The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) quashed excise duty demand as the charges of creating dummy units for keeping value of clearances below small scale industry ( SSI ) exemption is not sustainable.
An investigation was conducted against M/s Varun on the ground that they have created dummy units in order to keep the total value of clearances below the SSI exemption and not paying duty on their clearances.
Considering M/s. Varun B Corporation as the manufacturer, the clearance value of the other two factories needs to be added for calculating the total aggregate clearance value. None of the factories fulfilled the conditions to avail SSI benefit under Notification No. 8/2003-CE, requiring them to pay Central Excise duty from the first clearance during 2009-10 and 2010-11.
The Chartered Accountant who appeared for the appellants contended that it can be established that there was mutual flow back of funds amongst the units, control of both financial & management aspect by the same set of persons. There is no point to conclusion that these firms interlinked in their operation and management. In fact, all the three factories are totally independent with no interdependence, no financial flow back, no mutuality of interest between firm, nor any flow back of profit. There is no supporting evidence for common finance and common management and there is no finding that the Varun corporation has floated, financed and incorporated the SSI units.
A Two-Member Bench comprising Ramesh Nair, Judicial Member and Raju, Technical Member observed that “We find that nowhere it can be established that there was mutual flow back of funds amongst the units, control of both financial & management aspect by the same set of persons. We find that all the units are totally independent with no interdependence, no financial flow back, no mutuality of interest between firm, flow back of profit. There is no supporting evidence for common finance and common management and there is no finding that M/s Varun has floated, financed and incorporated the SSI units.”
“On careful consideration of the above facts, submission and our findings we are of the view that the charges against M/s Varun of creating dummy units for keeping the value of clearances below the SSI exemption are not sustainable. Hence, we set aside the demand and penalty imposed against M/s Varun. For the same reason we also set aside the penalty imposed upon co-appellants. Thus, impugned order is set aside and appeals are allowed with consequential reliefs” The Tribunal concluded.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
