TMI Blog2016 (10) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... all the units cannot be clubbed together and the respondents are entitled to the benefit of SSI exemption from time to time - issue answered in favor of respondent. Clandestine removal of goods - Held that: - in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof 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 excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty which were managed by these two brothers under the cover of bills of M/s National Steel (a trading firm) floated on papers by these two brothers for covering up the clandestine clearance of these manufacturing units of the respondents. Certain records were also seized and panchnama was drawn and after completion of investigation, it was alleged that the these units were fraudulently availing SSI exemption as they have been floated by two brothers Shri Sham Lal and Shri Ramesh Kumar who were having the entire managerial, financial and administrative control over these units and the clearance of the value of excisable goods manufactured by these units were also manipulated by them below the exemption limit of ₹ 3 crore in respect of these manufacturing units. Therefore, they are availing SSI exemption and they were clearing the goods clandestinely under the cover of invoices of M/sNational Steel. In these sets of facts, the show cause notice was issued to the manufacturing unit, their partners/directors and transporters. The matter was adjudicated, and after detailed consideration of the submissions made by both sides, the adjudicating dropped the charges of fraudulentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that these units were indulging in clandestine clearances and cash so collected was being shown as deposits made by buyers, who have denied having purchased the goods. He also relied on the decision of the Tribunal in the case of British Scaffolidng India Pvt.Ltd.-2014 (313) ELT 87 (Tri.-DeI.). 5. He further submits that the respondents are a group of industries and controlled over the management, staff, sale and purchase of finished goods and raw materials, financial transactions is with two persons who are cousins. There is commonality of interest among the business of the factories vis-a-vis financial arrangements, inter-unit transfers of finances, working of the staff under the directions of two persons among the respondents. The arrangement of initial and later investments were made by the two cousins and/or the other family members. Providing of security, by the family members, against the cash credit limits/loans taken from the financial institutions also corroborates the department's allegation of clubbing of clearances. In view of the above submissions, it is prayed that the impugned orders be set aside quo dropping the charges. 6. On the other hand, learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder lease to M/s NL Since 01.04.1999) 6. M/s R.K. Industries (RKI) Partners (i) Sh. Sham Lal (ii) Sh. Ramesh Kumar (iii) Smt. Sita Devi W/o Sh. Mahinder Pal, brother of Sh. Sham lal Sh. Ramesh Kumar (shown on paper to be lessee of M/s VST earlier and then lessee of M/s NI) 9. The organisational structure of the respondents show that the directors/partners altogether of two firms are not related to each other, it does not follow that they are one manufacturer only or that one company or firm is the dummy of the other. The same view has been taken in the following cases: 1 . J. YashodaVs. Shobha Rani, 2007 (212) ELT 458 (SC) 2. Nova Industries Ltd. Vs. CCE, Chandigarh -Final order No. A/50917-50922/2015-EX(DB) dt. 18.02.2015 3. Bullows India Pvt.Ltd. Vs. CCE, 2012 (284) ELT 584 (Tribunal) 4. Ennar Cements Pvt. Ltd. Vs. CC, 2013 (292) ELT 245 (Trib) 5. Geeta Valves Engineers (P) Ltd. Vs. CCE,1996 (87) ELT 672 (CEGAT) 6. Spring Fresh Drinks Vs. CCE, 1991 (54) ELT 333(CEGAT) 7. Santha industrials Vs. CCE,1995 (78) ELT 556 (CEGAT) 8. International Dyestuff Mfg. co. Vs. CCE,1991 (53) ELT 85 (CEGAT) 9. CCE Vs.Rock Drill (I) Pvt.Ltd.,1997 (95) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les tax and income tax registration and have their own work force. Each unit has a separate telephoone and electricity connection. Although Shri Sham Lal and Shri Ramesh Kumar are actively looking after the affairs of some of the firms/companies, it does not follow that the firms/companies do not have any separate existence. Legally also there is no bar against a person from becoming director/partner in more than one company/firm. It is not alleged that the raw material is being procured jointly and stored at one place or that one firm/company is receiving payments due to the other or that one firm/company is discharging the liabilities of the other. Therefore, there is no justification for clubbing the clearances of the respondent firms. He submits that in para 137 of the impugned order the Commissioner has examined and held that they are not related to each other. In para 138 of the impugned order, the Commissioner has held as under:- I further find that though the partners/Directors of various firms are related to each other but there is no bar against relatives or persons including wife and children from having independent business interest and it cannot be held that by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planning, there is interdependence of manufacturing operations, common stock of raw material and finished goods, common machinery, common marketing arrangement, free flow of finance among the units and cumulative indication of interdependent and interrelationship. But these criteria are not met in the present case hence the clearance of the respondents are not liable to be clubbed. 14. He also relied on the CBEC circular No.6/92 dated 29.5.1992 wherein the Board has issued the direction that limited companies whether the public or private are separate entities, distinct from the shareholders composing it and hence each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. The demand on account of clandestine removal of the goods in not sustainable. 