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2019 (4) TMI 173

and having common partners. That cannot be the sole ground to club the clearances of all the units. Moreover, M/s. Sonex Decor Pvt.Ltd., is a private limited company is a separate firm with its Directors, therefore, the same cannot be the ground to club the clearances of all the units - Moreover, M/s. Sonex Decor Pvt.Ltd., is a private limited company is a separate firm with its Directors, therefore, the same cannot be the ground to club the clearances of all the units. - Other reason for clubbing of clearances of all the units are having financial flow back, mutual lending and borrowing etc. amongst the units; collection of sale proceeds on behalf of each other; joint control exercised by Shri Harvinder Singh and Shri Jaspal Singh on all the four units; common managerial control; partners/directors being members of the same family; and common use of facilities of telephone, fax, computer, office equipment, staff etc - We take note of the fact that all the units located at different locations having separate income-tax, sales tax, central excise registration. All units are having electricity connection, their own machinery and plant to manufacture their final products and main .....

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The appellant No.1 unit established in March, 1995 for manufacture of plastic and sheet metal components of blinds and false ceiling of Aluminium and galvanized plain and coated sheet were not then registered with central excise. 2.2 The appellant No.2 i.e. M/s. Glorious Corporation, 77, Village Saran, Faridabad is an unregister unit having partners Shri Jaspal Singh S/o Mohinder Singh and Harvinder Singh S/o Shri Mohinder Singh; were engaged in the manufacture of plastic and metal components of Sofia rods and coated plastic sofia rods under Chapter heading 3925.99. 2.3 The appellant No.3 i.e. M/s. Sonex Industries, 76, Village Saran/2173A, Jawahar Colony, Faridabad is a registered unit with central excise having partners Shri Harvinder Singh S/o Mohinder Singh, Smt. Mohinder Sandha W/o Shri Harvinder Singh and Smt. Manjeet Kaur w/o Shri Jaspal Singh; were engaged in the manufacture of coated fabric of polyester viscose yarn, vertical blinds, venation blinds and drapes. In the classification list under Rule 173B, they had declared that they do not have any other manufacturing unit in India. The appellant unit was taken over by appellant No.1 w.e.f.1.04.2001. 2.4 The Appellant No.4 .....

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r Singh and Shri Jaswal Singh on all the four units; (iv) common managerial control; (v) partners/directors being members of the same family; and (vi) common use of facilities of telephone, fax, computer, office equipment, staff etc. 4. He submits that the benefit of SSI exemption notification has been denied to all four units yet the demand has been confirmed on M/s. M.G. Industries which is wholly contrary to law and facts. There is no allegation in the show cause notice that the other three units were dummy or non existent. Therefore, in the absence of any allegation or evidence in this respect, the confirmation of duty demand against M/s. M.G. Industries is contrary to legal provisions. The duty demand merits to be quashed on this ground alone. 4. He further submits that the imposition of penalty on the three units i.e. Glorious Corporation, M/s. Sonex Industries and M/s. Sonex Decor (P) Ltd. under Rule 173Q read with section 11A and 38 of Central Excise Act, 1944 and under Rule 25 of Central Excise Rules, itself would prove that the department itself has considered these units to be manufacturer of excisable goods. When the department itself is treating these units as manufact .....

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l transactions amongst all the units and simply clubbed the clearances. They had explained the various financial transactions and had stated that there could be case of temporary financial accommodations which duly reflected in the books of accounts and were duly returned. This fact could not be made the basis for denying a statutory benefit flowing from statutory notifications which accrue benefit to a small scale unit. 8. He submits that all the units are independent units incorporated/started at different point of time were situated at different premises, were engaged in the manufacture of different products. All the units are separate entities in the eyes of law performing all the statutory obligations separately. Therefore, they were rightly entitled for the benefit of SSI exemption notification issued from time to time. Even assuming for arguments sake that there were certain financial transactions amongst these units, the same were duly accounted in the books of account by each unit. Mere fact that some amounts were borrowed by one unit from other without payment of interest cannot be made the sole basis for clubbing the clearances of all the units. In the present case one u .....

