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M/s. Nuaire Engineers Pvt. Ltd., M/s Nutech Constructions Pvt. Ltd., Mr. B.N. Khurana Versus Commissioner of Central Excise, Belapur

2017 (11) TMI 706 - CESTAT MUMBAI

SSI exemption - clubbing of units - mutuality of interest - the proposal to club the units are based upon allegations that both the companies were owned by family members of Shri B.N. Khurana and Shri B.N. Khurana was the over-all authority - Trade Notice dt 24.9.1992 and Board Circular 213/15/92-CX.6 dt 29.5.1992 - Held that: - The adjudicating authorities has viewed the transfer of funds for few days from one concern to the other to save themselves from crossing the bank overdraft limit or to .....

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REME COURT OF INDIA] the Hon’ble Supreme Court held that two factories located within the same premises, owned by same owner, common boundaries and common balance sheet, but having separate staff, separate management, separate passage, separate entrance with separate central excise registration and producing different end products, cannot be treated as one and the same factory and, hence, are two factories separately eligible to exemption. - In present case we do not find any factor to club .....

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lled by same family members or use of certain common amenities or interest free loans when both have separate set ups. It is pertinent to note that the persons/share holders of the company are different from company which is an artificial legal person. Hence even same family members are looking after affairs of two companies, both companies have independent legal entities - M/s NCPL and M/s NEPL cannot be considered as single entity and their clearances cannot be clubbed. We, thus, set aside the .....

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17/EB - Dated:- 31-10-2017 - Shri Ramesh Nair, Member ( Judicial ) And Shri Raju, Member ( Technical ) Shri M.H. Patil, Advocate for Appellant Shri S.V. Nair, Asstt. Commr. ( A.R ) for respondent ORDER Per : Ramesh Nair These appeals have been filed by M/s Nuaire Engineers Pvt. Ltd.(M/s NEPL), M/s Nutech Constructions Pvt. Ltd (NCPL) and Shri B.N. Khurana against two separate Order in Original dt. 31.03.2006 and 29.11.2007. In terms of Order dt. 31.03.2006 a demand of ₹ 54,91,738/- was con .....

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The brief facts of the case are that M/s NEPL is a Pvt. Ltd company registered with Central Excise and is engaged in manufacture of Air Handling Units and its parts at Plot No. 407A, TTC Industrial Area, MIDC, Mahape since year 1998. M/s NCLP is also engaged in manufacture of Centrifugal fans and Air Handling Units at 1/3, Steelmade Industrial Estate, Marol Maroshi Road, Andheri (E), Mumbai since year 1998. 3. The Appellants, on the basis of investigations and recording of statements, were issu .....

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place. Shri B.N. Khurana was looking after overall affairs of both the companies. Reliance was also placed upon statement of Executive Director Shri A.R. Kashalkar wherein he had stated that sometime it so happened that the purchase order was placed by one of the two companies and the delivery of the material was made to the other company which has not placed the purchase order. The supplier raised bill based on the purchase order and they made the payment accordingly. Reliance was placed upon h .....

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Central Excise Department and they were paying central excise duty. The said diversion and utilization of materials of one factory and utilization of Cenvat credit by another factory appears to show that for availing Cenvat benefit, the two factories are posed as one single manufacturer, but when the question of payment of duty by M/s NEPL comes, it pretends to be different from M/s NCPL. That suppliers, considering both the units as single entity and required M/s NCPL to make payment of total .....

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s that the business relationship between the said units is not just of normal commercial nature. There is mutuality of business interest among them. They have interest in the business of each other, they have common funding, they have special financial relationship, which are not on a principal to principal basis. Various activities having financial implications and having bearing on the profitability of the units are inter-mingled , their existed mutual financial interest, free loans/advances, .....

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te and independent. However, the clearance of the said two companies/concerns/units is attributable to a single manufacturer. The SSI exemption notifications issued from time to time, viz. Notification Nos. 8/2000 and 9/2000 both dated 1/3/2000 are available if the value of excisable goods for home consumption by a manufacturer does not exceed ₹ 300 lac in a year. The combined value of clearances of both the companies have exceeded the said amount, which makes them ineligible to avail SSI .....

