Custom, Excise & Service Tax Tribunal
Shri S.K. Thirani, Chairman vs C.C.E & Indore on 10 September, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI PRINCIPAL BENCH, COURT NO. II Appeal No. E/2932-2939/2010-EX(DB) [Arising out of Order-in-Appeal No. 06/Commr/Cex/IND/2010 dated 30.03.2010 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Indore]. For approval and signature: Honble Shri Ashok Jindal, Member (Judicial) Hon'ble Shri B. Ravichandran, Member (Technical) 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether Their Lordships wish to see the fair copy of the Order? 4 Whether Order is to be circulated to the Departmental authorities? M/s. Kores (India) Ltd. M/s. Neptune Stationary Pvt. Ltd. M/s. Neha Stationary Pvt. Ltd. M/s. Mars Stationary Pvt. Ltd. Lt. Col. Harbhajan Singh (Retd.) Shri S. S. Bhandari, Director M/s. Nandini Stationary Pvt. Ltd. Shri S.K. Thirani, Chairman .Appellants Vs. C.C.E & Indore .Respondent
Appearance:
Shri Balbir Singh & Shri Alok Barthwal, Advocate for the Appellant Shri Govind Dixit, DR for the Respondent CORAM:
Hon'ble Shri Ashok Jindal, Member (Judicial) Hon'ble Shri B. Ravichandran, Member (Technical) Date of Hearing: 10.09.2015 FINAL ORDER NO. 52954-52961/2015-EX(DB) Per B. Ravichandran:
There are 8 appeals which are now being taken up together for decision as the issue involved is same. M/s. Kores (India) Ltd. are engaged in marketing of wide range of stationery items like staple pins etc., either manufactured by them or procured from other manufacturers. Certain investigations were conducted by the Department which resulted in the initiation of proceedings against M/s. Kores (India) Ltd. and other appellants in the present case. The case of the Revenue is that the staple pins manufactured by 4 SSI units (Appellants M/s. Mars Stationery Pvt. Ltd., M/s. Neha Stationery Pvt. Ltd., M/s. Nandani Stationery Pvt. Ltd. and M/s. Neptune Stationery Pvt Ltd.) are to be considered as manufactured in one manufacturing facility known as M/s. Kores (India) Ltd., staple pins project. Accordingly, the turnover has to be combined for determining the SSI eligibility. The proceedings concluded by way of Order in Original dated 30.09.1998. The original authority confirmed the demands raised and imposed penalties. On appeal, the Tribunal vide final order dated 27.06.2000 confirmed the demands waived / modified the penalty. The said order was challenged in the Honble High Court of Madhya Pradesh at Indore. The Honble High Court vide order dated 17.11.2005 remanded the matter to the Original Authority for fresh order. Consequently, the Original Authority decided the matter afresh and passed the impugned order dated 30.03.2010.
2. The appellants pleaded that the Ld. Commissioner categorically mentioned in the impugned order that M/s. Kores (India) Ltd. and the other 4 SSI units are separate entities. As such, after such finding there is no tenable way for the Department to club the clearances of all these independent units together to arrive at SSI exemption. Further, the duty demand has been confirmed and penalties imposed on the SSI units and appellant separately which itself shows that they are independent and separate entities. The main appellant (M/s. Kores India Ltd.) and the other appellants (SSI Units) are independent entities and have their separate existence as they are registered with various statutory authorities like Registrar of Companies, etc. As per the Companies Act no limited company can be held as a dummy unit as its existence is recognized as a company and there is no question of clubbing its financial business with another entity for tax purposes. The appellant further submits that various dealings between main appellant and other appellants are purely on commercial terms. The renting of premises to SSI Units, purchase of wire from main appellant by the SSI Units, and such dealings are all purely on commercial terms on recorded transactions. These SSI Units are put up by the promoters over a period of time from September 1992 to August 1995. The appellants further elaborately submitted against the Departments view that the main appellant have financial and administrative control over the SSI units and as such the value for clearances to determine the SSI Exemption should be taken together. The appellant pleads that there is no justification for such a course of action as there should be clear legal basis for that. The same was not disclosed and the exact provision which enables such clubbing of turnover is not indicated. The appellant also relied on the various case laws to reiterate their plea that when the legal status of various units as independent and separate entities were accepted there is no question of clubbing their turnover.
3. During the arguments the Ld. Counsel for the appellants reiterated the points in the appeals and relied on various case laws, more specifically on the following:
a) Commissioner Vs. Balsara Hygiene Products Ltd.-2015 (321) ELT A146 (SC)
b) Balsara Hygiene Products Ltd. Vs. CCE Vapi-2012 (278) ELT 526 (Tri-Ahmd.)
c) Plasto Containers India Pvt. Ltd. Vs. CCE Nagpur-2011 (268) ELT 509 (Tri-Mum)
4. The Ld. AR on the other hand, reiterated the findings of the Original Authorities and stated that the evidence collected by the Department relating to setting up of these small scale units the administrative and financial help extended by the main appellant to the SSI units, the overall managerial and administrative relationship among the appellants will show that there is only one manufacturing facility of the main appellant and the SSI units are only created for the purpose of availing the SSI units exemption. He further pleaded that the managerial control and financial transactions evidenced by the statements of the various persons in responsibility and the documents support the case of the Department for combining the sale turnover of SSI units.
