Custom, Excise & Service Tax Tribunal
Cce, Tirunelveli vs M/S. Universal Fireworks Industries on 12 November, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/959/2004
E/960/2004
E/961/2004
E/983/2004
E/984/2004
(Arising out of Order-in-Appeal No.18/2004-TVL(D)(ADK) dated 30.3.2004 passed by the Commissioner of Customs & Central Excise (Appeals), Tiruchirappalli)
For approval and signature:
Honble Shri P.K. Das, Judicial Member
Honble Shri R. Periasami, Technical Member
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 the Members wish to see the fair copy of the Order?
4. Whether order is to be circulated to the Departmental authorities?
CCE, Tirunelveli Appellant
Vs.
1. M/s. Universal Fireworks Industries
2. M/s. Mercury Fireworks Industries
3. M/s. Saraswathi Fireworks
4. M/s. Mercury Fireworks Industries
5. M/s. Mercury Fireworks Industries Respondents
Appearance Shri K.P. Muralidharan, AC (AR), for the Appellant Shri S. Ramachandran, Consultant for the Respondent CORAM Honble Shri P.K. Das, Judicial Member Honble Shri R. Periasami, Technical Member Date of Hearing: 12.11.2014 Date of Decision: 12.11.2014 Final Order Nos.40883 to 40887/2014 Per R. Periasami A common issue is involved in all these appeals and therefore all are taken up for disposal.
2. The relevant facts of the case, in brief, are that the central excise officers attached to the Headquarters (Preventive) Madurai on 19.9.1989 visited the factory premises of M/s. Mercury Fire Works Industries, M/s. Saraswathy Fire Works, M/s. Bannari Amman Fire Works and M/s. Universal Fire Works all are situated at Sivakasi engaged in the manufacture of fireworks classifiable under sub-heading 3604.10 of the CETA, 1985. It was found that one Smt. Madana and her husband Shri A. Ramamoorthy are controlling the four units. The central excise officers were of the view that the said units are not eligible to avail SSI exemption benefit under Notification No. 175/86-CE dated 1.3.1986 individually. Show Cause Notices were issued demanding duty for the period from September 1990 to December 1992 and proposing to club the clearances of all the four units and to deny the benefit of SSI exemption. The adjudicating authority dropped the proceedings initiated in the show-cause notices. Revenue filed appeals before the Commissioner (Appeals). By the impugned order, the Commissioner (Appeals) also dismissed the appeals filed by the Revenue.
3. After hearing both sides and on perusal of the records, we find that it is a second round of litigation. In the earlier round, the Tribunal vide Final Order No. 2763 to 2780/1999 dated 29.10.1999 remanded the matter to the adjudicating authority with certain direction. For proper appreciation of the case, we reproduce below the relevant portion of the order passed by the Tribunal:-
As the order suffers from several infirmities, we are of the considered opinion that the same is required to go back to the Commissioner for further consideration n the matter. We also notice that the learned Senior counsel was justified in drawing out attention to those judgments pertaining to Match Works, wherein the entire industry works in a particular pattern. The Commissioner ought to have appreciated this aspect of the matter. In all the Match Work cases, the Tribunal has discussed the pattern of work carried out in this industry. After such a discussion and examination of the evidence the appeals were allowed by holding that the units are independent ones and the benefit of exemption notification is required to be extended. If the Commissioner on fair examination of the evidence concludes that the cases fall within the ambit of the cited judgements, then the appellants case is required to be considered in that light subject, however, with regard to payment of duty no clandestine removal without payment of duty. For the reasons indicated, the impugned order is set aside and the matter remanded to Commissioner for de novo consideration. The appellants shall be heard in the matter and the Commissioner shall discuss every piece of evidence in the light of law laid down and pass a speaking order.
4. From the aforesaid Final Order, it is seen that the Tribunal had already allowed the appeals by holding that the units are independent and the benefit of exemption Notification is required to be extended. However, the Tribunal allowed the Commissioner to examine the removal of the goods without payment of duty clandestinely. We find that both the authorities below dropped the proceedings. In the grounds of appeal, it was contended by the Revenue that there is a flow of funds from M/s. Saraswathy Fire Works to M/s. Mercury Fire Works Industries as established by the ledger of M/s. Saraswathy Fire Works for 1988 to 89. It is stated that the Income Tax Return of M/s. Universal Fire Works would show that Smt. R.Madana has transferred funds from M/s. Mercury Fire Works for capital investment in M/s. Universal Fire Works establishing the mutuality of interest and all the firms are one and the same. It is also stated that the presence of common partner, common premises, common purchase of raw materials, exchange of raw material from one unit to another, common managerial control, transfer of fund from unit to another, 99% of profit for Smt. R. Madana establish the mutuality of interest. We have already stated that the Tribunal in the earlier round held that all the units are independent and the benefit of exemption Notification is required to be extended. It is noticed that the order of the Tribunal was not challenged by the Revenue before the higher appellate forum. So, the Revenue is not permitted to proceed on the same grounds in the remand proceedings.
