Custom, Excise & Service Tax Tribunal
Shri Rahul Khanna, Director vs Cce- Chandigarh on 18 February, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
R.K. PURAM, WEST BLOCK NO.2, NEW DELHI-110066
COURT NO. III
Date of hearing: 18/02/2015
Date of Pronouncement: 30.03.2015
Appeal No. E/394-399/2007-EX [DB]
[Arising out of order-in-original no. 47-55/CE/CHD/2006 dated 30.11.2006 passed by Commissioner of Central Excise-Chandigarh]
1.
Whether Press Reporter may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would 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 Department Authorities?
M/s. NOVA Industries (P) Ltd.,
Shri D.V. Khanna, M.D,
Shri T.S. Rawat,
Shri Suresh Anand,
Shri Kewal Singh and
Shri Rahul Khanna, Director Appellants
Vs.
CCE- Chandigarh Respondent
Appearance: Shri K.J. Singh, Advocate for the appellant Shri R.K. Khanna, DR for the respondent.
Coram: Honble Shri Rakesh Kumar, Member (Technical) Honble Shri Ashok Jindal, Member (Judicial) Final Order No. 50917-50922/2015 Per: Ashok Jindal The appellants are in appeals against the impugned order wherein duty demand has been confirmed by the Adjudicating Authority against M/s. Nova Industries Pvt. Ltd. (NOVA) along with interest and penalties are imposed on all the appellants.
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 factory and the residence of the employees showing clearances of goods without payment of duty. During investigation, it was found that both the units were controlled by one, Shri. D.V. Khanna. Therefore, Adjudicating Authority clubbed the clearances of both the units on the ground that both the units belong to one family and denied the benefit of SSI exemption notification on the ground that clearance of previous financial year exceeds the limit of clearance provided under SSI exemption notification. During the course of search, private records were recovered and it was alleged that on the basis of these private records, goods were cleared without payment of duty. The show cause notice was issued to deny of SSI exemption notification to both the units and clubbing the clearance of both the units in the name of M/s. Nova Industries Pvt. Ltd and to demand duty on the basis of private records recovered from the residence of employees to allege that goods had been cleared clandestinely without payment of duty. Therefore, duty is demandable along with interest and penalty on all the appellants were also proposed. The show cause notice was adjudicated, benefit of exemption notification was denied. Clearances of both the units were clubbed with the clearance of Nova. The charge of clandestine removal was also confirmed. Therefore, duty of Rs. 3,69,66,630/- was demanded from Nova along with interest and equivalent amount of penalty was imposed and penalties on the co-appellants were also imposed.
3. Aggrieved from the said order, all the appellants are before us by way of these appeals.
4. Sh. Kamaljeet Singh, ld. Counsel on behalf of the appellants appears and submits that the Commissioner has not considered the various contentions raised by the appellant (a) that it does not have the production capacity to produce the quantity alleged to have been manufactured by them, (b) there is no corroborative evidence on record to show procurement of excess raw material, (c) Certificate of Chartered Engineer produced by the appellant regarding their production capacity has not been rebutted, (d) that in 1993, the Central Excise Preventive Staff had recovered some duplicate parts of sanitary appliances bearing the brand name of DSA from the premises of a transporter at Chandigarh, (e) that DSA was in existence even prior to 1988 and was manufacturing sanitary goods only, hence, it could not have been treated as a dummy unit of the appellant which was set up in 1988 and (f) that the shareholding pattern of the two companies was different. In fact, some of the persons were holding shares in appellant unit do not have holding any share in DSA. He also submits that clearance of one unit can be clubbed with the other only if one unit is a dummy unit of the other. But, there is no finding that DSA is a dummy unit of NOVA. However, the Commissioner has observed that the existence of DSA is dwarfed by M/s. NOVA. Therefore, there is no ground of clubbing of the clearances. He further submits that the ld. Commissioner while denying the exemption availed to give the benefit of CC/Modvat credit available to the appellant during the impugned period of input and input services. He submits that the clearance of NOVA and DSA cannot be clubbed as (a) Both are private limited companies, (b) only some of the Directors are common, (c) shareholding pattern is different, (d) both were set up in different times, (e) both units are located at separate plots of land, (f) separately registered under Central Excise Sales Tax and Income-tax and regularly filing their returns under some Central Excise range, (g) raw material were procured independently, (h) separate and complete plant for manufacturing the goods, (i) separate work force, (j) separate electricity connection, (k) no unconscionable financial flow back between them, (l) no profit sharing and (m) no control of DSA by appellant.
