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TMI Blog2022 (2) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... Naresh Kumar and Shri A. Gopinath. TLGW is a proprietaryship firm of which Smt. Savithiri Arun is the Proprietrix. With effect from 01.11.2014, Smt. Savithiri Arun ceased to be a Director in TLPPL. Both the units are functioning from the same address, with TLPPL functioning on the ground floor and TLGW functioning from the first floor. TLPPL is the owner of the trademark 'TECHNICO'. Though both the units are manufacturing laboratory equipment and are clearing the same to various customers for installation and commissioning of laboratories through common dealers, both the units were availing SSI exemption under Notification No.8/2003-CE dt 1.3.2003 and were discharging duty separately after the first clearance of Rs. 150 lakhs. 4. Both the units TLPPL and TLGW have common Head office with same address and phone number. The profile of both TLPPL and TLGW and their e-mails are the same. TLPPL is the owner of the trade mark 'TECHNICO'. Both TLPPL and TLGW were clearing their goods under invoices bearing the trade name 'TECHNICO'. The exports were also done by using this trademark. 5. The Department was of the view that both the units were not eligible for SSI exemption for the perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how cause notice was issued to M/s.TLPPL and a separate show cause notice to Shri P. Arunagiri, Managing Director of TLPPL. It was proposed in the SCN as to why clearances of M/s.TLPPL and M/s.TLGW should not be clubbed together and why duty demand should not be demanded on the value of clearances arrived by clubbing clearances made by both the units during the disputed period. The appellant herein M/s.TLPPL replied to the show cause notice and after due process of law, the original authority confirmed the demand proposed in the SCN along with interest and imposed equal penalty besides imposing personal penalty of Rs. 1 crore on Shri P.Arunagiri, Managing Director under Rule 26 (1) of Central Excise Rules, 2002. Aggrieved by such order, the appellants are now before the Tribunal. 10. On behalf of the appellant, Ld. Consultant Shri P.C. Anand appeared and argued the matter. He submitted that the two units were functioning as two separate units. TLPPL is a Private Limited Company and the other is a Proprietrix firm. The Department has clubbed the turnover of proprietrix company with that of private limited company and thus arrived at the differential duty which has been confirmed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aryship firm. The Commissioner has erred in not considering the above circular. He relied upon the decision of the Hon'ble Supreme Court in Supreme Washers (P) Ltd. Vs CCE - 2002 (151) ELT 14 (SC) wherein the Hon'ble Apex Court remanded the matter directing the Tribunal to look into the applicability of the circular. 14. He submitted that department has not been able to adduce any evidence to establish mutuality of interest. There is no evidence to show that the clearances of alleged dummy unit of M/s.TLGW were the goods clandestinely manufactured by TLPPL and cleared through M/s.TLGW. There is no such case for the department as the goods which are manufactured by both the units are entirely different. The decision in the case of Ennar Cements Pvt. Ltd. Vs CCE Bangalore - 2013 (292) ELT 245 (Tri-Bang.) was also relied. 15. With regard to the penalty imposed on the Managing Director, Shri P. Arunagiri, he submitted that there are no grounds for imposing personal penalty on the Managing Director. He prayed that the appeal may be allowed. 16. Ld. A.R. Ms. Sridevi Taritla appeared and argued the matter for Revenue. She supported the findings in the impugned order. She adverted to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by M/s.TLPPL. Needless to say, when the products are entirely different, it cannot happen. On perusal of paras-24,25,26 of the impugned order as referred to by Ld. A.R, there is nothing to show that there is financial flow from one unit to the other. The department has mainly relied on the rental agreement entered into between the two units. Being separate entities, we cannot find any discrepancy in such rent agreement. There is proof that they have reflected payment of rent for the whole year by M/s.TLGW to TLPPL in their annual financial statement. Payment of rent cannot be considered as fund flow in respect of goods manufactured and cleared by the unit. There is no iota of evidence to show that the raw materials were purchased in the name of M/s.TLGW and that these raw materials were used for manufacturing goods which are cleared by TLPPL. 21. We find from the records that both the units are separately registered with the Central Excise department. One is the Private Limited Company and the other is a Proprietarship firm. Merely because the members of the family are owners of these two units, it cannot be said that there is mutuality of interest. The Tribunal in the case of Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para 18 of the notice and the reply thereto. The funds are arranged as gifts including a gift of Rs. 4.11 lakh from her own sister. There is finance by the bank also. I also find that the loans and gifts are by persons which are not concerned with the profits of the firm. There is no evidence that there is common control and management over the two units by the persons who have given gifts or loans. There is no evidence of any flow of funds from Vizag Poly to Andhra Poly, there is only an allegation that Shri P.K. Nahata, a partner in Vizag Poly, has arranged funds through gifts and loans from his relatives and friends for Andhra Poly Pack. 8. The Commissioner has quoted from the judgment of the Rajasthan High Court in Renu Tandon [1993 (66) E.L.T. 375 (Raj.)] as below : "Value of clearances of the two units cannot be clubbed together and the two units cannot be treated as one unit merely because of proximity of relationship or the situation of the two factories or because there are some common employees unless there is a clear and specific evidence that there is mutuality of business interest between the two units and that both have interest in the business of each other or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise flow of funds between them to make inferences that they constitute one unit and in that position clubbing of clearances will not be justified. Both the appellant units have been filing separate returns periodically and have submitted that their units were visited by Central Excise Officers and as well as by audit and they disclosed everything to the department. I agree that there are specific allegations of suppression of facts and case is based on statements of three persons who retracted at the time of cross examination. 10. From the above discussions, I find that M/s. Sankla Castings & M/s. Sankla Industries were separate and independent units. Both registered with Central Excise department and other department. There is no flow of funds between the two units and legally both have separate establishment and plant and machinery. The order of confirmation of demand of central excise duty of Rs. 18,45,187/- made in the O-in-O against M/s. Sankla Castings by clubbing value of clearances shown on records/papers of M/s. Sankla Industries under Section 14 of the Central Excise Act, 1944 is set aside and penalty of Rs. 20 lakhs levied on the firm on this account is dropped. Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodation to each other by lending money when needed without interest. We find that borrowing funds in need is not barred between two units eligible for SSI benefit and the arrangement was mutual. There are no details of money borrowed to see the volume of transactions and if the transactions were not on commercial basis. CEW-II is located on a land owned by a partner of PC; PC is situated on land owned by a partner of CEW. That no rent was collected by both owners of the land again was a mutual arrangement between the partnerships. The properties belonged to members of the same family; the arrangement found is not barred between units availing SSI benefit. Another aspect that led to the finding of the clearances being clubbable is that PC did not have sufficient infrastructure. This is not explained, except that PC did not do plating work. Both CEW-II and PC got part of the manufacturing work done on job work basis. If plating was got done by another unit, the status of PC as an independent unit is not lost. That the two partners of PC had only lent their names to the partnership (and did not run it) is not a valid ground to deny PC the status of SSI. Management of a firm can be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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