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B.N. Khurana on the ground that he prudently intended to claim concessions under SSI exemption notification with the sole intention of evading payment of duty. They were also issued Show Cause Notice No. V-Adj(Misc)30-97/05 dt. 02.09.2005 proposing demand of ₹ 8,94,593/- from M/s NCPL along with interest and penalty and also proposing penalty upon M/s NEPL and Shri B.N. Khurana. 4. Both the show cause notices were adjudicated vide Order in- Original dt. 76/Commr/05-06 dt.31.03.2006 and 53 .....

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ave treated as individual entities for small scale industries exemption purpose. That Shri B.N. Khurana and Smt. P.B. Khurana are beneficiaries of the corporate arrangement and that the central excise duty was evaded. The adjudicating authority held that there has been transfer of funds based on the financial need of the two companies and not on the basis of any business transaction. Had the two companies taken loans from banks, they would have incurred heavy interest burden. By transferring fun .....

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g to sales, purchase, production, material planning / allocation, quality, valuation, pricing of the products, marketing, future planning / growth concern of both the companies are being taken care by Shri B.N. Khurana. Accordingly, the demands, as proposed in the Show Cause Notices, were confirmed and penalty was imposed, as above. Hence the present appeals. 5. Shri M.H. Patil, Ld. Counsel appearing for the Appellants submits that both the companies are private limited companies having separate .....

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erent Commissionerates. None of them is dummy as independent existence of both the units was admitted and recognized by issuing separate SCNs to both the units. Both the units are having independent manufacturing set up including plant & machinery, workmen, staff members etc. They have their own independent electric connections, telephones and are registered separately with Income-tax, Sales-tax, Bombay Municipal Corporation, Directorate of Industries, Pollution Control Board, Central Excise .....

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based on Board's letter FNo.213/15/92-CX.6 dt 29.5.1992 that Limited companies whether public or private are separate entities, Hence each limited company is a manufacturer by itself and will be entitled to separate exemption limit. He submitted that in view of clarification from CBEC, the question of clubbing the value of clearances of two independent and separate private limited companies does not arise at all, hence both M/s NEPL and M/s NCPL are entitled for SSI exemption separately. He .....

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ertain amenities etc. than too the value of clearances cannot be clubbed together and cannot be denied SSI exemption to both the units in view of the Trade Notice dt 24.9.1992 and Board Circular (supra). He submits that office of both the companies being situated in a common premises cannot be a ground to club the value of clearances of both the units. That Mr B.N. Khurana is extending certain assistance in functioning of the units or the units using common telephone or production of both the co .....

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993 (66) E.L.T. 375 (Raj.) (vi) CARDCURE ENGINEERING CO. Vs. CCE, COIMBATORE - 1996 ) E.L.T. 351 (Tribunal) (vii) CCE Vs. NITON INDUSTRIES - 2001 (138) E.L.T. 651 (Tri. - Del.) (viii) PIMPRI GASES Vs. COLLECTOR OF CENTRAL EXCISE - 1990 (49) E.L.T. 474 (Tribunal) (ix) ALPHA TOYO LTD. Vs. CCE, NEW DELHI - 1994 (71) E.L.T. 689 (Tribunal) That the allegation that both the companies are financed by one other by way of interest-free loans and that too for a few days cannot be a ground for clubbing the .....

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the products manufactured by both the companies are identical and marketing of the same is done through common marketing net-work, cannot be a ground for clubbing the value of clearances of both the companies. He relied upon the following judgments :- i) PRIMLAKS WAFFLES P. LTD. Vs. CCE PUNE - 2000 (118) E.L.T. 221 (Tribunal) ii) PADMA PACKAGES (P) LTD. Vs. CCE, COIMBATORE - 1997 (90) E.L.T. 175 (Tribunal) iii) RENU TANDON Vs. UNION OF INDIA - 1993 (66) E.L.T. 375 (Raj.) iv) VIVOMED LABS. (P) LT .....

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). That if the Company profile, gives an impression that both the factories are of one single manufacturer that cannot be a ground for clubbing the value of clearances of both the companies. He relied upon the following judgments :- (i) SUVARNA POLYMERS PVT. LTD. Vs. CCE. HYDERABAD - 2000 (120) E.L.T. 148 (Tribunal) (ii) K.J. DIESELS (P) LTD. Vs. CCE, KANPUR - 2000 (120) E.L.T. 505 (Tribunal) (ii) RISHAB REFRACTORIES PVT. LTD. Vs. CCE CHANDIGARH - 1996 (87) E.L.T. 93 (Tribunal) (v) PUNJAB OIL &a .....

