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2016 (5) TMI 780 - CESTAT MUMBAI

2016 (5) TMI 780 - CESTAT MUMBAI - TMI - Demand of duty and imposition of penalties - under Notification No. 175/86 CE dt 01.03.86 - Clubbing of clearances of appellant with other company - Appellant contended that they have separate factory with machinery and set up and there is no mutuality of interest between them and M/s NTB International and the facts relied upon for confirmation of demands in previous period no more exists - Held that:- once the Appellant concern is alleged to be dummy con .....

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oceedings the demand has again been confirmed against the Appellant whose independent existence has been denied by the revenue. This confirmation of demand against the Appellant itself recognizes their independent existence and thus the demand made by holding the same to be part of M/s NTB international is illegal and not sustainable. - While remanding the earlier show cause notice the Tribunal had directed the adjudicating authority to examine the basis of clubbing for an earlier period. H .....

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the Appellant is a partnership firm and M/s NTB international is a Private Ltd. Company and therefore they cannot be clubbed. The adjudicating authority has not considered any of these aspects and confirmed the demand against the Appellant firm by clubbing it with M/s NTB International which is illegal. Therefore, on this ground also the demand against the Appellant is not sustainable. - Therefore, demand against the appellant are not sustainable and are set aside. Also since the demand it .....

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ta Phadke, Advocate For the Petitioner : Shri V.K. Singh Spl. Counsel ORDER PER : RAMESH NAIR The appeals involved herein are Appeal No. E/767/06 filed against Order-in-Original No. 14/KKS/2005- 2006 dt. 30.11.2005 passed by the Commissioner of Central Excise, Mumbai - III and Appeal Nos. E/3573/04, E/3616/04, E/396/2007, E/680/09, E/679/09 filed against Order-in-Appeal Nos. AT/M-III/54/3004 dt. 30.08.2004, AH/757/MII/06 dt. 5.12.2006, AH/104 & 105/M-III/09 dt. 12.03.2009 respectively passed .....

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e been classifying their product under chapter heading 3926.90 of the Central Excise Tariff Act and were making clearance under Nil rate of duty by claiming SSI Exemption in terms of Notification No. 175/86 CE dt. 01.03.86 as amended and subsequent analogus notifications. Initially they were issued show cause notice dt. 03.05.1997 wherein it was proposed to club their clearances and of one more unit M/s Transcon International (which was taken over in July 96) with M/s NTB International Pvt. Ltd .....

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75/86 CE dt 01.03.86 as amended from time to time. It was also proposed to classify the Transmission belt under chapter sub heading No. 4010.90, 4210.90 and 5901.00 of the Central Excise Tariff Act as per the composition of said product and to levy appropriate duty. 2.1 The show cause notice was adjudicated vide Order-in-Original No. 16/99 Commr.VI dt. 10.06.99 wherein the demands were confirmed and penalties were imposed. M/s. Polybelt Technologies, M/s. NTB International and M/s. Transcon file .....

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he subsequent period. The CESTAT vide Order No. A/764-771/WZB/2004 C-II dt. 01.09.2004 dismissed the appeal No. E/1325-30/02 on the issue of classification as well as clubbing. However in case of Appeal Nos. E/1331/02 and E/3374/03 filed by M/s Polybelt Technologies, the CESTAT remanded the matter to the jurisdictional Commissioner for fresh decision by giving following findings: These appeals have been filed by M/s Polybelt Technology. After hearing both sides and perusal of case records, we fi .....

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as upheld the duty demand confirmed by the Assistant Commissioner. We are of the view that these two appeals need to be remanded for fresh decision by the jurisdictional Commissioner in the light of our above decision on the issue of classification in appeal Nos. E/1325-1330/02 and concessions made by the Ld. Advocate in regard to clubbing etc. for the earlier period. In addition the following points urged by the appellants need to be considered at the time of fresh adjudication :- (i) No show c .....

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ents existing between the concerned units have undergone any change in the subsequent period. The impugned orders are set aside and both the matters are remanded back to the jurisdictional Commissioner specifically for fresh adjudication to avoid multiplicity of proceedings before him and his Assistant Commissioner. The Appellant shall be allowed a reasonable opportunity of being heard before passing a fresh order. 2.2 The Commissioner vide Order-in-Original No. 14/KKS/2005-2006 dt. 30.11.2005 i .....

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e further held that the objection of party regarding non issue of show cause notice to M/s NTB International is purely technical as the show cause notice discuss the issue of clubbing with NTB International and refers to previous show cause notice wherein the decision has now reached finality before CESTAT themselves. That he finds that the circumstances under which their clubbing together has been admitted before CESTAT still exists and the assessee have not come up with any fresh ground and/ o .....