5. Heard both the sides and examined the appeal records.
6. The point for decision is whether or not the turnover of 4 SSI appellants are to be clubbed together with the main appellant for the purpose of arriving at the turnover to extend the benefit of notification 1/93-CE dated 28.02.1993. The Honble High Court of Madhya Pradesh vide order dated 17.11.2005 directed the original authority to consider the case of clubbing in the light of the circulars issued by the Board from time to time. The Honble High Court also observed that for the subsequent period Revenue authorities have treated the manufacturing units as separate from petitioners and thus accepted that there is a relationship of buyer and seller between the petitioner and the four manufacturing units without any mutuality. It was also observed that the Adjudicating Authority dropped the proceedings vide order dated 18.03.2005 following the Tribunals order dated 04.08.2004.
7. We have examined the impugned order closely. The Ld. Commissioner while examining the applicability of Boards circular No. 6/92 dated 29.05.1992 held that the said circular does not debar clubbing of clearance of 2 or more companies if they are having common finance and management. He held the contents of the circular as not applicable to the present case. We find that the ld. Original authority has misdirected himself while considering implication of the Boards circular. While he held the appellants are having common finance and management, hence clubbing of turnover is permissible in para 69 he observed that there is no allegation in the present case that the SSI units were dummy. He observed that the existence of SSI units has been accepted. He further goes ahead and states that SSI units were administratively and financially controlled by the main appellant through noticee no. 6 & 7. Hence he concluded that the turnover can be clubbed. We are unable to appreciate the legal basis for such assertion. The Original Authority having arrived at the conclusion that the SSI units were not dummy and are having separate existence goes ahead and orders the clubbing of turnover only on the ground of administrative and financial control. Even this administrative and financial control has not been categorically established except for some inferences bases on statements and correspondence. The SSI units in the present case were all independently registered Pvt. Ltd. Companies. Their existence as legal entities have been accepted as a fact by the original authority. Even if it is said that the main appellant is having certain financial and administrative influence over the SSI units, this is not sufficient to club the turnover of all these SSI units. At best it may have the effect on valuation of excisable goods cleared or purchased by these appellants among themselves. In other words, even if it is considered that there may be related reasons transaction among the appellants this has no effect on their standing as separate legal entities. The provisions of notification no. 1/93-CE are to be examined in order to decide whether or not such clubbing is covered by any of such provisions. Para 3 of the said notifications states that nothing contained in this notification shall apply if the aggregate value of the clearances of all excisable goods for home consumption:
a) by a manufacturer from one or more factories, or
b) from any factory, by one or more manufacturers had exceeded Rs. 200 Lakhs in the preceding financial year.
8. Now applying the provisions of the said para it is apparent that the original authority ordered for combining the turnover of all SSI units with the main appellant considering them as a manufacturer.
9. We consider that such conclusion is not supported by any tenable evidence. We find that the Ld. Commissioner confirmed the demand and ordered recovery of duty from the 4 SSI units along with their principal M/s. Kores (India) Ltd. When the demand of recovery was confirmed against these SSI units their identity and separate existence has been recognized. Further, confirming the demand of recovery from the SSI units along with the principal (M/s. Kores (India) Ltd.) indicates ambiguity in the demand to the effect that if there is only one manufacturer in terms of notification no. 1/93-CE the duty liability will arise only against such manufacturer not against two units. If the department recognizes more than one manufacturer clubbing up their turnover is not provided for in the notification. Holding that the SSI units have separate legal existence but turnover has to be clubbed for the purpose of notification no. 1/93-CE is not a tenable legal proposition. There is no clarity on this aspect for the impugned order. There is no supporting evidence for common finance and common management and there is no finding by the original authority that the main appellant has floated, financed and incorporated the SSI units. There is no evidence that the main appellant investing money in SSI units. The main appellant and the other SSI units are limited / Pvt. Ltd. companies respectively and are independent entities irrespective of their Directors / shareholders. We find that there is no evidence that Directors of SSI units are related with M/s. Kores (India) Ltd. as per the provision of Central Excise Act or Companies Act. The financial transactions are of Commercial terms and there is nothing to show the flow back amongst the appellants. There is no profit sharing or combined ownership of assets. This Tribunal in the case of Balsara Hygiene Products Ltd. (Supra) held that mere fact of management, control or grant of interest free loan is not sufficient to hold the units as dummy units in the business of any money flowback/ profit sharing and total control on another unit. In the case of Plasto Containers India Pvt.Ltd. (Supra) the Tribunal held that when the units are having separate directors registered with Registrar of Companies, separate sales tax, registration, income tax, bank account and separate lease deal of the clubbing of clearances is not legally tenable. In the case of B.K. Office Needs (P) Ltd. 2015 (318) ELT 288 (Tri-Chennai) this Tribunal held that it is well settled by a series of decisions that mere common partners and proprietor of other concern, and use of staff etc. would not be sufficient to hold that units are one and the same.
10. In Jagatjit Agro Industries 2014 (309) ELT 301 (Tri-Del) this Tribunal held that merely because common electricity connection was used by both the units by itself will not make it a dummy of one another. Similarly, a common accountant or a common store room for raw materials cannot be held to be a reason for clubbing the clearances of both the units.
11. After careful consideration of evidences on record we find that the independent existence and legal identity of the SSI units have not been disputed. In that position we find the financial and management control as discussed in the impugned order has also not been categorically established. The original order also did not assert under which provision such clubbing is called for either in terms of the notification 1/93-CE or the provision of Central Excise Act or Rules made there under. As such we find that the findings of the original authority cannot be sustained and accordingly we set aside the order and allow the appeal with consequential relief, if any.
(Operative part of the order pronounced in the open court)
(B. Ravichandran) (Ashok Jindal) Member (Technical) Member (Judicial)
Bhanu
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E/2932-2939/2010-EX(DB)