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to M/s NCPL for supply of Humidifier to M/s India Polyfibers Ltd, Purchase order No. NCPL/1387 dt. 11.12.2003 of NCPL to M/s Spirax Marshall for supplier of Humidifier for use in Air handling unit to be supplied to M/s India Polyfibers and letter dt. 23.01.2004 from NCPL addressed to M/s Spirax Marshall requesting to dispatch material to premises of M/s NEPL and that M/s NCPL would collect the material from premises of NEPL. Post dated cheque No. 686087 issued by M/s NCPL in favour of M/s Spirax .....

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as used. In case of supply of goods by M/s Reitz India Ltd. he relied upon letter dt. 25.11.2003 of NCPL to M/s Reitz soliciting their quotation for centrifugal fans required for M/s Reliance Project, letter dt. 27.11.2003 of M/s Reitz to M/s NCPL offering prices for centrifugal fans, Purchase order No. NCPL/ 1363 dt. 06.12.2003 of NCPL on M/s Reitz for the fans and cheque No. 683552 dt. 06.12.2003 for ₹ 75,000/- being advance payment, Letter dt. 13.01.2004 of M/s Reitz to NCPL enclosing p .....

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dt. 15.02.2004 of M/s Indian Transport Organization showing consignee as NCPL and invoice no. 1283 dt. 16.02.2004 of M/s Reitz issued in the name of NCPL, Marol, Mumbai. He submitted that the aforesaid documents clearly prove that the goods were delivered by the suppliers in the premises of M/s NCPL. Further that the goods manufactured by M/ss NCPL and NEPL were entirely different. M/s NCPL were manufacturing Air Conditioning System and/ or Air Handling Units whereas NEPL were manufacturing Cent .....

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loyees, common management office, one person controlling / extending assistance in the working of the unit, common procurement of raw materials, common staff members carrying out the sale / marketing activities etc. cannot be ground for clubbing the value of clearances of both the companies. He relied upon the following judgments :- i) GIRISH ELECTRICALS INDS. Vs. CCE, MUMBAI-III - 2004 (167) E.L.T. 299 (Tri. - Mumbai) ii) CCE MUMBAI Vs. BOMBAY NEON SIGNS - 2003 (166) E.L.T. 102 (Tri. - Mumbai) .....

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997 (90) E.L.T. 175 (Tribunal) x) CARDCURE ENGINEERING CO. Vs. CCE COIMBATORE - 1996 (86) E.L.T. 351 (Tribunal) xi) RANG UDYOG Vs. CCE, AHMEDABAD - 1996 (83) E.L.T. 648 (Tribunal) He submitted that both the units are private limited companies having their independent and separate manufacturing set up and are registered separately under various laws. He submitted that the demand raised by the adjudicating authority is illegal as both the units have been filing classification lists, declarations s .....

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uction, clearance were within the knowledge of the Department, there was no suppression of fact or mis-statement and , hence, extended period cannot be invoked. He relied upon the judgments in case of the following :- (i) PUSHPAM PHARMACEUTICALS Vs. CCE, BOMBAY - 1995 (78) ELT 401 (SC) (ii) COSMIC DYE CHEMICAL Vs. CCE, MUMBAI - 1994 ELT 721(SC) (iii) TAMIL NADU HOUSING BOARD Vs. CCE, MADRAS - 1994 ELT 9 (SC) (iv) CHEMPAR DRUGS & LINIMENTS - 1989 (40) ELT 276 (SC) Without prejudice he submitt .....

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M/s NEPL had their office at 47, Vikas Centre, S.V. Road, Santacruz (W), Mumbai. Vikas Centre is a commercial complex with two wings and both the offices are situated in different wings of the same commercial complex. He relied upon the certificates issued by the Maharashtra Value Added Tax in 2002, CST registration, Pan allotted by the Income-tax Department, IC Code, Exporter Code in 1995 and the registration issued under Service-tax. He further submits that the factory of M/s NCPL was situate .....

