Custom, Excise & Service Tax Tribunal
Vadivel Pyro Park vs Commissioner Of Gst&Cce(Madurai) on 18 August, 2022
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. III
EXCISE APPEAL No.41747 of 2018
(Arising out of Order-in-Original No.MDU-CEX-COM-50-2018 dated 28.03.2018
passed by the Commissioner of CGST & Central Excise, Madurai)
M/s.Vadivel Pyrotech Private Ltd. Appellant
217/G, Sattur Road,
Anuppankulam,
Sivakasi - 626 189.
VERSUS
The Commissioner of CGST & Central Excise, Respondent
Madurai Commissionerate, Central Revenue Building, No.4, Lal Bahadur Shastri Road, Bibikulam, Madurai 625 002.
EXCISE APPEAL No.41748 of 2018 (Arising out of Order-in-Original No.MDU-CEX-COM-50-2018 dated 28.03.2018 passed by the Commissioner of CGST & Central Excise, Madurai) M/s.Vadivel Pyropark Appellant 1257,1269,1270/1, 2B, Sivakasi to Sattur Main Road, Anuppankulam, Sivakasi - 626 189.
VERSUS The Commissioner of CGST & Central Excise, Respondent Madurai Commissionerate, Central Revenue Building, No.4, Lal Bahadur Shastri Road, Bibikulam, Madurai 625 002.
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Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 EXCISE APPEAL No.41749 of 2018 (Arising out of Order-in-Original No.MDU-CEX-COM-50-2018 dated 28.03.2018 passed by the Commissioner of CGST & Central Excise, Madurai) Sri V.Arumugasamy, Managing Director Appellant M/s.Vadivel Pyrotech Private Limited, 217/G, Sattur Road, Anuppankulam, Sivakasi - 626 189.
VERSUS The Commissioner of CGST & Central Excise, Respondent Madurai Commissionerate, Central Revenue Building, No.4, Lal Bahadur Shastri Road, Bibikulam, Madurai 625 002.
EXCISE APPEAL No.41750 of 2018 (Arising out of Order-in-Original No.MDU-CEX-COM-50-2018 dated 28.03.2018 passed by the Commissioner of CGST & Central Excise, Madurai) Sri A. Vasant Vikas, Director Appellant M/s.Vadivel Pyrotech Private Limited, 217/G, Sattur Road, Anuppankulam, Sivakasi - 626 189.
VERSUS The Commissioner of CGST & Central Excise, Respondent Madurai Commissionerate, Central Revenue Building, No.4, Lal Bahadur Shastri Road, Bibikulam, Madurai 625 002.
APPEARANCE :
Shri N. Viswanathan, Advocate For the Appellant Shri Arul C. Durairaj, Superintendent (AR) For the Respondent 3 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 CORAM : HON'BLE MS. SULEKHA BEEVI, MEMBER (JUDICIAL) HON'BLE MR. P. ANJANI KUMAR, MEMBER(TECHNICAL) DATE OF HEARING : 08.06.2022 DATE OF PRONOUNCEMENT :18.08.2022 FINAL ORDER No. 40295-40298 / 2022 PER: SULEKHA BEEVI C.S. The appellant M/s.Vaivel Pyrotech Pvt. Ltd. (hereinafter referred to as M/s.VPPL) are engaged in the manufacture of fireworks. On the basis of specific intelligence gathered by the investigation wing of the Office of the DGCEI, Chennai Zonal unit, that Shri V. Arumugasamy (appellant in Appeal No.E/41749/2018), Managing Director of M/s.VPPL was evading Central Excise duty by clearing the goods in the name of other firms namely M/s.Karthi Fire Works, M/s.Revathi Fireworks Industries, M/s.Vadivel Pyro Park, M/s.Venus Fireworks and thereby suppressing the actual sales turnover of M/s.VPPL, investigation was initiated.4
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2. The officers conducted simultaneous searches on various premises on 07.08.2013. Incriminating documents along with CPUs/laptop were seized under mahazar drawn at the respective premises. As a follow up action searches were also conducted at the premises of few dealers. The CPUs seized from the factory of M/s.VPPL and other CPUs / laptop / note pad / pen drive which were seized from various other places as mentioned in office letter dated 30.08.2013 (Annexure-A20) were handed over by DGCEI to Central Forensic Laboratory (CFL), GEQD at Hyderabad for retrieval of documents. The laboratory furnished printouts of documents retrieved vide their letter dated 28.09.2015. On the basis of documents retrieved / seized from the premises and also after recording statements of various persons, it appeared that M/s.VPPL was evading Central Excise Duty by clandestinely clearing the goods in the name of other firms and thus suppressing their actual sales turnover. It also appeared that M/s.VPPL and their group firms were claiming discount @ 20% mostly upto December 2012 and @ 37.8% from January 2013 onwards in their invoices issued to the customers without actually passing on the discounts to customers. M/s.VPPL had not included these amounts in their accounts and thereby also suppressed the actual sales turnover. 2.1 Show cause notice No.5/2016 dated 29.02.2016 was issued to M/s.VPPL and also all the other firms proposing to recover duty jointly and severally and for imposing penalties. The appellants filed detailed 5 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 reply to the show cause notice. After adjudication, the original authority passed the impugned Order-in-Original confirming the duty demand, interest and penalties.
2.2 For better appreciation, the relevant amounts of duty confirmed in the operative part of the order is reproduced as under :
"1. I confirm the demand of duty amount of Rs.95,58,702/- (Rupees Ninety five lakh fifty eight thousand seven hundred and two only) (BED Rs.92,80,293/- + Education )
2. I confirm the demand of duty amount of Rs.31,61,644/- (Rupees Thirty One Lakh Sixty One Thousand six hundred and forty four only) (BED Rs.30,69,557/- + Education Cess - Rs.61,391/- + Secondary Higher Education Cess - Rs.30,696/-) from M/s.Revathi Fireworks Industries under Section 11A (10) of Central Excise Act, 1944.
