Custom, Excise & Service Tax Tribunal
M/S. Thiraviam Engineering Works vs Cce, Tirunelveli on 22 February, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal Nos. E/48 & 49/2011
(Arising out of Order-in-Appeal Nos.496 & 497/2010 dated 26.10.2010 passed by the Commissioner of Central Excise (Appeals), Madurai)
M/s. Thiraviam Engineering Works
Shri T. John Vasigaran Appellants
Vs.
CCE, Tirunelveli Respondent
Appearance Shri M. Karthikeyan, Advocate for the Appellant Shri R. Subramaniyan, AC (AR) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing / Decision: 22.02.2018 Final Order Nos. 40450-40451 / 2018 Per Bench The issue involved in these appeals arise out of the same impugned order, they are heard together and are disposed by this common order.
2. Brief facts are that the appellant is a Proprietrix firm engaged in manufacture / fabrication of spares/ parts for heavy equipments and were availing the benefit of SSI exemption. M/s. Quality Engineering, another partnership firm was also engaged in manufacture of similar products. On the basis of intelligence that the appellant namely M/s. Thiraviam Engineering Works (herein after referred to as TEW) was indulging in evasion of central excise duty. The officers visited their premises and seized records. They found records pertaining to (i) Quality Engineering, Tuticorin, (ii) Power Spares, Tuticorin, (iii) Thiraviam Engineering Works, Tuticorin, (iv) Thiraviam Industries Suppliers, Tuticorin (v) Venkateswara Enterprises, Tuticorin, (vi) High Tech Fly Ash Pvt. Ltd. and (vii) New Tech Industries, Tuticorin in their premises. On enquiry Shri T. Johan Vasikaran who was the Managing Director of TEW deposed that TEW, Power Spares and Quality Engineering were doing fabrication of spares for heavy equipments and reconditioning works; that Thiraviam Industrial Suppliers and Venkateswara Enterprises were trading concerns; that High Tech Fly Ash Pvt. Ltd. was a 100% EOU, dealing in fly ash brick manufacturing unit. After detailed inquiry and investigation, it was held that M/s. Quality Engineering was a dummy unit of TEW. The department issued show cause notice proposing to club the clearances of M/s. Quality Engineering with that of the appellant and to deny the SSI exemption benefit. After due process of law, the original authority confirmed the duty along with interest and also imposed penalties. In appeal, Commissioner (Appeals) upheld the same. Hence these appeals.
3. On behalf of the appellant, ld. counsel Shri M. Karthikeyan submitted that the unit namely TEW is a Proprietrix firm owned by Smt. Subha Annajothi and M/s. Quality Engineering which is alleged to be a dummy unit is a partnership firm with Smt. T. Violet and Shri T. John Vasikaran as partners. Both these units are separate entities. Though the department proposed to club the clearances of these two entities, no show cause notice has been issued to the alleged dummy unit. Though the appellant put forward the said plea, the Commissioner (Appeals) in para 6 of the impugned order observed that there is no necessity for issuance of a separate show cause notice to the alleged dummy unit when it is established that all the clearances were made by TEW. He argued that once clearance of the two units are proposed to be clubbed together, then separate show cause notice has to be issued to the dummy unit putting them to notice why they should not be considered as a dummy unit. He relied upon the following decisions:-
a. Unitech Containers P. Ltd. 2017 (358) ELT 99 (Del.) b. Sapna Engineering 2017 (350) ELT 506 (Bom.) c. Diamond Scaffolding 2011 (274) ELT 10 (Cal.)
4. The ld. AR Shri R.Subramaniyam reiterated the findings in the impugned order. With regard to the technical defect of non-issuance of show cause notice to the alleged dummy unit, he submitted that the department has adduced enough evidence to show that the clearances are made by TEW and M/s. Quality Engineering is only a dummy unit which is not in existence. The said unit was only a farce for allowing the appellant TEW to avail SSI exemption. That the lower authorities have rightly held that there is no necessity for issuing show cause notice to Quality Engineering. The department has proved that M/s. Quality Engineering is a dummy unit.
5. Heard both sides.
6. The main defence put forward by the ld. counsel is that no separate show cause notice has been issued to the alleged dummy unit and therefore the same vitiates the entire proceedings. He relied upon the decision in the case of Diamond Scaffolding rendered by the Honble High Court of Calcutta. The Tribunal in the case of Ambi Plywood has analyzed the very same issue and held that when no show cause notice has been issued to the alleged dummy unit, the same would vitiate the proceedings. The relevant paragraphs are reproduced as under:-
7.18 In an even more recent decision, this very Bench vide Final Order No.40215-40217/2018 dt. 25.01.2018 in the case of Sri Vari Packs & Others Vs. CCE Salem in Appeals E/188/2009 etc., following earlier Tribunal's decision in the case of Poly Resins (supra) and Hon'ble Calcutta High Court's decision in CCE Kolkata Vs. Diamond Scaffolding Co. - 2011 (274) ELT 10 (Cal.), held that proceedings without notice to one of the parties in holding adverse view against such party is not sustainable. The relevant portion of the order is reproduced below:
"5. We have heard both sides and perused the appeal records. Regarding the appeals by the assessee-appellant, we note that as correctly contested by the ld. consultant that, there is a serious legal infirmity in the proceedings concluded by the lower authorities. Admittedly, no notice was issued making allegation about the legal status of M/s.The Coastal Paper Packaging. The lower authorities held the said units as fictitious. Though the appellant strongly contested on merit and established the legal status and independence of M/s. The Coastal Paper Packaging, since no notice was issued to them, the whole proceedings are in violation of principles of natural justice. We note the proceedings without notice to one of the parties and holding the adverse view against such party is not sustainable. In this connection, we refer to decision of Tribunal in the case of CCE Kolkata Vs. Diamond Scaffolding Co. - 2011 (274) ELT 10 (Cal.) and Poly Resins Vs. CCE Chennai - 2003 (161) ELT 1136 (Tri.-Chennai). Accordingly, without going further into the merits of the case, we hold that the proceedings are not sustainable."
7.23 Following the ratio of the judgments/decisions cited supra, we have no hesitation in concluding that since the alleged "dummy units" namely VSF and ALBW having not been put to notice by way of issue of SCN, the entire proceedings for clubbing of value of clearances of those units with that of APPD will get vitiated ab initio. Hence the proceedings which have culminated in the impugned orders confirming differential duty liability on APPD by reason of clubbing of clearances of VSF and ALBW with that of APPD along with the imposition of penalties on APPD cannot sustain.
8. The impugned order will then have to be set aside in respect of the proceedings against all these appellants before us, which we hereby do. For these reasons, we do not find it necessary to go further into the merits and the factual aspects of the appeals. The appeals therefore succeed on the technical objections raised by the ld. Advocate. All appeals allowed as above.
7. Following the said decision, we are of the view that the demand cannot sustain as the department has not issued show cause notice to the alleged dummy unit proposing to club the clearances of the same with the appellant herein. In fact, we find that even the copy of the Order-in-Original has not been served upon the alleged dummy unit. The impugned order is set aside and the appeals are allowed with consequential relief, if any.
(Operative portion of the order was
pronounced in open court)
(Madhu Mohan Damodhar) (Sulekha Beevi C.S.)
Member (Technical) Member (Judicial)
Rex
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