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M/s NEPL were operated by Shri Ashok Advani, Shri Vivek Khurana and Shri R.C. Purohit, who were controlling the manufacturing activities and other operations. He also submitted that there was no flow back of funds as both the companies have given loans officially to each other, which were accounted for by both the companies and repaid, as certified by the statutory auditors. 6. Shri S.V. Nair, Ld. Assistant Commissioner (A.R.) appearing for the revenue supports the impugned orders and submitted .....

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he common office under the supervision of Shri B.N. Khurana. The infrastructures like computer, telephones, furniture etc. were used commonly. The employees admitted that they worked for both the units as well as other concerns owned by Shri B.N. Khurana. The products manufactured by the companies are identical and there are common raw material suppliers, common buyers. That in certain cases, the modvatable inputs were received by M/s NEPL , but the credit was availed by Ms NCPL, which shows tha .....

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em and M/s NEPL were manufacturing Centrifugual fans. Also, both the companies are registered with the Income-tax Dept, Department of Industries, Sales-tax as separate units. Even, M/s NCPL was registered with the Central Excise Department and was filing necessary classification declarations and other declarations and were complying with the statutory requirement. M/s NEPL being unregistered unit were also filing necessary declarations with the departments. There is no dispute about the fact tha .....

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transfer of funds for few days from one concern to the other to save themselves from crossing the bank overdraft limit or to meet the short-term financial needs as indicator of both the units being one. However we are of the view that such short terms transfer of amount for few days from one unit to another and which has been properly accounted for cannot lead to the conclusion that there is mutuality of business interest or has common funding. The interest free loan for a short period cannot be .....

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showing that in case of both such purchases i.e from M/s Spirax Marshall and Reitz India Ltd, the documents clearly show that the goods were delivered to the respective unit who consumed the goods and even the payments were made by the receipient consignee. In such circumstances only on the basis of statement of Shri Kashalkar and in view of documents we hold that the allegation of the revenue is not sustainable and cannot be a ground to club the clearances. In case of M/s Spirax Marshall we fin .....

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that the Humidifier for AHU was purchased from M/s Spirax Marshall. Similarly, the documents, as mentioned in the submission of Appellant have been produced in case of goods purchased from M/s Reitz India Ltd. It is also found that, whereas M/s NCPL were manufacturing air conditioning system / air handling units, M/s NEPL were manufacturing centrifugal fans of lower capacity. Thus, the products manufactured by M/s NCPL and NEPL were also different and it should not be said that the goods ordered .....

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l on another unit. The said order was upheld by the Hon ble Supreme Court as reported in Commissioner v. Balsara Hygiene Products Ltd. - 2015 (321) E.L.T. A146 (S.C. In case of RENU TANDON Vs. UNION OF INDIA, 1993 (66) E.L.T. 375 (Raj.), the Hon ble High Court held that In absence of evidence of common funding and financial flow-back, two units not treatable as one and their clearances not clubbable. In case of M/s Arca Controls Pvt Ltd - 2003 (158) ELT 272 (SC), while setting aside the Tribunal .....

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al excise registration and producing different end products, cannot be treated as one and the same factory and, hence, are two factories separately eligible to exemption. Same views were expressed by the Hon ble Apex Court in case of M/s Electro Mechanical Engg. Corporation (2008 (229) ELT 321 (SC), wherein while upholding the Tribunal judgment reported in 2003 (152) ELT 194 (T), the Hon ble Supreme Court held that in the absence of flow back of funds, even if certain employees of three firms we .....

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of independent and separate units and that too of limited companies cannot be clubbed only for the reason that the units belong to same family, controlled by same family members or use of certain common amenities or interest free loans when both have separate set ups. It is pertinent to note that the persons/share holders of the company are different from company which is an artificial legal person. Hence even same family members are looking after affairs of two companies, both companies have i .....

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(T), Kores India Ltd 2015-TIOL-2678-CESTAT-DEL; Krishna Engineering Works - 2016-TIOL-1139-CESTAT-HYD. 11. Thus looking to the above aspects compounded with the fact that both the companies are private limited companies and having independent legal existence, we do not find any valid reason to club their clearances and hold that there is no reason to hold the entities as one. 12. We find that the judgment of M/s Modi Alkalies & Chemicals - 2004 (171) ELT 155 (SC) relied upon by the revenue .....

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