3. I confirm the demand of duty amount of Rs.36,29,632/- (Rupees Thirty six lakh twenty nine thousand six hundred and thirty two only) (BED Rs.35,23,915/- + Education Cess Rs.70,478/- + Secondary Higher Education Cess Rs.35,239/-) from M/s.Vadivel Flame Factory under Section 11A (10) of Central Excise Act, 1944.
4. I confirm the demand of duty amount of Rs.43,35,085/- (Rupees Forty three lakh thirty five thousand and eighty five only) (BED Rs.42,08,821/- + Education Cess - Rs.84,176/- + Secondary Higher Education Cess - Rs.42,088/-) from M/s.Venus Fire Works under Section 11A (10) of Central Excise Act, 1944.
5. I confirm the demand of duty amount of Rs. 62,18,927/- (Rupees Sixty two lakh eighteen thousand nine hundred and twenty seven only) (BED Rs.60,37,793/- + Education C ess Rs.1,20,756/- + Secondary Higher Education Cess - Rs.60,378/-) from M/s.Vadivel Pyro Park under Section 11A (10) of Central Excise Act, 1944.
6. I confirm the demand of duty amount of Rs.20,50,238/- (Rupees Twenty lakh fifty thousand two hundred and thirty eight only) (BED Rs.19,90,523/- + Education Cess Rs.39,810/- + Secondary Higher Education Cess - Rs.19,905/-) from M/s.Vadivel Pyro Park & Karthi Fire Works Section 11A (10) of Central Excise Act, 1944.
7. I order that M/s.Karthi Fire Works, M/s.Revathi Fireworks Industries, M/s.Vadivel Flame Factory, M/s.Venus Fire Works, M/s.Vadivel Pyro Park shall also liable to pay the appropriate interest under Section 11AA of the Central Excise Act, 1944 on the amount demanded from them as above.
8. I impose a penalty of Rs.95,58,702/- (Rupees Ninety five lakh fifty eight thousand seven hundred and two only) on M/s.Karthi Fire Works under Section 11AC(1)( c) of the Central Excise Act, 1944."6
Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 2.3 Separate penalties were imposed on the Managing Director Shri V. Arumugasamy and his son Shri A. Vasant Vikas, Director as under :
"25. I impose a penalty of Rs.86,58,453/- (Rupees Eighty six lakh fifty eight thousand four hundred and fifty three only) under Rule 26 of CER, 2002 on Shri.V.Arumugasamy, Managing Director of M/s.Vadivel Pyrotech Private Limited, Sivakasi.
26. I impose a penalty of Rs.86,58,453/- (Rupees Eighty six lakh fifty eight thousand four hundred and fifty three only) under Rule 26 of CER, 2002 on Shri.A.Vasanth Vikas, S/o.Shri V.Arumugasamy, Director of M/s.Vadivel Pyrotech Private Limited, Sivakasi."
2.4. Aggrieved by the confirmation of duty along with interest and the penalties imposed, the appellants namely M/s.VPPL, M/s.Vadivel Pyropark, have filed these appeals. Ld. Counsel submitted that after the merger only the above two units are in existence and therefore appeals have been filed by them. Shri V. Arumugasamy and Shri Vasant Vikas have filed appeals against the personal penalties imposed on them under Rule 26 of Central Excise Rules, 2002.
3. Learned Counsel Shri N. Viswanathan, on behalf of the appellants, appeared and argued the matter. He submitted that M/s.VPPL, the main appellant, is engaged in the manufacture of fireworks and is registered with the Central Excise Department. They have been discharging applicable Central Excise duty and filing statutory returns since their inception in the year 2011. In fact, the first unit started by the family members of Shri V. Arumugasamy was 7 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 M/s.Karthi Fire Works in the year 2007. The other small units were also started in the nature of partnership firms in which Shri Arumugasamy was the main partner/Managing Director. Later during the year 2013, some of the small units namely (1) Vadivel Flame Factory (2) Revathi Fire Works Industries and (3) Venus Fire Works merged with M/s.VPPL pursuant to a Succession Agreement entered into between the firms. Accordingly, the assets and liabilities of these small units were taken over by M/s.VPPL which was the ongoing concern. This fact of merger of small units have been admitted and accepted by the department as seen in para-3 of the OIO. The said paragraph reads as under :
3. Ownership of firms of Vadivel group:
Sri.V.Arumugasamy, Managing Director of VPPL vide his statement dated 22/8/2013, (Annexure A-22) has given details about the partners of the firms viz. M/s.Karthi Fire Works, M/s.Revathi Fireworks Industries, M/s.Vadivel Flame Factory, M/s.Venus Fire Works and M/s.Vadivel Pyro Park and also about their present status which is as follows :
S.No. Name of the Firm Proprietor / Partner Present Status
1 M/s.Vadivel Flame Factory Partnership firm: Merged with
V.Arumugasamy M/s.Vadivel
Athiban (son) Pyrotech P Ltd
Sujatha (daughter in during 2013
law)
2 M/s.Revathy Fireworks Industries Partnership firm: Merged with
V.Arumugasamy M/s.Vadivel
Vasantha Vikas (son) Pyrotech P Ltd
Sujatha (daughter in during 2013
law)
3 M/s.Venus Fire Works Partnership firm: Merged with
V.Arumugasamy M/s.Vadivel
Athiban (son) Pyrotech P Ltd
Sujatha (daughter in during 2013
law)
4 M/s.Karthi Fire Works Partnership firm: Merged with
V.Arumugasamy M/s.Vadivel
Athiban (son) Pyrotech Park in
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2013
5 M/s.Vadivel Pyro Park Partnership firm: M/s.Karthi Fire
V.Arumugasamy Works merged in
Vasantha Vikas (son) 2013
Sujatha (daughter in
law) Athiban (son)
Prior to merger, all these small units were availing SSI exemption and consequently not discharging Central Excise duty.
4. Learned counsel submitted that the period of dispute is from 2011-12 to 2014-15. He submitted that though the small units were formed by family members of Shri V. Arumugasamy as partners, the existence of the units were independent. Prior to merger, none of the units were dependent on one another and there were no inter-unit transactions. Each unit had separate factory premises on their own with infrastructure equipment and capital to run the units and were not sharing any profits among them. There was no flow of funds for purchase of raw material or clearance of goods between these units. The units also did not do any job work for others and were independent of each other and enjoyed the SSI exemption available to each one of them.
