TMI Blog2022 (2) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... tment has mainly relied on the rental agreement entered into between the two units. Being separate entities, there are no 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 - it is found 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. In fact, there is no specific allegation that TLGW is a dummy unit. The department has proceeded to club the clearances of both these units without raising such allegation. It is found that the department has miserably failed to establish any mutuality of interest or cash flow between both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022-13 and 2013-14 during June 2014. 6. Notification No.8/2003-CE dated 01.03.2003 as amended, stipulates vide para-2 (v) as follows : Where a manufacturer clears the specified goods from one or more factories, the exemption in his cases shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said Table and not separately for each factory . Para 4 of the above Notification states that the exemption contained in this notification shall not apply to specified goods bearing the brand name or trade name, whether registered or not, to another person. 7. The applicable notification as above strictly prohibits availing of benefit of Notification by units clearing goods with brand name / trade name of another. 8. As per the Memorandum of Association of TLPPL, the incorporation of the company was for manufacturing furnaces, instruments, driers, glassware, scientific apparatus and laboratory products. The glassware manufactured by TLGW also figures in the Memorandum of Association of TLPPL. The rental agreement dated 19.09.2009 between two units has no ground plan specifically showing the area leased to TLGW and as per this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been confirmed in the impugned order. 11. There is no flow back of funds between the two companies. The products manufactured are totally different in nature. The limited company M/s.TLPPL was engaged in the manufacture of laboratory furniture. M/s.TLGW was engaged in manufacture of glassware used in laboratories. The products being entirely different, it cannot be said that the brand name of the company has been used by the other. The raw materials used by both the units are totally different and the department has not been able to show that the purchase of raw materials by one unit has been used for clandestinely manufacturing goods of the other unit. The purchase orders are placed by customers of each company separately. The sales of each units is conducted individually and independently. The money received from the customers are billed separately. He argued that there is no evidence for flow of cash between the two units. The department has merely relied upon rental agreement to allege that there is cash flow between the units. 12. Ld. Consultant submitted that though the department has clubbed the clearances of both the units and treated the unit M/s.TLGW to be a dummy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned order. She adverted to paras-23, 25 26 of the impugned order. It is submitted by her that the Private Limited Company M/s.TLPPL came into existence in May 2003 and had opened current account in its unit s name on 18.11.2005. The Proprietaryship firm M/s.TLGW was opened its current account only on 09.04.2007. She referred to para-25 of the impugned order which is extracted as under : 25. From the above, it is also evident after the investigation of the Department, the fund flow from one unit to another as minimal or stopped Further even though the Pvt. Limited company had come into existence in May 2003, it had opened current account in its name only on 18.11.2005. TLGW had opened its current account only on 09.04.2007. As the unis have been functional during the interim period also, it stands to reason that all along during the interim period and perhaps during the subsequent period also, the current account of earlier proprietor firm had been kept alive and was used to deposit the operational income. All this go to show that the assesee had not maintained separate accounts for the Pvt. Limited Company TLPPL, the proprietrix firm TLGW and only after obtaining MSME certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest. The Tribunal in the case of Vizag Poly Packaging Industries (supra) observed as under : 6 . The department lays emphasis on the facts that accounts of both units are centralized and maintained at one place by the Managing Partner of respondent unit. All activities of both units are carried out collectively by members of one family and besides sharing facilities, the documents are also stored in one office. These allegations are refuted by respondent in their statements. It is stated by the Accountant, Shri Venkateswara Rao of M/s. Andhra Poly Pack, that the accounts of M/s. Andhra Poly Pack are maintained in computer system of respondent unit, since M/s. Andhra Poly Pack does not have computer system of their own. It is stated by Shri Pradip Kumar Nahata, Managing Partner of respondent unit, that the records of M/s. Andhra Poly Pack is kept in their premises since M/s. Andhra Poly Pack does not have office of their own. The weighing scale, telephone are used by M/s. Andhra Poly Pack, but no charge is collected. That M/s. Andhra Poly Pack is a proprietorship concern owned by his wife. 7 . The Commissioner, in the impugned order has elaborately discussed the stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both have interest in the business of each other or they have common funding and financial flow-back. In the present case, the most important aspect about having common funding and financial flow-back is missing and therefore, to withdraw the assessment or club the clearances is wholly unjustified and illegal and without jurisdiction. Reference in this connection may be made to International Dyestuff Mfg. Co. v. Collector of Central Excise, Baroda [1991 (53) E.L.T. 85 (Tribunal)]. 22. In the case of CCE Faridabad Vs Sankla Castings - 2018 (364) ELT 322 (Tri.-Chan.) it was held as under : 3 . As per facts on records, the respondents are engaged in the manufacture of Lub. Oil pumps. The respondent is proprietary unit and there is another unit of his brother under the name and style of M/s. Sankla Industries near to the factory of present respondent. The distance between the two factories is around 30-35 industrial plot. The Revenue conducted searches in the respondents factory and recorded various statements and entertained a view that the two units owned by the two brothers are one and the same and their clearances have to be clubbed. Accordingly, the proceedings were ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of ₹ 20 lakhs levied on the firm on this account is dropped. Similarly there are not sufficient evidence to establish that Shri Bharat Bhushan Sankla Shri Sandeep Sankla have violated the provisions of Rule 209A of the Central Excise Rules, 1944 and penalty of ₹ 5 lakh imposed on each of them is dropped. 5 . As is seen from the above, the appellate authority extended the benefit to the respondents on the ground that both are independent units duly registered independently with the Central Excise department as well as also there is no allegation or evidence of any joint financial inter-tuning between the two. The Revenue in their memo of appeal have not rebutted the said finding of the Commissioner (Appeals) by production of any positive evidence. It is well-settled law that the two units belonging to two different relations, complete by themselves and independently registered with the tax authorities, cannot be termed to be one and the same units and clearances of the two cannot be clubbed. In the absence of any evidence contrary to the finding arrived by the Commissioner (Appeals), we find no infirmity in the impugned order of the appellate authority. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot run it) is not a valid ground to deny PC the status of SSI. Management of a firm can be entrusted to an experienced person and the same cannot come in the way of the firm getting a benefit legally due to it. 6.3 Some goods found in the CEW-II premises carried labels of PC. There were labels of PC available in CEW-II when the officers visited CEW-II. We find that this alone is not sufficient to find that all goods manufactured by CEW-II were cleared and accounted in the name of PC. There is no reliable evidence to find that goods manufactured by CEW-II used to be regularly cleared with PC labels. 6.4 No mutuality of interest between the two units is established. There is no charge that the separate identities of CEW-II and PC are not real. There is no finding that the management of the two units was common. There is no finding that PC was run with funds provided by CEW or that the PC shared its profit with CEW. 6.5 We do not consider that a common phone being used by CEW-II and PC or, some employees being common, put the entitlement of either of the units for SSI benefit in jeopardy. It is found against the two units that they had received power from a mains connec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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