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ngh S/o Shri Mohinder Singh & Mohinder Singh S/o Shri Bishen Singh whereas M/s.Glorious Corporation having partners Shri aspal Singh S/o Shri Mohinder Singh and Shri Harvinder Singh S/o Shri Mohinder Singh and M/s. Sonex Industries, having partners Shri Harvinder Singh S/o Shri Mohinder Singh, Smt. Mohinder Sandha W/o Shri Harvinder Singh and Smt. Manjeet Kaur w/o Shri Jaspal Singh. The allegation of the Revenue is that all three units are partnership firm and having common partners. That cannot be the sole ground to club the clearances of all the units. Moreover, M/s. Sonex Decor Pvt.Ltd., is a private limited company is a separate firm with its Directors, therefore, the same cannot be the ground to club the clearances of all the units. Other reason for clubbing of clearances of all the units are having financial flow back, mutual lending and borrowing etc. amongst the units; collection of sale proceeds on behalf of each other; joint control exercised by Shri Harvinder Singh and Shri Jaspal Singh on all the four units; common managerial control; partners/directors being members of the same family; and common use of facilities of telephone, fax, computer, office equipment, staf .....

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godown for storage of its raw material, namely waste paper. Thereafter, the ground plan was amended in May, 1998, to show the Specialty Paper Factory in Shed No. 3 for storing the finished goods manufactured at Dharuhera and clearing them on payment of duty. Accordingly, classification list was also filed for the purpose of clearing the stock manufactured at Dharuhera. Subsequent to erection of the plant and machinery of Specialty Paper Factory shifted from Dharuhera to Shed No. 3, Narela Road, Kundli and manufacture of paper in such separate premises by separate staff and workers who were earlier employed at Dharuhera, were engaged and the appellant applied for Central Excise registration as provided under Rule 174(3) of the Central Excise Rules, 1944. No portion of the manufacturing process of Paper Board Factory was ever carried on in Shed No. 3 wherein exclusively Specialty Paper Factory operations were carried out. The registrations issued to the Paper Board Factory and the Specialty Paper Factory were premises specific as stipulated under Rule 174(3) which reads as under: Every registration certificate granted shall be in the specified form and shall be valid only for the pre .....

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ies but having separate staff, separate management, separate passage, separate entrance with separate central excise registration and producing different end products, cannot be clubbed together. 15. We further take note of the fact that similar issue came up before this Tribunal in the case of Dirba Pipes Pvt.Ltd.-2017 (347) ELT 529 (Tri.-Chan.) wherein the facts of the are as under:- 2. The facts of the case are that the respondents are engaged in the manufacture of ERW pipes and registered with the Central Excise department. They are availing SSI exemption benefit under various Notifications as applicable from time-to-time and had been availing the Modvat/Cenvat credit facility to discharge their duty liability on their final products. Based on intelligence gathered, DGCEI conducted raid on various factory, office, business, godown and residential preemies of the respondents on 29-11-2001. Furtherance to investigation, the show cause notices were issued to the respondents on account of that the clearances of four units should be clubbed together and the benefit of SSI exemption should not be given and demanding duty on account of clandestine manufacture and clearance of excisabl .....

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th 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 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 companies are registered with Income-tax Department, Sales-tax Department, .....

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ing 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 dubbing 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 manufacturing the goods without any help from the other unit, it has to be held that both the units .....

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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 each appellant s company is separate. In respect of the Board s Circular, the clearances of the limited companies cannot be clubbed. T .....

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invokable for dubbing 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 flowback, 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 dubbing of the clearance of M/s. DSA with M/s. NOVA is not sustainable and the same is set aside. 20. We find that learned AR relied on the decision of the Apex Court in the case of Modi Alkalies & Chemicals Ltd. [2004 (171) E.L.T. 155 (S.C.)]. In the said case, the facts were as under: Respondent no. 1 - M/s. Modi Alkalies & 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 sub-heading 2804.90 of the schedule of the Central Excise Tariff Act, 1985 (in short Tariff Act ). But with a view to evade payment of excise duty it floated t .....