5. Only a few stray instances of interest free loans does not establish that there was a mutuality of interest and these loans were invariably been paid up. Therefore, they were not reflected in the audit balance sheet. Merely, some of the Directors of two companies are common or related to each other, it is no ground of clubbing to support these contentions relied on the decision of CCE Vs. Sharad Industries reported in 2013 (294) ELT 561 (T), Ennar Cements Pvt. Ltd Vs. CCE reported in 2013 (292) ELT 245 (T), Bullows India Pvt. Ltd. Vs. CCE, reported in 2012 (284) ELT 584 (T), Summerking Electricals Pvt. Ltd. Vs. CCE reported in 2004 (176) ELT 302 (Trib-Delhi), D.M. Gears Pvt. Ltd. Vs. CCE reported in 2002 (141) ELT 514 (T), Superior Products Vs. CCE reported in 2002 (144) ELT 187 (T), Sri Nataraja Industries Vs. CCE reported in 2005 (187) ELT 45 (Trib.Chennai), Unity Industries Vs. CCE 2006 (193) ELT 314, Shree Krishna Minerals Vs. CE reported in 2005 (190) ELT 251, Jindal Steel Fabricators Vs. CCE reported in 2005 (180) ELT 238, International Dye Stuff Mfg. Co. Vs. CCE reported in 1991 (53) ELT 85 (CESTAT), Geeta Valves & Engineers (P) Ltd. Vs. CCE reported in 1996 (87) ELT 672 (CESTAT), Padma Packages (P) Ltd. Vs. CCE reported in 1997 ELT 175 (CESTAT).
6. He further submits that the extended period of limitation is not invokable. In this case, as the Revenue was fully aware that Shri D.V. Khanna was the Managing Director of both the companies and both the companies falls under same range and Shri D.V. Khanna was regularly signing the correspondence of both the companies mainly declarations/invoices of both companies in his capacity as Managing Director. The appellant unit was in existence since, 1989 and DSA became private limited company in 1994. Both the companies were filing SSI exemptions separately since beginning and no objection was raised at any point of time. Both the units were being visited several times by the audit team and other staff but no objection was raised at any point of time.
7. He further submits that at the time of their visit, officers did not find any excess stock of raw material which establishes that the appellant was not engaged in clandestine manufacture and removal of goods. The records on the basis of which it is alleged that goods were manufactured and cleared clandestinely, were recovered from the premises of the employees and the facts is on record that one of the employees in the factory do not belong to the appellant and the documents were not prepared on the instance of appellant and his Director or Managing Director, these records do not reflect the production and clearance of the appellant. No corroborative evidence has been produced, therefore, demand on the basis of records maintained by employees without any authorization of management and without any independent corroborative evidence, the demand cum duty cannot be confirmed against the appellant. To support his contention, he relied on the decision of Standard Grease & Specialties Pvt. Ltd. Vs. CCE reported in 2014 (303) ELT 434 (T), Mahesh Silk Mills Vs. CCE reported in 2014 (304) ELT 703 (T), CCE Vs. Gopi Synthetics Pvt. Ltd. reported in 2014 (302) ELT 435 (T), Surya Alloy Indus Ltd. Vs. UOI reported in 2014 (305) ELT 340 (Cal), Hindustan Machines Vs. CCE reported in 2013 (294) ELT 43 (T), Prempreet Textile Industries Ltd. Vs. CCE reported in 2001 (134) ELT 691 (T), Punjab Fibres Ltd. Vs. CCE reported in 2002 (141) ELT 819 (Trib), Sri Jayajothi & Co. Ltd. Vs. CCE reported in 2002 (141) ELT 676 (Trib.), M/s. Meenambal Fire Works Vs. CCE reported in 2002 (49) RLT 832 (T) and Super Pipes Pvt. Ltd. Vs. CCE reported in 2002 RLT 23 (T).
8. He further submits that there is no corroborative evidence to allege that the appellant has manufactured clandestinely and remove the goods to support his contention. He relied on the following decisions:
Arya Fibres Pvt. Ltd. Vs. CC Ahmedabad-II reported in 2014 (311) ELT 529 (Tri-Ahmd.)
