Customs, Excise and Gold Tribunal - Delhi
Sangam Spinners vs Commissioner Of C. Ex. on 22 September, 2006
ORDER C.N.B. Nair, Member (T)
1. M/s. Sangam (India) Ltd. is a limited company from 1990. It started a spinning division at Bhilwara in Rajast-han in 1996 and obtained a central excise licence. Subsequently, in 1999, M/s. Sangam Spinners imported an electricity generating set for captive power supply. It took Modvat Credit on (capital) goods as permissible. Subsequently, spares and fuels for running power generating sets were also purchased on a continuous basis. Modvat credit is being taken on these items also. On 3-7-03, show cause notice was issued alleging that there was transfer of the power generating unit from Sangam Spinners to Sangam Power. Based on this allegation, the notice proposed to reverse the credits taken and to impose penalty on the appellant.
2. The appellant resisted the proposal by contending that Sangam(India) Ltd. is the only legal entity and Sangam Spinners, Sangam Powers, Sangam Suitings etc. are all the divisions of the same company. It was also explained that the power generating unit was all along located at the premises of the spinning mill and the power generating unit was being used only for supplying power for spinning purposes. The appellant's contention was that the keeping of separate accounts of different activities of M/s. Sangam (India) Ltd. under heads like textile fabric, power and infrastructure is only for the purpose of management accounting and management decision-making and it did not, in any way affect the legal rights and liabilities of M/s. Sangam (India) Ltd. and there was no transfer of capital goods as alleged.
3. The above contentions of the appellants were rejected in adjudication and the Commissioner held that keeping of separate accounts and showing transfer of goods from one unit to another clearly confirmed the allegation that Sangam Spinners and Sangam Powers were separate units and there was transfer of the capital goods in question and their spares and fuels from Sangam Spinners to Sangam Powers. Based on this finding, the Modvat credit of over Rs. 4 crores has been denied, equal amount of penalty imposed on M/s. Sangam Spinners and a penalty of Rs. 5 lakhs imposed on Shri G.C. Jain, Joint President of M/s. Sangam Spinners. The present appeals are directed against those orders.
4. Heard both sides and perused records.
5. The contention of both sides before us is a reiteration of the points made during adjudication i.e. revenue contending that Sangam Spinners and Sangam Power are two separate units and that there was transfer of capital goods received by Sangam Spinners to Sangam Power which attracted reversal of Modvat credit and the appellant contending that the legal entity is one and the same and there was no transfer from one unit to other and furthermore, there was no change in the location of equipment or utilization of the power generated from the time of installation.
6. When the matter came up last time, we had directed the revenue to produce evidence, if any, to show the separate identity of the two units in question. No further evidence has been brought on record. But balance sheet and other relevant records are already on record Ld. DR would also point out that Sangam Suitings Sangam Processors are all having separate excise registrations and therefore, they are separate entities. It is to be seen from the balance sheet that the only legal entity is M/s. Sangam India Ltd. and the various activities like power generation, spinning, processing are all separately accounted. Thus, it is clear that legal entity, rights and liabilities are only of Sangam (India) Ltd. and there is no transfer of equipment as to attract reversal of credit. Separate excise registration for each product under manufacture is also no proof of a separate manufacturer for each item.
7. Common premises, integrated use of resources all have continued all along. There has been no separation of entities through demergers in terms of law. Only separate internal account keeping is taking place. This is a common practice for management control and appraisal.
8. In the above facts and circumstances of the case, there is no merit in the revenue's contentions that there was transfer of power unit. Denial of credit already taken and imposition of penalties are not sustainable. They are set aside and the appeals are allowed with consequential relief to the appellant.
(Dictated and pronounced in open Court)