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hed finality before CESTAT in its order dt. 01.0-9.2004, nothing is left to be decided. 2.3 For the subsequent period the demands against M/s Polybelt Technologies India were also confirmed by the adjudicating authority and upheld by the Commissioner (Appeals) on the similar grounds. Against all such orders M/s Polybelt Technologies India have filed Appeal Nos. E/3573/04, E/396/07, E/680/09 and E/679/09. The revenue is also in appeal in Appeal No. E/3616/04 urging for imposition of penalty which .....

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ere decided by the adjudicating authority vide Order-in-original No. 38/2001 Commr. M-VI dt. 31.12.2001 and upheld by the CESTAT in appeal No. E/1325-1331/02, the demands were made against M/s NTB International by clubbing the clearances of Appellant holding, that the Appellant is fragment of M/s NTB international. That whereas in instant appeals no show cause notice was issued to M/s NTB International and the demand has been made from Appellant which essentially means that the independent exist .....

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vague. That in subsequent period there was no transfer of funds, but still considering the earlier transfer of funds as basis to show mutuality of interest, demand was confirmed against Appellant. That the Tribunal in its order dt. 01.09.2004 considered the two legal and factual issue i.e (i) No show cause notice has been issued in the impugned periods to M/s NTB International Pvt. Ltd though small scale exemption is sought to be denied to M/s Polybelt Technologies India by clubbing their cleara .....

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. The partnership firm which is independent and NTB international Pvt. Ltd does not hold any share in partnership. Therefore the findings of the Commissioner are erroneous and imaginary, hence the order deserves to be set aside. He relies upon the order of Tribunal as reported in Super Star Vs. CCE, Calicut 2002 (148) E.L.T. 854 (Tri. - Bang.). He submits that the non issue of show cause notice to M/s NTB International as adjudged by the adjudicating authority to be purely technical tentamounts .....

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Tribunal in its remand order. That in subsequent show cause notice there is no allegation of any transfer of money from M/s NTB International to Appellant firm or vice versa. That it is settled proposition of law that for clubbing of clearances ground of related person is not sufficient because the ground of related person is contemplated with the transaction between two related persons under section 4 of the Central Excise Act.. He submits that the department has confirmed the demand for period .....

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the Appellant has own factory at Plot No. A-404, Wagle Industrial Estate, Thane with complete set of machines and independent financial arrangement. M/s NTB International is an independent manufacturing factory at plot No. A 302, Road No. 32, Wagle Industrial Estate, Thane. Thus when the two separate central excise registration have been granted to two independent manufacturers and it is not the case that the Appellant is selling goods to NTB or that NTB is selling its goods to Appellant, then .....

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at 2000 (121) E.L.T. 502 (Tribunal). 3.3 On the issue of classification he submits that though the classification list of their predecessor company M/s Transcon International has been approved by the department in terms of Rule 173B of Central Excise Rules, 1944,therefore classification resorted by them is correct. That even the Tribunal accepted their contention in case of M/s Transcon and set aside the demands for the extended period in its order No. M/422//WZB/MUM/C-II/EB dt. 20.12.2005. 4. O .....

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d for holding Appellant unit as dummy of M/s NTB International. 5. We have carefully considered the submissions made by both sides. 6. We find that as far as classification issue is concerned the same has been finally decided and thus stands settled in favour of revenue. However so far as eligibility to claim SSI Exemption benefit by Appellant M/s Polybelt Technologies India is concerned, we find that the show cause notices involved in the present appeals were issued by relying upon earlier inve .....

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ed for the impugned periods to M/s NTB International though small scale exemption is sought to be denied to M/s Polybelt Technologies India by clubbing clearances and that whether Clubbing canbe done for subsequent period on the basis for such clubbing for an earlier period. The adjudicating authority while deciding the issues in remand proceedings and also while adjudicating other show cause notices has given findings that the non issue of show cause notice to M/s NTB international is purely te .....

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TB International in that case the demand should not have been proposed against M/s. Polybelt as in the eyes of the revenue the Appellant has got no independent existence. We thus find that the impugned orders suffers from serious infirmity on this count. Once the independent existence of a concern is denied and is held to be dummy concern, in that case the duty could not have been demanded from Appellant M/s Polybelt Technologies India which is illegal. In the case of M/s Gajanan Distributors Vs .....