2. CCE Vs. Renny Steel Castings (P) Ltd. reported in 2013 (288) ELT 45 (P&H)
3. Kuber Tobacco Products Ltd. Vs. CCE reported in 2013 (290) ELT 545 (Trib.),
4. Suntrek Aluminium P. Ltd. Vs. CCE reported in 2013 (288) ELT 500 (Guj.)
5. Shree Nathiji Industries Vs. CCE reported in 2011 (267) ELT 241 (Tribunal)
6. Resha Wires Pvt. Ltd. Vs. CCE reported in 2006 (202) ELT 332 (Tribunal)
7. Vishwa Traders Pvt. Ltd. Vs. CCE reported in 2012 (278) ELT 362 (Tribunal) which was upheld by the Honble High Court reported in 2013 (287) ELT 243 (H.C.) and by the Apex Court reported in 2014 (303) ELT A24 (SC).
8. CCE Vs. Dhariwal Industries Ltd. reported in 2012 (283) ELT 113 (CESTAT)
9. Commr. Vs. Shri Narottam Udyog Pvt. Ltd. reported in 2003 (158) ELT 40 (CESTAT)
10. Sharma Chemicals Vs. CCE reported in 2001 (130) ELT 271 (Trib)
11. CCE Vs. Universal Polythene Industries reported in 2001 (130) ELT 228 (Trib)
9. He further submits that there were some units located in or around Delhi and Chandigarh and manufacturing sanitary items clandestinely and using the brand name of the appellant and DSA unauthorisely without knowledge and consent of the appellant and DSA. Some unscrupulous employees of the appellant have also acted malafidely and have purchased these duplicate goods from these units and using the appellant brand name unauthorisely and sold these duplicate goods in the market by passing them of brand having been manufactured by the appellant and DSA and have duped the dealers. It is also submitted that the appellant does not have the capacity to produce the quantity alleged to have been manufactured, the appellant unit was inspected by Shri R.D. Sharma, Chartered Engineer on 2/2/2000 and 3/2/2000 for assignment of the production capacity and it was concluded that the installed capacity of the appellant is 67,632/- pieces of sanitary fittings per year by taking the average weight of fittings as 1.47 kg. The figures alleged in the show cause notice are more than 2 to 3 times of the total installed capacity of appellant and DSA both. Therefore, the charge of clandestine removal is not sustainable. He further submits that all the dealers have admitted that payments were made to DSA and appellants through accounts cheques and in cross-examination, the dealers have denied having received goods without invoice from the appellant or DSA. The statement of Shri Sunil Sharma is false who was involved in trading of duplicate sanitary items bearing the brand name of NOVA and DSA and in his affidavit, he has admitted that he was also selling duplicate goods bearing the brand of NOVA and DSA. He submits that the submission of Shri Suresh Anand cannot be relied upon as he was involved in trading of duplicate goods bearing the brand name of NOVA and DSA. Sh. Suresh Anand was also not called for cross-examination. He relied on the decision of Ganga Rubber Industries Vs. Collector reported in 1989 (39) ELT 650 (T) to say that onus to prove the reliability of account books disowned by manufacturer lies on the department and department has failed to discharge their onus as the submission of Shri Suresh Anand was not tested by way of cross-examination. Therefore, the statement cannot be relied upon as there is a doubt of truth and veracity of the statement. Some documents were received from the premises of Shri Harbans Lal but no enquiry has been made from Shri Harbans Lal and the cross-examination of suppliers, dealers, employees of the appellant, establish that appellant has not manufactured and removed goods clandestinely. None of the transporters was produced for cross-examination. Therefore, the statement of transporters cannot be relied upon. He further submits that on the basis of search carried out by the Central Excise Department on 28/10/1999, the proceedings were initiated by the Income-tax Department wherein the CIT (appeals) arrived at the conclusion that the cash found in the premises of the appellant was fully accounted for and also held that there were no unaccounted sales by the appellant. Against the said order, the CIT filed an appeal before the ITAT and the Honble ITAT vide its order dated 30/01/2006 was pleased to dismiss the appeal filed by the Income-tax Department. He also submits that before arriving at the conclusion by the CIA (appeals) or alleging charges against the appellant, Income-tax Department has further examined the matter and thereafter, found that case is not sustainable against the appellant, therefore, charge of clandestine removal is not sustainable.