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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. 21. 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. 16. We further take note of the fact that in the case of Nova Industries Pvt.Ltd.-2015 (327) ELT 103 (Tri.-Del.) wherein the facts of the case are as under:- 2. The facts, in brief, are that M/s. Nova and M/s. Deluxe Sanitary Appliances Pvt. Ltd. (DSA) were engaged in the manufacturing of sanitary appliances. The factory premises and residence of the employees were searched by the Revenue Officers on 28-10-1999. Certain records were recovered from the fac .....

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aving manufacturing the goods and same have been cleared on payment of duty by availing SSI exemption of both the units separately. The only allegation is that sometimes, salary of one of the employees was paid by the other firm or they are managed by one person. Moreover, the dealers get the commission on the combined sales of both the companies. These things cannot constitute that there was a mutuality of interest and therefore, clearances of one unit cannot be clubbed with the clearance of other unit. 17. We find that this issues has come before the Tribunal in various cases whereas in the case of Bullows India Pvt. Ltd. v. CCE, reported in 2012 (284) E.L.T. 584 (T) (supra) wherein this Tribunal has observed as under: We find that in the present case the issue is whether the appellants are entitled for the benefit of Notification 175/86-C.E. and subsequently Notification 1/93-C.E., therefore, the ratio of the above decision of the Hon ble Gujarat High Court is fully applicable on the facts of the present case. The Hon ble High Court held that the Revenue has to establish that there was mutuality of interest or financial flowback of the funds and in such cases the clearances of t .....

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of M/s. RenuTandonv. Union of India - 1993 (66) E.L.T. 375 (Raj.). Similarly, in the case of M/s. Electro Mechanical Engg. Corporation v. CCE, Jaipur - 2003 (152) E.L.T. 194 (Tri.), Girish Electricals Industries v. CCE, Mumbai - 2004 (167) E.L.T. 299 (Tri.) it was held evidence of common office premises, common staff and common maintenance of records, etc. cannot be held to be sufficient to club the clearances of the units, who have different registration in all the departments and in the absence of any financial flow back. 19. We further, analyse the decision of Ennar Cements Pvt. Ltd v. CCE reported in 2013 (292) E.L.T. 245 (T) (supra) wherein this Tribunal has observed as under : We have gone through the records of the case carefully. The appellants are two Private Limited Companies. They have separate existence. The investigation reveals that the clearances of one unit were done with the other and vice versa in order to remain with the exempted limit and thereby evading payment of Central Excise duty. If that is the case, the investigation ought to have decided the real clearances of each unit and demanded the duty accordingly in respect of each unit. However, in the present c .....

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o make other units as dummies when they are having independent control or money flow back to the main unit - Clearances not clubbable - Situation not to be confused with that of related person concept under Section 4(4)(c) of Central Excises & Salt Act, 1944 - Notification No. 175/86-C.E., dated 1-3-1986 - Section 5A ibid. 21. In the case of RenuTandonv. Union of India reported in 1993 (66) E.L.T. 375 (Raj.) Exemption - SSI Exemption - Clubbing of clearances - Two units situated at same premises, manufacturing similar product, having some common management, office and labour and common electric connection - One unit owned by father-in-law and the other by daughter-in-law and work of both units looked after by her husband - In absence of evidence of common finding and financial flow back, two units not treatable as one and their clearances not clubbable - Notification No. 175/86-C.E. dated 1-3-1986. 22. In the case of Vivomed Labs. (P) Ltd. v. Collector of C. Ex. reported in 1991 (53) E.L.T. 152 (Tribunal) Exemption to SSI Units - Clubbing of clearances - Units registered separately under Income-tax Act, Sales Tax having separate Central Excise Licenses and also financed through .....

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