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dependent existence and thus the demand made by holding the same to be part of M/s NTB international is illegal and not sustainable. We agree with the judgments relied upon by the Appellant in case of M/s Highland Dye Works Pvt. Ltd. Vs. CCE, Surat 2000 (121) E.L.T. 502 (Tribunal) wherein while setting aside the demand the Tribunal held as under : 13. In 1997 (92)? E.L.T. 451 (S.C.) in the case of Gajanan Fabric Distributors v. CCE, Pune it is held in paragraphs 2, 3 and 4 that the Collector re .....

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- By confirming the demand upon all the seven units, the Collector treated them all as assessees and implicitly recognised their independent existence - matter to go back to Commissioner of Central Excise, Pune with unlimited remand for de novo adjudication without reference to either orders of the Collector and Tribunal - Sections 2(f), 3, 5A(1) and 11A of Central Excise Act, 1944 - Rule 7 of Central Excise Rules, 1944. 14. In addition to that, 2000 (115) ELT 704 in the case of Universal Indus .....

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light of the law settled by the judgment of the High Court and the Supreme Court up to date with parties to file additional documents if they so chose and the remand was unlimited. The matter is required to be decided independently. In the precedent Bench order indication is given that the Commissioner shall give adequate opportunity to the party to state the case and the appellant shall cooperate with the Commissioner. As against this, the ld. JDR has not submitted anything. So under these circ .....

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e observations and findings we are of the view that the demand made against the Appellant M/s Polybelt is not sustainable. 7. We further find that while remanding the earlier show cause notice the Tribunal had directed the adjudicating authority to examine the basis of clubbing for an earlier period. However the adjudicating authority without examining the basis of clearances again confirmed the demand which shows that no fresh enquiries were made to determine as to how the Appellant is connecte .....

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8. Reliance has been placed by both sides on catena of judgments pronounced by the Tribunal to show that commonness of Directors and partners, occasional transfer of raw materials, same company staff, transfer of purchase order by one unit to another will not make them one unit for the purpose of clubbing, as long as each unit is having complete set of machine required to manufacture the goods in question. We note that all the incidence referred to by the Commissioner are in the nature of commo .....

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lubbed with a partnership firm especially when a partnership firm is created independently and is a complete unit in itself. As such, we hold that M/s. JEE is an independent unit entitled to SSI benefit in its own right and its clearances cannot be clubbed with the clearances of JTPL. 8. We find that the Appellant from the very beginning has been contending that they have separate factory with machinery and set up. They have also been contending that there is no mutuality of interest between the .....

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ainst the Appellant is not sustainable. Our views are also supported by the judgment of this Tribunal in the case of M/s Bentex Industries Vs. CCE, New Delhi 2003 (151) E.L.T. 695 (Tri. - Del.) wherein it was held that: 5. The bare perusal of the impugned order shows that the learned Commissioner has clubbed the clearances of both the companies named above, broadly on the grounds; that both were working in the same building, had a shared staff and machinery, the Managing Director of one company .....

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on some other grounds detailed in the order itself. But, in our view, all these facts, circumstances and grounds were inconclusive and insufficient in the eyes of law for clubbing the clearance of both the companies. The duty has been demanded in the show cause notice from both the companies and same had been even confirmed by the Commissioner through the impugned order against both of them. This fact itself is enough to prove that the Department itself had accepted both the companies, as indep .....

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ere could not be clubbing of the clearances of this company with that of company, appellants no. 1. Moreover, the appellants no. 1 is a Private Limited company, whereas appellants no. 2 is only a Proprietorship concern. Both have got distinct legal identities. The mere fact that in the company, appellants no. 1, the major shares were held by Shri R.L. Chopra and his family members, while company, appellants no. 2, was the sole concern of Shri R.L. Chopra could not be taken to be enough to infer .....

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., as detailed in the impugned order were not sufficient in the eyes of law to club the clearance of both the units. In the case of Indian Metal Industries v. CCE, Bhubaneshwar, 1999 (108) E.L.T. 593 (Tribunal), it has been observed that financial flow back between the two units is essential for clubbing their clearances. Similarly, in the case of CCE, Rajkot v. Amar Plast Industries, 2000 (115) E.L.T. 482 (Tribunal), it has been ruled that use of common premises, telephone, common electric gene .....

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s been held by the Tribunal that just because two limited companies were interested in the business of each other, their clearances could not be clubbed, holding one to be dummy of another. 9. Similarly, in the case of Applied Research & Engg. (P) Ltd, v. CCE, Pune, 1997 (89) E.L.T. 494 (Tribunal), it has been observed that clubbing of a limited company with a partnership firm, although having some common factors, is not permissible. The use of same premises/shed, common management, common o .....

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