10. In the light of these submissions, he submits that the clearance of both the units cannot be clubbed together. Therefore, both the units entitled for SSI exemption and charge of the clandestine removal has not been established by the Department. Consequently, the demand on that account is not sustainable and no penalties can be imposed on the appellants.
11. On the other hand, the contentions of ld. Counsel were strongly opposed by the ld. AR who supported the impugned order and submits that as both the companies were promoted by Shri D.V. Khanna by himself (as Managing Director in both the companies), the NOVA was registered with Registrar of companies in 1988 with D.V. Khanna, Shri Rohit Khanna and Shri Atul Khanna as Directors and DSA was registered in 1994 with Shri D.V. Khanna his son Shri Rohit Khanna and is wife Smt. Lalit Khanna all residence of Panchkula Haryana as a Director and Shri D.V. Khanna was looking after work of both the companies. The Commission to various salesman dealers to be decided mutually and no minutes were drawn, marketing was common for both the companies and Commission of Shri Rohit Sehgal, an employee of NOVA, was paid from DSA and Commission to Shri Naresh Sehgal, an employee of NOVA, was paid from DSA and Commissions to dealers were also paid at the end of the year on the basis of combined sales of both the units during the year and the percentage varies from dealer to dealer and area to area. Shri D.V. Khanna also admitted that company being run as a family concern, he submits that in DSA 95.3 per cent shares were owned by Shri D.V. Khanna and his wife and remaining 4.7 per cent by his son Shri Rahul Khanna and Shri Atul Khanna. In NOVA Shri D.V. Khanna and his wife having the shareholding of 45.71 per cent, Shri Atul Khanna and Shri Rahul Khanna have the shareholding of 26.66 per cent, Smt. Reeta Khaana having the shareholding of 7.62 per cent, Shri Marsha Khanna and Shri Manav Khanna were having 8.57 per cent and remaining 11.44 per cent was with Shri D.V. Khanna. Therefore, as both the units were controlled and maintained by Shri D.V. Khanna, the clearance of both the units is required to be clubbed, accordingly, appellants are not entitled for SSI exemption. He also submits that the statement of Shri Suresh Anand, Shri Rahul Khanna corroborates the fact that the salary of marketing staff was drawn either from DSA or from NOVA and they were looking after marketing of both the companies. Shri Rohit Sehgal was looking after the marketing of Jammu & Kashmir, Pathankot, Jalhandar and Phagwara of both the units who was shown as employee of NOVA. He submits that not only the ownership of both the units were same but there was a common staff, same common advertisement, maintenance of common records of clandestine operations at the residence of their employees. Therefore, both the units under cover of two limited companies were colourable device adopted to defraud to the Revenue to obtain SSI exemptions.
12. On the charge of clandestine removal, he submits that the parallel invoices handwritten/ typed slips were recovered from the residential premises of Shri Suresh Anand, Shri Harbans Lal and Shri Sunil Sharma. They disclose that these records were maintained on the direction of Shri D.V. Khanna and the entries of excisable goods removed without payment of duty. One of the dealers have admitted that he has made the payment of DSA through the account of Shri Ratan Singh and the said draft was payable at Vysya Bank Limited-Chandigarh. The same has been confirmed by the Bank and the accounts in the name of Shri Ratan Singh was opened on 25/3/1998 and closed on 30/10/1999, two days after the raid was conducted. No person named as Shri Ratan Singh was found at the residential address which was given to the Bank and after investigation, it was revealed that Shri Ratan Singh was the driver working with NOVA. The statement of Shri Ratan Singh was also recorded for opening of the Bank account with Times Bank, he submits that he had signed as Ratan Singh (whereas his actual name was Ratan Chand) on the direction of Shri D.V. Khanna, the employer. He further submits that Shri D.V. Khanna used to get signatures on blank cheques from Shri Harsh Verma to check out the cash deposited in their account on account of clandestine removal of goods. He also submits that apart from this, there were some fake accounts were also found in the name of Shri Wazir Khan, Shri Kewal Singh, joint account of Shri Kewal Singh and Shri Ratan Singh and they have admitted that these were not their personal account. The same has been opened in their name by Shri D.V. Khanna. He further submits that Shri Sunil Sharma admitted that details regarding consignee description and quantity and value of goods mentioned in some invoices were different from the corresponding details shown in the statutory invoice. On this point, Shri Rahul Khanna, the Director, stated that they were maintaining parallel set of invoices which were invariably pre-authenticated by Shri Rahul Khanna but at that time, he also pre-authenticated the invoices. He further submits that Shri Suresh Anand stated that the documents recovered