5. The first allegation raised by the department is that M/s.VPPL has evaded Central Excise duty by clearing the goods in the name of other units and thereby suppressed the sales turnover of M/s.VPPL. The second allegation is that M/s.VPPL though raised invoices showing discount being passed on to the customers, have not actually passed 9 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 on any such discount and have suppressed the value of actual clearances.
6. The main evidence relied by the Department is a file marked as Sl.No.109/1 as per mahazar dated 07.08.2013. This document is said to contain the printouts of the date wise sales details of fireworks cleared from the various units such as Karthi Fire Works, Revathi Fire Works Industries, Vadivel Flame Factory, Venus Fire Works, Vadivel Pyro Park and M/s.VPPL for the period from 01.04.2012 to 09.07.2013. The entire duty demand has been quantified on the basis of the above document. Though the said document No.109/1 is said to contain print outs / documents received from Income Tax department vide letter dated 10.10.2013 (para 18.1 & 18.2 of SCN), these were actually seized form the factory premises. Such printouts are not admissible in evidence. Ld. Counsel adverted to Section 36B of Central Excise Act, 1944 and argued that the procedure contemplated in the said section has not been complied by the department while collecting or retrieving the evidence from the computer/laptop/notepad/pen drive and therefore such documents/ printouts are not 'admissible evidences'. He submitted that the appellant has put forward the said grievance in para-5 of his reply to the SCN. Ld. Counsel argued that the hard disc obtained from the factory premises from which printouts were taken at the CFL, Hyderabad also cannot be relied for confirming the duty demand as these have been obtained without following the procedures 10 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 provided in Section 36B of the Central Excise Act, 1944. As per the said provision, the document can be admitted as evidence only after complying with the procedure stated therein. The department has not obtained any certificate from the person who was in-charge of operating the computer stating that the said print outs were taken from the computer that was being used in the ordinary course of business of the company and that the data forms part of the ordinary business transactions of the company. For these reasons, the documents are vitiated and void. He relied upon the following decisions :
(i) Premium Packaging Pvt. Ltd. Vs CCE Kanpur 2005 (184) ELT 165 (Tri.-Del.)
(ii) Surya Boards Ltd. Vs CCE Rohtak 2014 (312) ELT 282 (Tri.-Del.)
(iii) Ambica Organics V s CCE& Cus. Surat-I -
2016 (334) ELT 97 (Tri.-Ahmd.) confirmed by Gujarat High Court reported in 2016 (334) ELT A67 (Guj.)
(iv) S.N. Agrotech Vs CC, New Delhi -
2018 (361) ELT 761 (Tri.-Del.)
(v) Vishnu Kumar Traders (P) Ltd. Vs CC Chennai-IV
2019 (369) ELT 1070 (Tri.-Chennai)
(vi) CCE Delhi Vs Jindal Nickel & Alloys Ltd.
2020 (371) ELT 661 (Del.)
7. In para-26 of the SCN, the appellants have been called upon to show cause jointly and severally. Further, in sub-para (b) of para-26 of SCN, the appellants have been called upon to show cause why all the 11 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 units should not be treated as single financial entity constituting one single manufacturer and why their clearances should not be clubbed together to demand duty. It can be seen that though department alleges that clearances of all the units have to be clubbed as one unit and as a single manufacturer, in sub-paras (c) to (h) of para-26 of the SCN, the department has proposed to demand duty separately on all the units. It thus appeared that department has admitted that all these units have individual and independent existences. If small units are to be considered as dummy units of the main appellant, M/s.VPPL, then separate duty ought not to have been demanded from the small units. The clearances of all the units ought to have been clubbed upon the main single unit only. M/s.VPPL is a private limited company and has been paying excise duty from its inception. All the other units were availing SSI exemption in terms of Notification 8/2003-CE. The department has sought to club the clearances of the proprietorship and partnership firms with that of M/s.VPPL. He submitted that it is not even alleged that the other units are dummy units created as a legal façade to evade payment of duty. It is not alleged that other units do not manufacture goods on their own or are fully funded by M/s.VPPL. The case put forward by the department is not in consonance with the allegation that small units were violating the conditions of the SSI Exemption Notification No.8/2003-CE dt. 01.03.2003. 12
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8. It is submitted by Learned Counsel that apart from the file marked as Sl.No.109/1 and the hard disc recovered from the factory premises, the other evidence relied by the adjudicating authority is the statement of Shri S.G.Subbiah who is the Sales Tax Consultant of the appellant. The said statement cannot be accepted as evidence without complying with the procedure contemplated in Section 9D of Central Excise Act, 1944. The appellant was not afforded an opportunity of cross examining of Shri Subbiah. Therefore his statement cannot be relied.
9. The show cause notice further alleges that the units have maintained two sets of invoices. The department has not recovered or produced any such invoice and only the statement of Shri Subbiah has been relied to hold that the appellant has issued two sets of invoices. No documentary evidence of two sets of invoices have been recovered. Though it is stated that second set of invoices were recorded in a sales journal, the Accounts Manager Mr. Gopinath who is said to have provided details has not been examined. In any case, show cause notice only relied upon 15 invoices recovered from 3 upcountry dealers and ledger entry of two of the upcountry dealers pertaining to 31 invoices as against 313 invoices seized from the 3 upcountry dealers. It is held by adjudicating authority that since the same details appeared in File No.109/1, it is authentic and does not need any corroboration by the said dealers as to purchase of goods clandestinely. Such 13 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 observation is erroneous. Even though the department conducted searches on the premises of raw material supplier and transporters, no incriminating evidence was brought out to prove excess production to support the allegation of clandestine removal. The excess receipt of raw material or consideration has not been alleged or established by the Department.
10. After investigation, common show cause notice has been issued to all the units wherein the proposal is to demand duty jointly and severally. Such demand made against the appellant jointly and severally cannot sustain when the allegation is to club the clearances of all the units alleging that some of the units are dummy units.