5. In any event, we find that the Commissioner (Appeals) had given detailed finding on the issue of clubbing as under:-
I observe from the case records that the Additional Commissioner has discussed all the evidences in the light of law laid down with regard to clubbing of clearances of various units for the purpose of reckoning the exemption limit and the law laid down in respect of partnership with regard to clubbing of clearances. As directed by the Honble CEGAT the Additional Commissioner has considered all the evidences and held that the 4 units were holding valid SSI Registration certificate, they were independent entities, there was no evidence for mutuality of interest and free financial flowback between these units. However, the department has come in appeal on the note that Smt. Madana having 99% of profit in all 4 units and there was common raw material procurement etc. and there was also flowback of money from one unit to another. In this regard, I observe from the case law in respect of DBI Engineers Pvt. Ltd. Vs. CCE, Bangalore 2003 (157) ELT691 (Tri. Ban.) that the Honble CEGAT, South Zonal Bench, Bangalore has held that units having separate income tax, sale tax, SSI and Central Excise Registration, wherein no financial flowback from one to other, their clearances would not be clubbed merely because partner in one firm was close relative of Chairman of other company or records of one kept in the premises of other of some staff members of one firm signed for the other company. I also observe from the case of Sree Andal and co. Vs. CCE, Trichy 2003 (154) ELT 430 that the Honble CEGAT, South Zonal Bench, Chennai has held that clubbing of the value of clearances of the units separately registered in Central Excise laws, Income Tax, Sales Tax Authority and Bank accounts separately maintained, when financial flow between the units not accrued, they being independent legal entities, therefore value of clearances are not to be clubbed for the purpose of availment of Notification No. 1/93-CE. In view of the said decision of Honble Tribunal at Bangalore and Madras, it is seen that the case laws cited by the Department in respect of Deputy Commissioner of Sales Tax Vs. K. Kellukutty 1986 (24) ELT 186 (SC) and that of Commissioner of C. Ex. Chandigarh Vs. M/s. Paper Packaging Ind. 1988 (38) ELT 340 are out of context and not relatable to the facts of the case.
Similarly, in view of the law laid down by the Honble CEGAT, Bangalore in the case of DBK Engineers Pvt. Ltd. and by the Honble Tribunal madras in the case of Sree Andal & Co. the case laws relied upon by the Department in the case of L.R. Ind. Vs. CCE Pune, 1999 (114) ELT 550, CCE, Pune Vs. Elemec Ind. 2000 (120) ELT 198, HT Bhawani Chemicals P. Ld. Vs. CCE, Barodi 1997 (92) ELT 502 Lubricare Relays Ltd. Vs. CCE, 2000 (125) ELT 904 relating to common raw material procurement, free transfer of funds inter se between the units common Head Office facilities, common marketing strategy, exchange of raw materials from one unit to other unit, have become redundant and not maintainable. And in view of the same ruling of Honble CEGAT, Bangalore and Chennai, the issue of mutuality of interest and flow back of money from one unit to another, as relied upon by the Department in the case of M/s. Simplex Expeller Works Vs. Commissioner 2001 (138) ELT 678, becomes redundant and not maintainable.
In view of the said discussions and the legal facts of the case the dropping of further proceedings initiated under seven show cause notices demanding a sum of Rs.6,08,570/- as duty by the lower authority in his Order-in-Original No. 26/2002 dated 28.11.2002 is maintainable in law and departmental appeal is not maintainable in law.
6. It is well settled by the various decisions of the Tribunal that clubbing cannot be established without any evidence of flow of funds. In the case of VIR Industries Vs. CCE, Bombay 1999 (109) ELT 322, it has been held that the three units having some common partners operating from the same premises and having common facilities, entire production of two units sold to third unit, no finding of special financial relationship involving common funding and financial flow back or manipulation of accounts and therefore clearance cannot be clubbed and assessable value to be the sale price of each unit. In the case of Techno Device Vs. CCE, Chennai 2009 (243) ELT 79, it has been held that maintenance of accounts of various units by a single person and at one office is not a ground for justifying clubbing.
7. In our considered view, Revenue has not placed any material for clandestine removal of the goods as directed by the Tribunal in earlier order. Regarding, the clubbing of the four units, we have already observed that the Tribunal decided the issue in favour of the respondents. Further, the Commissioner (Appeals) has also given detail findings and we agree with it. Accordingly, we do not find any infirmity in the order passed by the Commissioner (Appeals) and we uphold the same. The appeals filed by Revenue are dismissed.
(Operative portion of the order was pronounced
in open court on 12.11.2014)
(R. PERIASAMI) (P.K. DAS)
Technical Member Judicial Member
Rex
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