the basis of which it is alleged that goods were manufactured and cleared clandestinely, were recovered from the premises of the employees and the facts is on record that one of the employees in the factory do not belong to the appellant and the documents were not prepared on the instance of appellant and his Director or Managing Director .....

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Mills Vs. CCE reported in 2014 (304) ELT 703 (T), CCE Vs. Gopi Synthetics Pvt. Ltd. reported in 2014 (302) ELT 435 (T), Surya Alloy Indus Ltd. Vs. UOI reported in 2014 (305) ELT 340 (Cal), Hindustan Machines Vs. CCE reported in 2013 (294) ELT 43 (T), Prempreet Textile Industries Ltd. Vs. CCE reported in 2001 (134) ELT 691 (T), Punjab Fibres Ltd. Vs. CCE reported in 2002 (141) ELT 819 (Trib), Sri Jayajothi & Co. Ltd. Vs. CCE reported in 2002 (141) ELT 676 (Trib.), M/s. Meenambal Fire Works Vs .....

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ts 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) .....

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uthorisely without knowledge and consent of the appellant and DSA. Some unscrupulous employees of the appellant have also acted malafidely and have purchased these duplicate goods from these units and using the appellant brand name unauthorisely and sold these duplicate goods in the market by passing them of brand having been manufactured by the appellant and DSA and have duped the dealers. It is also submitted that the appellant does not have the capacity to produce the quantity alleged to have .....

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val is not sustainable. He further submits that all the dealers have admitted that payments were made to DSA and appellants through accounts cheques and in cross-examination, the dealers have denied having received goods without invoice from the appellant or DSA. The statement of Shri Sunil Sharma is false who was involved in trading of duplicate sanitary items bearing the brand name of NOVA and DSA and in his affidavit, he has admitted that he was also selling duplicate goods bearing the brand .....

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the submission of Shri Suresh Anand was not tested by way of cross-examination. Therefore, the statement cannot be relied upon as there is a doubt of truth and veracity of the statement. Some documents were received from the premises of Shri Harbans Lal but no enquiry has been made from Shri Harbans Lal and the cross-examination of suppliers, dealers, employees of the appellant, establish that appellant has not manufactured and removed goods clandestinely. None of the transporters was produced .....

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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 tha .....

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nna by himself (as Managing Director in both the companies), the NOVA was registered with Registrar of companies in 1988 with D.V. Khanna, Shri Rohit Khanna and Shri Atul Khanna as Directors and DSA was registered in 1994 with Shri D.V. Khanna his son Shri Rohit Khanna and is wife Smt. Lalit Khanna all residence of Panchkula Haryana as a Director and Shri D.V. Khanna was looking after work of both the companies. The Commission to various salesman dealers to be decided mutually and no minutes wer .....

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95.3 per cent shares were owned by Shri D.V. Khanna and his wife and remaining 4.7 per cent by his son Shri Rahul Khanna and Shri Atul Khanna. In NOVA Shri D.V. Khanna and his wife having the shareholding of 45.71 per cent, Shri Atul Khanna and Shri Rahul Khanna have the shareholding of 26.66 per cent, Smt. Reeta Khaana having the shareholding of 7.62 per cent, Shri Marsha Khanna and Shri Manav Khanna were having 8.57 per cent and remaining 11.44 per cent was with Shri D.V. Khanna. Therefore, as .....

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ot, Jalhandar 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 .....

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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 at the residential address which was given to the Bank and after investigation, it was revealed that Shri Ratan Singh was the driver working with NOVA. The statement of Shri Ratan Singh was also recorded for opening of the Bank account with Times Bank, he submits that he had signed as Ratan S .....

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mitted that these were not their personal account. The same has been opened in their name by Shri D.V. Khanna. He further submits that Shri Sunil Sharma admitted that details regarding consignee description and quantity and value of goods mentioned in some invoices were different from the corresponding details shown in the statutory invoice. On this point, Shri Rahul Khanna, the Director, stated that they were maintaining parallel set of invoices which were invariably pre-authenticated by Shri R .....

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ction of Shri D.V. Khanna. He further submits that parallel invoices for discharge of sanitary goods by these units to different buyers is undeniable in as much as the evidence of receipts of goods and pieces of dispatched goods by the concerned buyers have been duly confirmed in their statement and also by documentary evidence such as payment particulars and reflection thereof in the recipients account. The pre-authentication of parallel invoices by Shri D.V. Khanna and Shri Rahul Khanna and Sh .....

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ubmissions 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 h .....

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in both the units by the Directors is almost common. 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 a .....

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ing 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. The only allegation is that sometimes, salary of one of the employees was paid by the other firm or they are managed by one person. Moreover, the dealers get the commission on the combined sales of both the companies. These things cannot constitute that t .....

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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 t .....

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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 units have separate Sales Tax Registration, Industries Registration, Income Tax Registration, Electricity Connection, Telephone .....

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s 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 flow back and fin .....

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common staff and common maintenance of records, etc. cannot be held to be sufficient to club the clearances of the units, who have different registration in all the departments and in the absence of any financial flow back. 19. We further, analysis the decision of Ennar Cements Pvt. Ltd Vs. CCE reported in 2013 (292) ELT 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 .....

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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 .....

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not in dispute that M/s. Ennar Cements and M/s. Seshashaila Cements are private limited companies registered separately under the Companies Act and each of them have separate factories. Taking various facts in to 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 .....

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of Alpha Toyo Ltd. Vs. CCE, New Delhi reported in 1994 (71) ELT 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 money flow back to the main unit Clearances not clubbable Situation not to be confused with that of related person concept under Section 4 (4 .....

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sband- 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. Vs. Collector of C. Ex. reported in 1991 (53) ELT 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 fi .....

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re 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 .....

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ating 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-t .....

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should be of; (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in exc .....

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