11. The Ld. Counsel submitted that reason for alleging that appellant M/s.VPPL has clandestinely cleared the goods to the other small units and thus has suppressed the value of clearance is because all the units were managed / owned by the members of the same family. Further because the accounts of all the units were maintained in the office of M/s.VPPL. It is submitted by the Ld. Counsel that there is nothing wrong or impermissible in any law for the family members to form a partnership or business in their own right. So long as composition of the family members constituting partnership are different in each firm, each such firm is to be regarded as separate legal entity for all purposes including availment of the SSI exemption as provided under Notification No.8/2003-CE. The CBEC vide its Circular No.6/92 dated 14 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 19.05.1992 has affirmed the above legal position. It is also well settled law that clubbing of clearances under the value-based SSI exemption notification is not permissible unless the department is able to establish flow back of funds from such units and also that the other units were dummy units to camouflage clearance of the main unit. In the present case, each unit was truly independent unit and even department has not stated that the other units were dummy units and did not exist at all. This is clear from the demand of duty against each unit. Further, the maintenance of accounts of other independent units in a common office for cost conservation purposes cannot be a ground for clubbing clearance of various units.
12. It is also seen that clubbing of value of clearance of all units including VPPL has been done in the preceding years upto merger of these units. Thereafter, the demand has been separately confirmed on M/s.VPPL for the period 01.04.2013 to 30.06.2013. This exposes the inconsistent stand adopted by the department as they have no clear allegation that M/s.VPPL has been suppressing the value of their clearance by using small units. There is no iota of evidence to show that the appellant indulged in any unaccounted production and clandestine clearance. The department has not been able to establish any mutuality of interest or cash flow between the units.
13. The Ld. Counsel submitted that it can be seen that duty confirmed for the clearances effected from 01.04.2013 till 07.07.2013 15 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 by the small firms (Revathi Fire Works Industries, Venus Fire Works, Vadivel Flame Factory) have been accounted for in regard to M/s.VPPL. As these units have been merged with M/s.VPPL for the period 2012-13 and each of the above units were well within their exemption limit prior to merger. The total value of clearances effected by them during 2012-13 are detailed below :
Sl.No. Year Name of the firm Value of clearances 1 2012-13 RFW 29,41,555/-
2 2012-13 VFW 61,670/-
3 2012-13 VFF 11,08,713/-
14. The above units are separate legal entities and they have separate premises/sheds to produce crackers. They have foreman and other workers in their factory to produce fire crackers. The raw materials were produced out of their funds and sales proceeds of finished products were realized by cash and cheque which was accounted properly. The workers have been paid wages from their own funds. There was no common funding or sharing of profits with any of the firms of the Vadivel Group or with VPPL. These units were registered with the Director of Industries as a Micro unit producing fire crackers. Each unit had separate VAT and CST registration. So also, they have separate PAN issued by the Income Tax Department. The amount of each unit had been properly audited by the statutory 16 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 auditors and Income Tax returns have been filed. In terms of Notification No.8/2003-CE each of the above unit is entitled to avail exemption upto the aggregate value of clearance of excisable goods upto the value of Rs.1.50 crores. Since none of the above units had exceeded the limit of exemption, the demand confirmed against them individually or on VPPL who had taken the business prior to 2013 cannot sustain.
15. The second ground on which duty has been demanded is that the appellant not passed on the discounts to the customers, and thereby has suppressed the actual amount received by way of sales. The evidence relied are the computer printout (File No.109/1), computer printout of party wise ledger and the entries in sales ledger of few customers.
16. Ld. Counsel submitted that based on the computer printouts obtained from GEQD Laboratory at Hyderabad, it was alleged by department that sales details of such clients did not reflect the discount given and that it tallied with similar details available in file No.109/1. He argued that the appellant had supplied goods to about 200 dealers out of which only a few invoices have been relied by the department. Only 7 invoices out of 117 invoices retrieved with regard to Shiv Crackers and 3 out of 126 invoices in regard to M.R Fire Works were relied to allege that the discounts were not passed on to the customers.
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17. The allegation of non-passing of the discount amount to dealers has been made without reference to the statement, if any, obtained from the customer or at least on the basis of the accounts of such customer obtained during the search operations. In fact, the ledger account of the firms namely M/s.Shiv Crackers, Surat, M.R. Fireworks, Ludhiana, Baldev Raj & Co., Ludhiana which are made available as part of Relied Upon Documents would show a different story and in fact nails the proposition made by the department in respect of this allegation.
18. Ld. Counsel submitted that the department has failed to establish any of the allegations raised in the SCN. He prayed that the demand of duty and penalties may be set aside and the appeals may be allowed.
19. Ld. A.R Shri Arul C. Durairaj appeared on behalf of the Department. He adverted to para 41.6 of the impugned order and submitted that it was clear from the records that the document recovered from the dealers when compared with the date wise sales available in File No.109/1 would fully tally with each other. So also, the documents retrieved by the Central Forensic Laboratory, Hyderabad (GEQD) which is an authentic agency of the Government of India, from the CPU seized at their factory on 07.08.2013 contained sales details of the above firms which corroborated with the details in file No.109/1. Again, the printouts contained the ledger of various parties and showed details of invoices of M/s.VPPL and other firms of Vadivel group. The 18 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 amounts under column "Bill amounts, Sales, Total and Receipts" were deliberately shown in two digit less in order to evade payment of tax. The date wise sales details of the firms namely, Karthi Fire Works, Revathi Fire Works Industries, Vadivel Flame Factory, Venus Fire Works and VPPL for the period 2012-13 and 2013-14 were found in the said file No.109/1. The ledger print outs in the nature of bill amounts were corroborated with the total amount mentioned against respective firms.
20. Countering the argument of Ld. Counsel that computer printouts contained in File No.109/1 and the hard disc etc. are not admissible evidences, he adverted to the discussions of the adjudicating authority in para 41.8.