15. With regard to the allegation of clandestine clearance, the demand has been raised on the basis of data collected from ICC of the Punjab Govt and on the basis of data of sales tax sought to be enhanced the total turnover of the M/s National Steel. The sales tax assessment has been finalized for the year 2001 and it has been held that the information of ICC are photocopies only it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s RX. Industries (RKI) Partners (i) Sh. Sham Lal (ii) Sh. Ramesh Kumar (iii) Smt. Sita Devi W/o Sh. Mahinder Pal, brother of Sh. Sham lal Sh. Ramesh Kumar (shown on paper to be lessee of M/s VST earlier and then lessee of M/s NI) 21. On the basis of above organisational structure, it has been alleged that Shri Sham Lal and Shri Ramesh Kumar have either been shown on paper as directors or have been shown other persons as directors in the aforesaid manufacturing units. It is admitted fact that all the units are or the partnership from companies registered under the Companies Act and these cannot be held related to each other. 22. We find that the said issue came before this Tribunal in the case of Nova Industries Ltd. vide Final order No-50917-50922/15 dated 18.2.2015 , wherein this Tribunal has held that the units are private limited company registered with the Registrar of Companies and both the units are having their units separately located with a distance in the same industrial area but there is no common gate for both the companies. Further, both the companies are registered with Income-tax Department, Sales-tax department, Central Excise department, Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned 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 M/s, DSA s and commission of employees of M/s, NOVA was paid from M/s DSA's account. The annual incentives were given to the dealers on the basis of combined sales of both the units. Moreover, the shareholding 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 area but there is no common gate for both the companies. Further, both the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in 2013 (294) E.L.T. 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 units have separate Sales Tax Registration, Industries Registration, Income Tax Registration, Electricity Connection, Telephone Connection ESI Registration etc. Merely because there is a door between the two units and power of attorney stand given to her husband to look after the job of her unit, by itself cannot be held to be a ground for holding both the units as one, Admittedly, husband and wife are entitled to their own business and if the husband is looking after the business of the wife that will not make the unit owned by the wife as a dummy unit. The prime requirement, for clubbing the clearance of two units is not having complete independent machinery and infrastructure to manufacture the goods. If both the units are complete by itself, capable of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 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 to a separate exemption limit. It is 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 into 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 by the Board in the said Circular dated 29-5-1992 are not applicable to the facts of the present case. On perusal of the above findings of the learned Commissioner, it is clearly stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of interest between the units Accordingly, clearances of both the units cannot be clubbed together. 25. In these circumstances, the charge of clubbing of the clearance of M/s DSA with M/s, NOVA is not sustainable and the same is set aside. 25. We find that learned AR relied on the decision of the Apex Court in the case of Modi Alkalies Chemicals Ltd. In the said case, the facts were as under: Respondent no, 1 - M/s Modi A/ka/ies Chemicals Ltd, (in short 'MACL') is engaged in the manufacture of caustic soda of which Hydrogen gas is a by-product. The Central Excise Authorities noticed that in reality MACL was engaged in the manufacture of Hydrogen gas falling under su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of cash was also collected by MACL over and above the invoice prices of Hydrogen gas Supplied by three companies. It was noted that while front companies. It was noted that while front companies were being supplied gas by MACL @ 0.50 per unit, till August 1996 the same gas was sold by the three companies @ ₹ 5/- per unit. Keeping in view all these factors the authorities were of the view that MACL had created the three companies with the fraudulent intention to avail benefit of exemption granted under Central Excise Notification No. 1/93, dated 28-2-1993 and has mis-declared the assessable value in the invoices with the intention to evade central excise duty. 26. On these set of facts, the Apex Court came to the conclusion that the benefit of exemption notification is not available and were fraudulent intention to evade the benefit of SSI exemption. The said facts are not in the case in hand. Therefore, the said decision is not applicable to this case. 27. Further in the case of Heemanshu Trader vs. CCE-2003 (153) ELT 119, the facts as under : 2.1 Briefly stated the facts are that the Central Excise officers intercepted a truck No. GRW - 2645 on 7-4-88 at U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uck and land, plant, buildings and imposition of penalty under Rule 173Q (1) of the Central Excise Rules. Thereafter this Tribunal has held that exemption is not available. 28 . The decision of this Tribunal in the case of British Scaffolding India Pvt. Ltd. (supra) is not applicable to the facts of the present case as in that case, the other units were selling 75% to 100% of the production to British Scaffolding India Pvt.Ltd. which in tern was selling the goods on higher price in the open market. There is no such allegation in this case. 29. We have seen that the decisions in all the case/relied on by the learned AR the facts are somehow different from the case in hand before us as observed in above paragraphs. Therefore, the said decisions are not applicable to the facts of this case. 30. We take note of the fact that in this case, the facts somehow are similar to the facts in the case of Nova Industries Pvt.Ltd. (supra) and on the analysis of that decision, we hold that all the units are having separate machinery, separate registration number and dealing separately. We also take note of the fact there is no financial flow back and there is no mutuality of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. 32. We hold that the charge of clandestine removal of goods is not sustainable against the respondents. 33. Further, we find that in the show cause notice, it is alleged that since it is not ascertainable how much the quantify and value of ERW pipes had been cleared in the aforesaid manner from each of the manufacturing units, the duty not paid has been equally apportioned in respect of these manufacturing units. In the case while distributing the demand on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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