form his residential premises pertain to both the units. He submitted that the sales covered by Bill were outside the book accounts and same has not been accounted for in statutory excise records. The sale bill and other private records recovered from his residence were kept at his residence to avoid detection by Central Excise Department on the direction of Shri D.V. Khanna. He further submits that parallel invoices for discharge of sanitary goods by these units to different buyers is undeniable in as much as the evidence of receipts of goods and pieces of dispatched goods by the concerned buyers have been duly confirmed in their statement and also by documentary evidence such as payment particulars and reflection thereof in the recipients account. The pre-authentication of parallel invoices by Shri D.V. Khanna and Shri Rahul Khanna and Shril Sunil Sharma admitted and so also the availability of loose as well as bound book invoices. The fictitious banks accounts were used for receipt and withdrawal of sales proceeds of clandestinely removed goods. Therefore, the charge of clandestine removal has been proved against the appellants. Moreover, the Adjudicating Authority has passed the impugned order after following the principle of natural justice. Therefore, the appeals are to be dismissed.
13. Heard both the sides and considered submissions in detail.
14. We find that in this case demands have been confirmed against the appellants on two accounts:
(a) by clubbing the sales of M/s. DSA in the account of M/s. NOVA and
(b) Goods have been removed clandestinely without payment of duty.
15. First, we will deal with the issue whether the clearance of M/s. DSA can be clubbed with the clearance of M/s. NOVA. In the impugned order, the allegation against the appellant is that both 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. DSAs 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, Central Excise Department, Director of industries, etc. as separate units. The registration of Central Excise was granted to both the units although the documents were signed by Shri D.V. Khanna for filing returns or correspondence with the department but they were never objected to. We also find that in this case although both the companies are having different brand names of their product such as NOVA /DSA. The units are having their own separate machinery having 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. Vs. CCE, reported in 2012 (284) ELT 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 Honble Gujarat High Court is fully applicable on the facts of the present case. The Honble 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 the holding and subsidiary private limited companies can be clubbed. In the present case we find that even in the show cause notice there were no such allegations. In the show cause notice the only allegation is that the holding company has share capital in the subsidiary company. There is no evidence regarding financial flowback on record. In these circumstances and respectfully following the decision of the Honble Gujarat High Court, the impugned order is set aside and the appeals are allowed. The cross objections filed by the Revenue are disposed off accordingly.
18. Further, we find that, in the case of CCE Vs. Sharad Industries reported in 2013 (294) ELT 561 (T) this Tribunal again observed as under:
We, after appreciating the submissions of both the sides find that there is not much dispute on factual position. It is not the Revenues 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 no make the unit owned by the wife as a dummy unit. The prime requirement, for clubbing 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 are independent units. The various decisions of the Tribunal referred to and relied upon by Commissioner (Appeals) in his impugned order are applicable to the facts of the present case. It stands held in precedent decision that financial flow back and financial intertwining between the two units is the main reasons for reflecting upon the fact of their being independent or not. One such reference can be made to in decision of the Honble High Court in the case of M/s. Renu Tandon V. Union of India-1993 (66) ELT 375 (Raj.). Similarly, in the case of M/s. Electro Mechanical Engg. Corporation V. CCE-Jaipur-2003 (152) ELT 194 (Tri), Girish Electricals Industries V. CCE Mumbai -2004 (167) ELT 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, analysis the decision of Ennar Cements Pvt. Ltd Vs. CCE reported in 2013 (292) ELT 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 case, the duty has been demanded collectively from both the units. If the Department feels that out of the two units, one unit is dummy, then the dummy unit should have been identified. In that case, the value of the clearance of dummy unit could have been clubbed with the clearance of the real unit and duty demanded. This has not been done.
The learned Commissioner in the impugned order has given the following findings:-
70 (ii) Whether each unit is entitled to a separate limit (under the SSI exemption notification) as per the Boards Circular No. 6/1992, dated 29-5-1992.