21. Ld. A.R argued that Managing Director of VPPL and his son Mr. Vasant Vikas admitted that the details in the printouts retrieved from the CPU were fed in the computer by their employees. The data in such print outs seized from the factory matched with the document retrieved by CRL, Hyderabad. As their own Director had admitted that sales details were fed into the computer by the employees, there is nothing to disbelieve the data given in the computer printouts.
22. In para-11 of the SCN, it is stated that computer printouts in file No.109/1 were received from the Income Tax Department vide letter dated 10.10.2013. These are photocopies of documents seized by the Income Tax Department from the premises of M/s.VPPL. Copies of documents seized by I.T department were forwarded to the Excise 19 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 officers which have helped the investigation. The data contained in these printouts tallied with the data of the printouts retrieved by CFL, Hyderabad from the CPU / hard disc seized during search conducted in the factory premises.
23. Further, the statement of Mr.Subbiah who is the Sales Tax Consultant supports the case put forward by the Department in the SCN. He has stated that out of several items mentioned in the sales invoices, he was directed to include only few items in the sales journal; that he was asked to make sales journal in such way in respect of most of the transactions of the companies of Vadivel Group which has resulted in suppression of sales turn over. The tax consultant of the appellant-company having admitted that they have been suppressing sales turn over, the clandestine clearances has been established.
24. With regard to the demand of duty on the ground that discount has not been passed on to the customers, Ld. A.R adverted to para 41.24.9 of the impugned order. He stated that discount was mentioned in the invoices issued by appellants. The same was not passed on to the customers. On the basis of documents in the nature of computer printouts and sales ledgers of customers, it was clear that the discount mentioned in the invoices were not actually passed on to the customers. He argued that department has been able to establish allegations raised in the show cause notice. He prayed that the appeals may be dismissed.
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25. Heard both sides.
26. The operative part of the order has already been reproduced. It can be seen that the demand of duty is on two grounds. Firstly, that M/s.VPPL had suppressed the value of sales turnover by clandestinely removing the finished products through their other firms namely M/s.Revathi Fireworks Industries, M/s.Venus Fire Works, M/s.Vadivel Flame Factory, M/s.Karthi Fire Works and M/s.Vadivel Pyro Park and thereby wrongly availed the small scale exemption under Notification No.8/2003-CE dated 01.03.2003.
27. The relevant part of the Notification No.8/2003-CE which gives SSI exemption reads as under :
"In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) (herein after referred to as the Central Excise Act) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 8/2002-Central Excise, dated the 1st March, 2002, published in the Gazette of India vide number G.S.R. 129(E), dated the 1st March, 2002, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts clearances, specified in column (2) of the Table below (hereinafter referred to as the said Table) for home consumption of excisable goods of the description specified in the Annexure appended to this notification (hereinafter referred to as the specified goods), from so much of the aggregate of, -
(i) the duty of excise specified thereon in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the First Schedule); and
(ii) the special duty of excise specified thereon in the Second Schedule to the said Central Excise Tariff Act, 1985 (hereinafter referred to as the Second Schedule), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (3) of the said Table :
Provided that nothing contained in this notification shall apply to a manufacturer who has availed the exemption under notification No. 39/2001-Central Excise, dated the 31st July, 2001, published in the Gazette of India vide number G.S.R. 565 (E), dated the 31st July, 2001, in the same financial year.
Provided further that exemption contained in this notification shall not apply to goods which are chargeable to nil rate of duty or are except from the whole of the duty of excise leviable thereon.21
Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 Table S. No Value of clearances Rate of duty (1) (2) (3)
1. First clearances up to an aggregate value not Nil exceeding *one hundred and fifty lakh rupees made on or after the 1st day of April in any financial year.
2. All clearances of the specified goods which Nil are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods.
*The word "one hundred and fifty lakh rupees effective 1st day of April 2007.
2. The exemption contained in this notification shall apply subject to the following conditions, namely : -
(i) a manufacturer has the option not to avail the exemption contained in this notification and instead pay the normal rate of duty on the goods cleared by him. Such option shall be exercised before effecting his first clearances at the normal rate of duty. Such option shall not be withdrawn during the remaining part of the financial year;
(ii) while exercising the option under condition (i), the manufacturer shall inform in writing to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise with a copy to the Superintendent of Central Excise giving the following particulars, namely :-
(a) name and address of the manufacturer;
(b) location/locations of factory/factories;
(c) description of inputs used in manufacture of specified goods;
(d) description of specified goods produced;
(e) date from which option under this notification has been exercised;
(f) aggregate value of clearances of specified goods (excluding the value of clearances referred to in paragraph 3 of this notification) till the date of exercising the option;
(iii) the manufacturer shall not avail the credit of duty on inputs under rule 3 or rule 11 of the CENVAT Credit Rules, 2002 (herein after referred to as the said rules), paid on inputs used in the manufacture of the specified goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified in the said Table does not exceed rupees one hundred lakhs;
(iv) the manufacturer also does not utilise the credit of duty on capital goods under rule 3 or rule 11 of the said rules, paid on capital goods, for payment of duty, if any, on the aforesaid clearances, the aggregate value of first clearances of which does not exceed rupees one hundred lakhs, as calculated in the manner specified in the said Table;
(v) where a manufacturer clears the specified goods from one or more factories, the exemption in his case 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;22
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(vi) where the specified goods are cleared by one or more manufacturers from a factory, the exemption shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said Table and not separately for each manufacturer;
(vii) the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturers, does not exceed rupees three hundred lakhs in the preceding financial year.
3. For the purposes of determining the aggregate value of clearances for home consumption, the following clearances shall not be taken into account, namely : -
(a) clearances bearing the brand name or trade name of another person, which are ineligible for the grant of this exemption in terms of paragraph 4;
(b) clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods;
(c) clearances of strips of plastics used within the factory of production for weaving of fabrics or for manufacture of sacks or bags made of polymers of ethylene or propylene.
