TMI Blog2017 (7) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... h case, the notices are to be restricted, if at all, only to penal proceedings as no duty can be demanded from such purported dummy units. The rural SSI units were engaged in packing of staple pins with Kores brand. This was evidenced even during the searches conducted by the officers, in two of the such units. The Original Authority also found that while the demand was raised against the rural units, no such demand was made from urban units in the proceedings. Appeal dismissed - decided against Revenue. - Excise Appeals No.50733 – 50737 and 50741 – 50747 of 2014 - A/53606-53617/2017 - Dated:- 25-5-2017 - Shri Anil Choudhary, Member (Judicial) And Shri B. Ravichandran, Member (Technical) Shri M.R. Sharma, Authorized Representative (DR) for the appellant. S/Shri Vishal Agarwaland Alok Barthwal, Advocates for the Respondents. ORDER Per. B. Ravichandran Revenue filed these appeals against the order dated 30/09/2013 of Commissioner of Central Excise, Indore. The brief facts of the case are that M/s Kores (India) Ltd. [Kores] are engaged in manufacture and marketing of stationery items like staple pins etc., either manufactured by them or obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture. Duty has to be discharged in terms of Section 4A, based on MRP less abatement. 6. The units located in rural areas have cleared staple pins claiming small scale exemption under Notification 8/2003-CE which provided exemption up to the turnover of Rs. One crore. 7. The dispute in the present appeals relates to the clearances made by these rural units during the period 2003-2004 to 20072008. The proceedings initiated against these units and Kores sought to demand Central Excise duty from them, jointly and severally, on the ground that the goods have been actually manufactured and cleared by the 4 urban units. It was alleged that the rural units have not undertaken any activity other than raising invoices. Both these rural as well as urban units were related to Kores as they were created and managed by people who were ex-employees of Kores. It was further alleged that Kores had made advances to these units for procurement of materials. These units were alleged to be dummies and, as such, all their turnover was sought to be clubbed with that of Kores to arrive at the duty liability. The allegations in the proceedings were mainly based on the investigation conducted in Oct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these small scale units were nothing but fragmented establishments of Kores. Cumulatively taken the evidences will establish the modus operandi adopted by Kores to evade Central Excise duty. The main thrust of the present case is that staple pins were manufactured and packed by Kores in its 4 units at Pithampur. The paper work was so managed to show that the staple pins were package at the rural units which were also nothing but creation of Kores, as dummies. Kores availed inadmissible benefit under Notification 8/2003-CE and, as such, the demand is correctly made against Kores jointly and severally with respective dummy units. 11. The learned Counsel for the respondents submitted that the Revenue had initiated multiple proceedings for various periods against Kores and other small scale units, supplying staple pins to Kores, based on single investigation carried out in 1996. The matter reached twice, to the Tribunal for the earlier periods and on both the occasions, vide final orders dated 10/09/2015 and 18/01/2017, the Tribunal categorically held that the Department could not establish the legal provision under which the clubbing of turnover of various individual units can be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were run by Noticee No.1 by planting its trusted employees/ex-employees and their relatives as share holders and dummy directors in the SSI units. However, I find from the show cause notice and the records of the case that none of the directors or share holders of Noticee No.2 to 12 were present employees of Noticee No.1. As far as the ex-employees of Noticee No. 1 being share holders or directors of SSI units is concerned, I am of the view that if some of the share holders or directors had been ex-employees of Noticee No. 1, this by itself cannot lead to the inference that the Noticee No. 6 to 12 are dummy of Noticee No. 1. From the show cause notice, it is also noticed that none of the directors or share holders of these SSI units were under established control of any officer/employee of Noticee No.1. The investigation at the end of the Noticee No. 1 or statement of its employee i.e. Noticee No. 14, Shri A.K. Chopra, Director (Finance) has not shown or revealed such fact. I also find that no evidence has been found in the premises of Noticee No. 2 to 12 which can substantially and cogently lead to the inference that Noticee No. 1 were controlling the SSI units through the Directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee No. 6 to 12 and there is no evidence to prove that there is any financial flow back from Noticee No.1 to Noticee No. 6 to 12 and/or vice versa. Consequentially, in absence of any tangible evidence, all the notices Nos. 6 to 12 are to be treated as independent legal entity as Pvt. Ltd. companies. From the records and submissions of the Noticees, it is seen that all the SSI companies i.e. Noticee No. 6 to 12 were a. Having their own leased factory premises. b. Having employed paid labourers for manufacturing activities. c. Having their separate power connection from MP Electricity Board. d. Maintaining their separate books of accounts and related documents. e. Having their own source of funds. f. Have separately registered themselves with ROC, District Industries Center, Sales Tax, Income Tax, Factory Act, ESIC Act etc. and assessed independently under their laws from time to time and having valid registrations till date. g. Have submitted separate duly audited balance sheet and annual return to the Registrar of Companies, Gwalior and other authorities wherever required. 25.21 From the above independent facts also, Noticees No. 6 to 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tratively and financially controlled by the main appellant through noticee no. 6 7. Hence he concluded that the turnover can be clubbed. We are unable to appreciate the legal basis for such assertion. The Original Authority having arrived at the conclusion that the SSI units were not dummy and are having separate existence goes ahead and orders the clubbing of turnover only on the ground of administrative and financial control. Even this administrative and financial control has not been categorically established except for some inferences bases on statements and correspondence. The SSI units in the present case were all independently registered Pvt. Ltd. Companies. Their existence as legal entities have been accepted as a fact by the original authority. Even if it is said that the main appellant is having certain financial and administrative influence over the SSI units, this is not sufficient to club the turnover of all these SSI units. At best it may have the effect on valuation of excisable goods cleared or purchased by these appellants among themselves. In other words, even if it is considered that there may be related reasons transaction among the appellants this has no effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Act. The financial transactions are of Commercial terms and there is nothing to show the flow back amongst the appellants. There is no profit sharing or combined ownership of assets. This Tribunal in the case of Balsara Hygiene Products Ltd. (Supra) held that mere fact of management, control or grant of interest free loan is not sufficient to hold the units as dummy units in the business of any money flowback/ profit sharing and total control on another unit. In the case of Plasto Containers India Pvt. Ltd. (Supra) the Tribunal held that when the units are having separate directors registered with Registrar of Companies, separate sales tax, registration, income tax, bank account and separate lease deal of the clubbing of clearances is not legally tenable. In the case of B.K. Office Needs (P) Ltd. 2015 (318) ELT 288 (Tri-Chennai) this Tribunal held that it is well settled by a series of decisions that mere common partners and proprietor of other concern, and use of staff etc. would not be sufficient to hold that units are one and the same. 10. In Jagatjit Agro Industries 2014 (309) ELT 301 (Tri-Del) this Tribunal held that merely because common electricity connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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