CX - When manufacturing operations are under common management and financial control and there is mutuality of financial interest, clearance values of all units are required to be clubbed: CESTAT
By TIOL News Service
NEW DELHI, OCT 03, 2016: CX duty demands have been confirmed against the appellants on the following grounds -
+ wrong fulavailment of SSI exemption notification 175/86-CE, 1/93-CE, clubbing of clearance values of other allegedly dummy units;
+ unaccounted manufacture and clandestine removal of RBA in the guise of soda bicarbonate (Soda bi-carb)
+ unaccounted manufacture and clearance of RBA;
Penalties have also been imposed on the appellants. The period involved is 1989-90 to 1990-93 and show cause notice is dated 16.3.94.
Before the CESTAT the appellant rebutted the demands raised and also took the ground of the demand being hit by limitation.
The AR too highlighted the basis on which the demands were confirmed by the adjudicating authority.
After considering the submissions made by both sides, the Bench gave its findings thus -
Clubbing of clearances:
+ Manufacture and clearances made by the respective noticees/appellants - M/s Atlantic Chemical Industries, M/s Foamsil Chemicals and M/s Arun Chemicals for the item namely RBA availing the benefit of Notification No.175/86-CE (1/93-CE later) have to be clubbed together as we hold that these units are one and the same, when their operations are under common management and financial control and have mutuality of financial interest with each other. When it is so, then we agree with the findings of the impugned order.
+ It is clear that noticee appellants M/s Atlantic Chemicals played a major role in the manufacturing of the item RBA. Many of the machinery items and facilities for manufacturing are available only with M/s Atlantic Chemicals. Therefore, after clubbing of clearances of the subject three units, liabilities for payment of duty of Central Excise is hereby fixed on M/s Atlantic Chemicals. Consequently, the appellant M/s Atlantic Chemicals is to pay total duty of Central Excise of Rs.71,06,066/- (i.e. Rs.38,45,363/- + Rs.31,39,343/- + Rs.1,21,360/-) for the RBA manufactured and cleared during 1989-90 to 1993-94. In this regard, corresponding penalty of Rs.70,20,000/- is also imposed on M/s Atlantic Chemicals … Further M/s Arun Chemicals have been involved in continuing this operation of wrongly claiming exemption Notification No.175/86-CE; therefore, the penalty of Rs.1,20,000/- imposed on them is hereby sustained.
RBA manufactured and not accounted for and removed clandestinely in the guise of soda bicarbonate.
+ It has come out clearly that soda bicarbonate (soda bi carb) was available in Kerala at hugely cheaper rate for anyone to buy and use; whereas the appellants have claimed that they sold and sent soda bi carbonate when there was no commercial or other reason available to such sale/dispatch of soda bi carb to Kerala or any other place. There have been enough number of corroborative evidences in the form of statements by respective persons concerning the subject matter to disprove the appellants averments that they sold/ sent soda bi carb and not the RBA. …It has also come on record that soda bi carbonate cannot be technically used by the manufacturers concerned, who are using RBA as one of the raw materials for their products in Kerala. In other words, soda bi carb is not the substitute for the use of RBA in the respective rubber or other industries.
+ We agree with the findings and the conclusion of the impugned order on the issue of manufacture and clearance of RBA in the guise of soda bi carb. However, as it is on record that M/s Arun Chemicals did not have required manufacturing facility (though they were actively involved in the clearance of RBA in the garb of soda bi carb) the demand of Central Excise duty of Rs. 29,42,754/- and Rs. 6,87,381/- confirmed against M/s Atlantic Chemicals and M/s Arun Chemicals by the impugned order is hereby confirmed against M/s Atlantic Chemicals only.
+ We impose the penalty of Rs. 35,00,000/- (Rupees thirty five lakhs only) on M/s Atlantic Chemicals only in this regard under Rule 9(2) and Rule 173Q of the Central Excise Rules. Further, it is to be noted that M/s Arun Chemicals along with M/s Atlantic Chemicals and others has been actively involved in the clearance of RBA in the guise of soda bi carb and therefore, deserve imposition of penalties. Consequently, penalty of Rs.6 lakhs imposed on M/s Arun Chemicals by the impugned order under Rule 9(2) and Rule 173Q of Central Excise Rules is hereby sustained.
Unaccounted manufacturing and clearance of RBA:
+ We find that the Department does not have any other evidence other than the test report in order to prove its case of extra production of RBA.
+ Unless there are sufficient corroboratory evidences on records to support this charge of extra production of RBA (based on the test reports), we are of the considered view that there would be no sufficient justification to sustain the charge of extra-production of RBA (based on mere test reports), where the Revenue claims that central excise duty was not paid by the respective noticees/appellants.
+ We have no option but to hold that this charge of unaccounted production of RBA (based on sample test reports) by the noticees namely, Atlantic Chemicals, M/s Foamsil Chemicals and M/s Arun Chemicals remain unsustainable and hereby dropped. Consequently, the penalties imposed on the respective noticees…are also not sustainable and are hereby dropped.
Penalties imposed on other co-noticees viz. J.S. Jain,Amar Kumar Jain,Amar Enterprises, M/s India Rubber & Chemicals, M/s Ceyenar Chemicals & M/s Lotus Chemicals was upheld.
The impugned order was modified as mentioned above and the appeals were disposed of.
In passing: In all probability, we would be hearing more about this case in the days to come…clubbing, limitation et al…
(See 2016-TIOL-2599-CESTAT-DEL)