28. As per the notification the clearances upto Rs.1.50 crores can avail the benefit of SSI exemption. As already stated, M/s.VPPL, the main appellant was registered with the Central Excise Department and was paying Central Excise duty. The other units were availing the small scale exemption under the notification till their merger. M/s.Revathi Fireworks Industries, M/s.Venus Fire Works and M/s.Vadivel Flame Factory merged with M/s.VPPL during the financial year 2013. Later, M/s.Karthi Fireworks, M/s.Vadivel Pyro Park merged together during the financial year 2013-14. The details of such merger as well as the partners holding the firms have been already stated in the table reproduced earlier in para-3 of this order.
29. In an allegation of clubbing of clearances, the main unit would have several other units (as dummy units) and the clearances of main unit would be diverted or accounted as clearances of the dummy units. 23
Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 In the present case, the department does not allege that goods produced by M/s.VPPL were accounted as clearances of the other units. So also, there is no allegation that raw material was purchased and accounted in the name of the small units and thereafter used for manufacture of goods by M/s.VPPL.
30. On perusal of page 274 of SCN, the allegation is that all the small units have to be treated as a single financial entity constituting one single manufacturer and their value of clearances should be clubbed together as they have wrongly availed the SSI exemption. The demand of duty is seen to have been raised separately on all the 6 units. Thus, though it is alleged that the value of clearances have to be clubbed, the duty demand has been raised separately on all the units which indicate that the department considers all these units to have independent existence. In other words, though department alleges that M/s.VPPL was using other units as dummy units for clandestinely removing their finished products, they in fact admit that these units have independent existence. In other words, these small units are not dummy units. Since duty demand is separately raised on all the units, the allegation that M/s.VPPL was clandestinely removing the finished products using the dummy units appears to be confusing. We are not able to decipher as to what exactly is the ground for clubbing the clearances.
24
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31. In para-26 of the SCN, all the appellants have been called upon to show cause jointly and severally against the allegations. The Learned counsel for appellant has stressed that the demand made against each unit by the department would cut the root of the case framed by the department. It is argued by him that when duty has been demanded against each individual unit for different periods, then it cannot be alleged that they are dummy units. We have to say that in an allegation of wrongful availment of SSI exemption, the clearances of the dummy units are usually clubbed together with the main unit and the demand of duty is raised only against the main unit. In such cases, the dummy units will not have any independent existence and are sham units used for making clandestine clearance of the main unit so as to suppress its sales turnover. In the present case, all the six units including M/s.VPPL do have their own factory and machinery for producing finished products (fireworks). So also, they have separate PAN allotted by the Income Tax Department, Sales Tax and CST Registration etc. They have been registered with the Director of Industries as Microunit producing fireworks. Further, in para 41.24, the adjudicating authority has observed that individual units are separate legal entities and are liable for penalty as separate legal entities. The department having demanded duty separately from these 5 units, we are unable to understand how the allegation of clubbing of clearances of these units with that of M/s.VPPL is sustainable. 25
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32. Coming to the evidence gathered by the department, it is seen that the main evidence relied is the File Sl.No.109/1 (Annexure A-23) and the hard disc of the CPU seized from the factory premises. On perusal of para-4 of SCN, it is seen that File No.109/1 is a file containing computer printouts of date wise sales details of fireworks of the various units. The hard disc from the CPU was sent to Central Forensic Laboratory (GQED), Hyderabad and the printouts were retrieved by the said laboratory. It is also seen that the Department of Income Tax had conducted a search/survey at the premises of the appellant and had seized some documents. In para 11 of the SCN, it is stated that vide letter dt. 10.10.2013, the photocopies of such documents seized by the Income Tax Department were forwarded to the investigating officers of this case. It is alleged that the sales details in the printouts seized by the Income Tax Department and contained in File No.109/1 matched with the details available in the printouts retrieved from the hard disc of the CPU seized at the factory premises of M/s.VPPL. Para 4.1.3 of the SCN reads as under :
"4.1.3 Similar all sales details of 2012-2013 and 2013-2014 (upto 9/7/2013) were observed in the Printouts of documents retrieved by GEQD, Hyderabad from the CPU seized at the factory premises of VPPL. Pages Nos.491 to 737 contains printouts captioned "All Sales Details for All" - Period from 01/04/2012 to 31/03/2013 (Annexure A-24) and from Pages No.738 to 899 contains printouts captioned "All Sales Details for All" - Period from 01/04/2012 to 09/07/2013. (Annexure A-25). Details available in the printouts retrieved by GEQD, Hyderabad found to contain the same details available in file S.No.109/1 seized from the factory premises of VPPL. Thus it appears to show that the details were entered and stored in the system by VPPL personnel and that the transactions were sales details of VPPL and their related firms."26
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33. Thus, the main documentary evidence relied by the department is the computer printouts obtained from Income Tax Department as well as from the hard disc of the CPU seized from the factory premises of VPPL. The Ld. Counsel for appellant has argued that such computer printouts cannot be relied upon as evidence as the required procedure under Section 36B of the Central Excise Act, 1944 has not been complied by the department.
34. Sub-section (2) of Section 36B provides that the document seized should be accompanied by a certificate which states that the computer printout containing the statement was fed into the computer during the period over which computer was used regularly to store or process information etc. and it should contain a certificate that throughout the said period computer was operating properly. Such procedures have not been complied. The requirement to comply with the procedure under Section 36B has been emphasized in various decisions. The Hon'ble High Court of Delhi in the case of CCE Vs Jindal Nickel & Alloys Ltd. - 2020 (371) ELT 661 (Del.) held that provisions of Section 36B of Central Excise Act, 1944 are mandatory and to be complied with before admitting the said printouts as an evidence. The relevant paragraphs of the Hon'ble High Court decision are reproduced as under :
"15. Mr. Ahluwalia, Learned Counsel appearing for the appellant also sought to find fault with the observations, by the CESTAT, that it was not permissible to proceed on the basis of the computer printouts, in view of Section 36B of the Act. We are, however, not persuaded to disturb this finding. The provisions of Section 36B of the Act are mandatory. Sub-sections 1 and 2 of Section 36B of the Act may, for ready reference, be reproduced thus :27
Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 "36B. Admissibility of micro films, facsimile copies of documents and computer printouts as documents and as evidence. -- (1) Notwithstanding anything contained in any other law for the time being in force, --
(a) a micro film of a document or the reproduction of the image or images embodied in such micro film (whether enlarged or not); or
(b) a facsimile copy of a document; or
(c) a statement contained in a document and included in a printed material produced by a computer (hereinafter referred to as a "computer printout"), if the conditions mentioned in sub-section (2) and the other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be also a document for the purposes of this Act and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.
