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2015 (8) TMI 635 - MADRAS HIGH COURT

2015 (8) TMI 635 - MADRAS HIGH COURT - 2015 (325) E.L.T. 97 (Mad.) - Denial of SSI Exemption - Clandestine Removal and Deliberate Fragmentation of manufacturing activities - clubbing of clearance - tribunal decided in favor of assessee on technical ground - Held that:- Whether the failure to challenge the finding in favour of Shri M.S. Jain in a connected matter would operate on the principle of res judicata on the Tribunal from examining the other cases on merits - Held that:- Records of the va .....

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e person who suffered the penalty order, did not file any appeal

It is the specific case of the department that the clearances of all these units and the proprietory concerns should be clubbed together for the purpose of denying the benefit of notification. However, the Department can always sustain its allegations, de hors the statement of M.S.Jain, if there are other materials to support its case. Merely because the case of M.S. Jain has not been appealed against, it does not, and w .....

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passed by the Tribunal in allowing the appeals filed by the assessee, the Revenue/appellant is before this Court by filing these appeals, 21 in number. These appeals were admitted by this Court, on 11.08.2005, on the following substantial question of law:- "Whether the failure to challenge the finding in favour of Shri M.S. Jain in a connected matter would operate on the principle of res judicata on the Tribunal from examining the other cases on merits? " 2. The brief facts of the case .....

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ere indulging in evasion of Central Excise duty by clandestinely removing Sodium Silicate without payment of duty and by wrongly availing S.S.I. Exemption under Notification No: 175/86 as amended, the Directorate General of Anti-Evasion (CE) Chennai, conducted search in their factories, common registered office and the residential premises of persons connected with their activities, certain records were recovered and statements were also recorded from the concerned individuals. On the basis of t .....

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of the Directors (who were holding the said post during the period from 1.4.88 to 31.12.92 1. M/s. Devi Silicates Pvt. Ltd. Shri. S.K. Jain and Shri. Adish Jain 2. M/s. Andavar Silicates Pvt. Ltd. Shri. B.M. Bharadwaj, Shri. Rufus Fernando and Smt. Patricia Rufus 3. M/s. Kiran Silicates Pvt. Ltd. Shri. S.K. Jain, Shri. P.K. Jain, Shri. K.K. Jain and Shri. B.M. Bharadwaj 4. M/s. Ezhil Chemicals Pvt. Ltd. Shri. S.K. Jain & Shri.D.K. Jain 5. M/s. Nannilam Silicates Pvt. Ltd. Shri. P.K. Jain &am .....

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Kanagadurga Chemical Works Pvt. Ltd. Shri. B.M. Bharadwaj, Shri. Allah Basha and Shri. Anand Sharma 13. M/s. Pavul Silicates Pvt. Ltd. Shri. S.K. Jain, Shri. Rufus Fernando and Shri. P.N. Sugumaran SOLE PROPRIETORY CONCERNS : (i) M/s. Sri Kiran Chemicals at Madras with Smt. Kiran Jain wife of Shri. M.S. Jain as the Proprietrix. (ii) M/s. Prem Chem Co., Madras with Smt.Prem Jain wife of Shri. S.K. Jain as the Proprietrix. (iii) M/s. Kanyakumari Silicata Industries at Nagercoil with Shri.P.K. Jai .....

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as Proprietrix. (viii) M/s. Pushpa Chemicals at Nellore with Smt.Susheel Kumari Jain as the Proprietrix. It is seen that all the above units were under the Proprietorship of Shri.M.S. Jain and his family members or they were one of the Directors in the units. (iii) Prima facie, it appeared that one M.S. Jain aided by S.K.Jain master minded the alleged offence along with other Directors and their family members. The show causes notices were issued for recovery of duty and for penalty under Rule 9 .....

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licate Ltd. 9. Shri. V. Manickam, Works Manager, Sagar Chemicals 10. Shri. Rufus Fernando, Excise - in - charge 11. Shri. M.S. Mahadevan, Excise - in - charge 12. Shri. M. Ganesan, Accountant. (iv) Replies to show cause notices were submitted and based on the replies given by various individuals, the adjudication order came to be passed. The adjudicating authority dealt with the charges in the show cause notice one after another by placing reliance on the statement of persons recorded in the cou .....

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on ratio of Soda Ash to Soluble Glass and Soda Ash to Sodium Silicate, the respective allegations and the defence put forth by the assessee were discussed in paragraphs 49 to 54 of the adjudicating authority's order. The final conclusion arrived at by the said authority is as follows : "55. From the above it is clear that the goods were either cleared on payment of duty or on job work basis under Rule 57 F (4) and therefore, clearances of Sodium Silicate / Soluable Glass without payment .....

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above quantities of Sodium Silicate were cleared without payment of duty and the said charge had not been rebutted by the assessee as the said goods were accounted for in their private records but a lesser quantity was reflected in the statutory records. .... .... .... 64. The above units are therefore liable to pay duty at the appropriate rate on the above quantities of Sodium Silicates as the same were cleared without payment of duty as has been established with reference to the private record .....

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djudicating authority declining to club the clearances of 13 private limited companies and 8 proprietory concerns, the Department filed an appeal and the Tribunal came to pass the following order on 14.07.2004 in Appeal Nos: E/956 to 976 of 2000: "6. .... .... ... ... In the instant case, as we have already noted, no appeal has been filed by the department against Shri.M.S.Jain despite the fact that what was dropped by the Commissioner was, mainly, a proposal for clubbing of clearances of t .....

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went to the extent of saying that the 21 units were only dummies of Shri.M.S. Jain. In the context of defending the invocation of the larger period of limitation in the show cause notices for demanding duty from Shri. M.S. Jain and the 21 units, the Board again focused on the role of Shri. M.S. Jain and held that it was Shri. Jain who suppressed facts to evade payment of duty. All the grounds raised in the review order have found a place in the memoranda of Appeals before us. These appeals are a .....

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issue. Following the view taken in the said cases, we hold that these appeals of the Revenue, wherein clearances of goods by the 21 units are sought to be clubbed for the purpose of denial of SSI exemption on grounds integrally connected with the role of Shri. M.S. Jain, cannot be maintained for want of appeal as against Shri. M.S. Jain." 4. According to the Tribunal, in the absence of any appeal being filed against the said M.S.Jain, the other appeals filed on the ground of integrally con .....

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been perused and on the basis of that, the Department has issued the show cause notice against the group companies and proprietory concerns. The adjudicating authority, according to the Department, had failed to consider that it is a case of wrong availment of the benefits of the notification and all the units were clubbed together and the benefit granted under the exemption notification should be denied. It is of no consequence that merely because M.S. Jain, one of the person who suffered the .....

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