I have perused the Circular No. 6/1992, dated 29-5-1992 [issued from F. No. 213/15/92-CX-6] issued by the Central Board of Excise and Customs, New Delhi in 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 in to 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 appellants company is separate. In respect of the Boards Circular, the clearances of the limited companies cannot be clubbed. The Commissioner has clubbed it and demanded duty collectively. This is not legal and correct and it is contrary to the Boards Circular.
20. We further find that in the case of Alpha Toyo Ltd. Vs. CCE, New Delhi reported in 1994 (71) ELT 689 (Tribunal) this Tribunal has observed as under :
SSI exemption Clubbing of clearances common Managerial Control, a few common directors and advancing of interest free loans by main unit to other units not sufficient to 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 Renu Tandon Vs. Union of India reported in 1993 (66) ELT 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. Vs. Collector of C. Ex. reported in 1991 (53) ELT 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 separate application for loan from financial institutions Shareholders in all the firms not the same group of persons-Tie up with Medly Pharmaceuticals for marketing purposes explained inasmuch as the services rendered being paid for in terms of agreement between them Clubbing of clearances of units not justified in absence of conclusive evidence of financial flow back among them Notification No. 83/83, dated 1-3-1983, No. 85/85, dated 17-3-1985 and No. 175/86, dated 1-3-1986.
23. We also find that the activity of the appellants were in the knowledge of the department as they were registered with the Central Excise Department and units are located in the same range, therefore, extended period of limitation is also not invokable for clubbing 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 flow back, 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 clubbing of the clearance of M/s. DSA with M/s. NOVA is not sustainable and the same is set aside.
26. The second issue is of clandestine removal of goods
27. We find that in this case, case has been made out against the appellant on the basis of the documents resumed from the residence of employees and third party. There were no incriminating documents recovered from the custody of the appellant or Managing Director thereof. On the basis of the investigation conducted, the matter was referred to the Income-tax department also and the Income-tax Department after further investigating the case found that the some parties are manufacturing the duplicate goods and some employees of the appellant were in league with the parties who are manufacturing duplicate goods. On the basis of that investigation, the case booked by the Income-tax Department has been dropped. Further, we find that to allege clandestine removal, test has been laid down by this Tribunal in the case of Arya Fibres Pvt. Ltd. Vs. CC Ahmedabad-II reported in 2014 (311) ELT 529 (Tri-Ahmd.) (Supra) wherein this Tribunal has laid down the test for charge of clandestine removal which are as follows:
(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;
(ii) Evidence in support thereof should be of;
(a) raw materials, in excess of that contained as per the statutory records;
(b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty;
(c) discovery of such finished goods outside the factory;
(d) instances of sale of such goods to identified parties;
(e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him;
(f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty;
(g) statements of buyers with some details of licit manufacture and clearance;
(h) proof of actual transportation of goods, cleared without payment of duty;
(i) links between the documents recovered during the search and activities being carried on in the factory of production; etc.
28. Admittedly, in this case, the cross-examination of Shri Suresh Anand was not granted from whose possession certain records were recovered which were relied upon by the Adjudicating Authority. Moreover, the production capacity of the appellant has not been considered. It has not been proved with supportive evidence that the appellant has used electricity/procured excess raw material, etc. In rebuttal, there is an evidence on record that some parties are manufacturing duplicate goods under the brand name of NOVA/ DSA are owned by the appellant. The case looked by the Income-tax Authority has been dropped for clandestine removal of goods, also supports the case of appellants. No efforts were made to comply with tests laid down by this Tribunal in the case of Arya Fibres (P) Ltd. (Supra). Therefore, as discussed above and in view of the decision of Arya Fibres (P) Ltd. (Supra), the charge of clandestine removal is not sustainable against the appellant. Accordingly, demands confirmed against the appellant on the account of clandestine removal, is not sustainable. Therefore, the same is set aside.
29. As demand of duty is not sustainable on both the charges, i.e., clubbing of clearances of both the units together and for clandestine removal of goods without payment of duty are set aside. Therefore, penalties on all the appellants are not sustainable. Consequently, penalties on all the appellants are also set aside.
30. With these terms, appeals are allowed with consequential relief, if any.
(Order pronounced on 30.03.2015)
(Rakesh Kumar) (Ashok Jindal)
Member (Technical) Member (Judicial)
Ritu
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