(2) The conditions referred to in sub-section (1) in respect of a computer printout shall be the following, namely :--
(a) the computer printout containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;
(b) during the said period, there was regular supply to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived;
(c) throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of period was not such as to affect the production of the document or the accuracy of the contents; and
(d) the information contained in the statement reproduces or is derived from information supplied to the computer in the ordinary course of the said activities."
16. There is nothing to indicate compliance with the strict stipulations contained in sub-sections (1) and (2) of Section 36B of the Act in the present case. We, therefore, find no reason to interfere with the findings of the CESTAT regarding non-compliance of Section 36B of the Act either."
35. The Tribunal in the case of S.N. Agrotech Vs CC New Delhi - 2018 (361) ELT 761 (Tri.-Del.) observed that in the absence of 28 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 certificate required by section 138C (2) of the Customs Act, 1962 (which is pari materia to Section 36B of Central Excise Act, 1944), the Revenue cannot rely upon such document to confirm the duty. In the case of Ambika Organics Vs CCE Surat - 2016 (334) ELT 97 (Tri- .Ahmd) similar view was taken by the Tribunal which was upheld by the Hon'ble High Court of Gujarat as reported in 2016 (334) A67 (Guj.)
36. In the present case, we find that the department has not complied with Section 36B of the Central Excise Act, 1944 while retrieving the data from the hard disc. The provision does not say that if the documents are sent to Central Forensic Laboratory, Hyderabad, it would become admissible. Further, such documents have been compared with the photocopies of the printouts sent by the Income Tax Department to the Central Excise investigating officers. Such documents cannot be relied for confirmation of duty, when obtained without following the mandate under Section 36B of the Central Excise Act, 1944.
37. Apart from the computer printouts, another evidence relied for confirming duty is the statement of Sales Tax Consultant Shri Subbiah. It is alleged that he admitted issuing two set of invoices. The Ld. Counsel submitted that in spite of request, the appellant was not 29 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 afforded an opportunity to cross examine any of the witnesses. As per Section 9D of the Central Excise Act, 1944, the statement can be relied only if the person is examined. Again, on perusal of records, there is no documentary evidence to show that two sets of invoices have been recovered by the department. The department has relied upon the statement of Accounts Manager Shri Gopinath. In absence of examination/cross examination his recorded statement is of no evidentiary value.
38. One other ground for clubbing the clearances is that M/s.VPPL has been maintaining the accounts of all other units. As already seen from the above decisions, merely because one unit is maintaining the accounts of the other units, it cannot be said that the other units are dummy units. In para-10 of SCN, the account details obtained from various banks have been reproduced. However, there is no discussion that the amounts were paid to raw material suppliers for purchasing raw material in the name of dummy units so as to facilitate clandestine clearance in the name of the main unit. After discussing various bank details, in para 10.11 of the SCN, it is stated that Vadivel Group of firms have maintained various accounts not only in the name of their firms but also in the name of other units and received money and used in their business activities. These bank statements do not show that there is flow back of funds in the nature 30 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 of transactions for purchase of raw material or collection of amounts from the customers.
39. For clubbing the clearances, the department has to establish mutuality of interest, flow back of funds between the main unit and the alleged dummy units. For this, the department has to produce evidence that the main unit was purchasing raw material through the dummy units and also removing the finished products manufactured by them through the dummy units. It also has to be established that the dummy units do not have any existence or facilities for manufacture of goods on their own. Such evidences are absolutely absent in the present case. Merely because Shri V.Arumugasamy, his son and family members were partners in the different units cannot be a ground to say that there is mutuality of interest. Ld. Counsel has adverted to Circular No.6/92 dated 19.05.1992. The relevant part of the said circular reads as under :
"1. Different firms will be treated as different manufacturers for the purpose the purpose of exemption limit. But if a firm consisting of certain partners say A,B, or C has got more than one factory, all these factories should be of course be combined. Limited companies whether public or private are separate entities distinct from the shareholders composing it. Hence, each limited company is a manufacturer by itself and will be entitled to a separate exemption limit.
2. If there are two firms with only some of the partners in common, each firm is entitled to separate exemption limit and hence the question of distributing the exemption may not arise. If one firm or individual owns several factories, he or it gets exemption only in respect of one lot and the manufacturer being only one entity there will be no question of distributing the exemption;"31
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3. Whether or not the expression "by or on behalf of a manufacturer the expression "from one or more factories" is added, the effect would be the same if the manufacturer is also the same. The expression "one or more factories" only further clarifies that whether the factory is one or more, it is the clearances by or on bahalf of the same manufacturer which is to be taken in to consideration for the purpose of interpreting the exemption notification."
It is clear from the circular that all the units have to be treated differently and each firm is eligible for the exemption of notification separately even if the partners in the different units are one and the same.
40. The Hon'ble High Court of Rajasthan in the case of Renu Tandon Vs Union of India - 1993 (66) ELT 375 (Raj.) held that in the absence of evidence of common funding and financial flow back two units cannot be treated as one and the clearances cannot be clubbed.
41. The Tribunal in the case of Coimbatore Engineering Works Vs CCE Coimbatore - 2009 (239) ELT 366 (Tri.-Chennai) held that borrowing funds in need is not a bar between two units eligible for SSI benefit.
