Clubbing of clearances for grant of SSI exemption.

PJ/CASE LAW/2014-15/2484

Case:-M/s CHIRAG ELECTRONICS AND OTHERS Vs COMMISSIONER OF CENTRAL EXCISE, DELHI-IV

Citation:- 2014-TIOL-2327-CESTAT-DEL

Brief facts:- The appellants have filed stay applications alongwith appeals in these cases against Order-in-Original No.06/ Comm / Fbd /CX/2013 dated 30.07.2013 in terms of which demand of Rs.1,42,82,986 /- was confirmed alongwith interest and equal mandatory penalty against M/s. Chirag Electronics (C.E.) holding that M/s. Chirag Packing machines (Pvt.) Ltd. (CPMPL) was a dummy unit of the former and consequently clubbed their clearances. Penalties on others were also imposed. Some goods seized were also confiscated and option to pay redemption fine given.
Essentially the issues involved in these cases are as under:
(i) Whether the clearances of M/s. CPMPL are to be clubbed with clearances of M/s. CE.
(ii) Whether the goods manufactured by the appellants were having the brand name of some other person.
(iii) Whether the seizure was legal and proper.

Appellant’s contention:- The appellants (CE) have contended that:

(i) the brand name belongs to them as it is the name of a son in the family.

(ii) The adjudicating authority has wrongly clubbed the clearances of M/s. CE & M/s. CPMPL for charging duty and the value of the traded goods and exported goods has not been excluded while computing the impugned demand.

(iii) The seizure was not based on any sustainable ground and the semi finished goods cannot be seized.

Respondent’s contention:- As regards penalty on Mr. Praveen Parasher , it is seen that he is the proprietor of M/s. CE and therefore, as penalty on M/s. CE has been imposed, separate penalty on Mr. Praveen Parasher is not warranted. But in the present case, Mr. Praveen Parasher was the main person and was the master mind behind the whole modus operandi (beyond his role as proprietor) as
has been clearly brought out in the impugned order. Therefore penalty on him is not only attracted but also warranted. Ms. Hemlata Parasher as Director of Mr. CPMPL knowingly participated in the entire modus operandi and she as Director allowed M/s. CPMPL to knowingly and willingly provide cover by pretending to be as SSI manufacturer though they did not have any infrastructure for doing so. So liability of Ms. Hemlata Parasher to Penalty is not questionable.

Reasoning of judgment:-After perusing the impugned order as regards the clubbing, they find that the impugned order has fully taken into accounts the facts like unity of control, financial flow back, absence of manufacturing facility at M/s. CPMPL, common employees and office, and rent-free space given to M/s. CPMPL and after a detailed discussion supported by judicial pronouncements has clearly established the sustainability of the allegation that clearances of two units are to be clubbed as M/s. CPMPL was merely a dummy unit of M/s. CE. The adjudicating authority also established on sustainable basis that the brand name " Chirag " did not belong to the appellants but actually belonged to others who have been mentioned by name in the impugned order. Mr. Praveen Parashar's application to get the said brand name registered in his name had not been approved. That the brand name happens to be the same as the name of a son in the family does not make the brand name belong to them. As M/s. CPMPL is found to be a dummy unit, the seizure and subsequent confiscation is also clearly sustainable as has been brought out by the adjudicating authority. The appellants' contention that semi finished goods can not be seized is totally devoid of any legal basis as Section 110 of Customs Act (Made applicable to Central Excise Act 1944 by virtue of Section 12 thereof) nowhere debars seizure of semi-finished goods if they are liable to confiscation. Thus, they find no infirmity in the impugned orders except to the extent that the adjudicating authority should have dealt with the appellants' contention that the value of the traded goods and the goods exported are not includible for the purpose of computation of the impugned demand. Therefore, with the consent of the Ld. AR, they waive the pre deposit, set aside the impugned order and remand the case for de novo adjudication only for the limited purpose that the appellants' contention that the value of the traded goods and the goods exported needs to be excluded for the purpose of computing the impugned demand should be considered with a view to (re) computing the demand and also penalties to the extent they (i.e. penalties) get impinged upon by the (re) computation of demand. The adjudicating authority shall do so after giving the appellants an opportunity of being heard.

In view of the above findings, the appeals were disposed off.

Decision:- Appeal disposed off.

Comment:- The gist of the case in that for clubbing the clearances of dummy unit with the functional unit, the clearance of dummy named company, following factors are to be examined:-
·         Unity of control
·         Financial flow back
·         Absence of manufacturing facilities at dummy unit
·         Common employees and office
·         Rent-free space given by one unit to another.

Prepared by:- Kushal Shah

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PJ/CASE LAW/2014-15/2484

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