42. In the case of CCE Kanpur Vs Sharad Industries - 2013 (294) ELT 561 (Tri.-Del.), it was observed that husband and wife are entitled to do their own business and if husband is looking after the business of wife, it would not make the unit owned by wife as dummy unit. The prime requirement, for clubbing the clearance of two units is that both the units do not have any independent existence or 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 32 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 units are independent units. The evidence of common office premises, common staff and common maintenance of records cannot be a sufficient ground to club clearances of the units. The relevant paragraphs of this decision are reproduced as under :
"2. Brief facts of the case are that a team of Central Excise Officers of Agra visited the factory of M/s. R.R. Foundry, Agra on 5-8-1995. The officers, at the time of taking round in the factory premises of the Respondent No. 1 observed certain doors interconnected with an adjacent unit working in the name and style of M/s. Sharad Industries, Agra. It was reported that the Proprietor of the Respondent No. 1 is Mr. Avdesh Kumar Gupta and the Proprietor of the Respondent No. 2 is Smt. Kamlesh Gupta W/o Shri Avdesh Kumar Gupta. The officers during the course of investigation observed the following points :-
(a)M/s. R.R. Iron Foundry and M/s. Sharad Industries had common office, situated at the factory premises of Appellant No. 1 in order to have better control,
(b) the records of both the units were also kept and maintained therewith, doors between both the units were created and common labours were being utilized in both the units but according to convenience the labours were being deployed in any of the two units,
(c)'RRIF' Brand was owned by Respondent No. 1 and the 'KIRTI' & 'VATAN' Brand were owned by Respondent No. 2, whereas, seizure of 152 Pcs. of 'VATAN' Brand C.I. Casting found in excess at the factory premises of Respondent No. 1 and 18,700,00 Kgs. of 'RRIF' Brand C.I. Casting was recovered from the factory premises of Respondent No. 2,
(d) Proprietor of Respondent No. 2 was Smt. Kamlesh Gupta, W/o Shri Avdhesh Kumar Gupta, who was the Proprietor of Respondent No. 1 was looking after the entire work relating to Respondent No. 2 with regards to production, clearances, procurement of orders and operation of bank accounts under the Authority of Power of Attorney,
(e)Shri Rakesh Kumar Gupta, was authorized to look after the work relating to maintenance of records, bill books etc. of both the units.
On the basis of the above facts, the officers concluded that the value of clearances of both the units must be clubbed together. Accordingly, two Show Cause Notices for the different periods dated 22-4-1999 & dated 29-11-1999 were issued to both the Units proposing therein total demand of Rs. 9,32,114/- and penal action for the Appellants. The said notices were, later on, adjudicated by the Joint Commissioner, Central Excise, Kanpur vide his said Order-in-Original dated 31- 33 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 10-2000 by confirming the demand of Rs. 9,32,114/- & penalty of Rs. 9,32,114/- & Rs. 25,000/- upon the Respondent No. 1 on the following ground :-
"the two firms are owned by husband and wife and general Power of Attorney is with the husband to run the business which is in wife's name and the products are with the Brand name which is admittedly belonging to their family therefore prima-facie it appears that the benefit of both the units is accruing to the same set of persons constituting a family. Merely because they are having separate records for the requirement of Trade Tax Act etc, the two cannot be considered separate. The acid test in such case is recipient of the benefit. Unless the wife or husband are professional and engaged in separate business by virtue of their professional standing and practice it is difficult to hold that enterprises having common product, common management and common brand name etc. are separate. Though the noticee have argued that prior to year 1991 M/s. Sharad Industries was a partnership firm but there is nothing to prove that the other partner Smt. Kamlesh Gupta was a person not closely related to the family. Moreover, the period prior to year 1991 is not subject matter of these Show Cause Notices. In the case of Ashok Enterprises v. CCE - 1997 (92) E.L.T. 77 the Tribunal held that the two partnership firms owned by son and daughter in law producing the other product with the same brand name were related and their clearances were liable to be clubbed."
... ... ...
6. We, after appreciating the submissions of both the sides find that there is not much dispute on factual position. It is not the Revenue's 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 not 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 reason for reflecting upon the fact of their being independent or not. One such reference can be made to in decision of the Hon'ble High Court in the case of M/s. Renu Tandon v. Union of India - 1993 (66) E.L.T. 375 (Raj.). Similarly in the case of M/s. Electro Mechanical Engg. Corporation v. CCE, Jaipur - 2003 (152) E.L.T. 194 34 Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 (Tri.), Girish Electricals Industries v. CCE, Mumbai - 2004 (167) E.L.T. 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 registrations in all the departments and in the absence of any financial flow back." From the discussions made above, we do not find that the department has been able to establish sufficient grounds for clubbing the clearances of each unit or for confirming duty against all the 6 units.
43. The second duty demand is with respect to the allegation that M/s.VPPL has not passed on the discount to their customers and has thus suppressed their actual sales turnover. It is submitted by the Ld. Counsel that clearances made by all the units were totally accounted in their books. Though the department has obtained invoices and sales ledgers in regard to their customers they have merely relied upon sales ledger maintained by a few customers only. In para 41.24.1 the adjudicating authority has made a very small discussion about this allegation. It is stated that appellants have mentioned the discount amount in their invoices but collected the amounts from the parties later. To support such allegation, they have mainly relied upon computer printouts in File No.109/1 as well as printouts obtained from the hard disc. Further, these have been compared with sales ledgers from two or three customers. It is the case of the department that the sales ledgers of the customers show that they have paid to the appellants amounts including the discount. 35
Excise Appeal No.41747 of 2018 Excise Appeal No.41748 of 2018 Excise Appeal No.41749 of 2018 Excise Appeal No.41750 of 2018 We do not understand how the department has been able to rely upon the sales ledgers of such customers and totally discard the entries in the sales ledger of the appellants. At the cost of repetition, it has to be stated that comparison is made with the computer printouts which have already been held to be inadmissible in evidence. We therefore hold that the department has failed to establish the allegations for confirming the duty that the appellant has not passed on the discounts to their customers.
44. After appreciating the facts and evidence and following the decisions which have been discussed above, we are of the considered opinion that the demand cannot sustain. The impugned orders are set aside. The appeals are allowed with consequential relief, if any, as per law.
(Pronounced in Court on 18.08.2022) Sd/-
(SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) Sd/-
(P. ANJANI KUMAR) MEMBER (TECHNICAL) gs