In a recent case before Jharkhand High Court an appeal is disposed of ruling against the clubbing of clearance values of proprietorship and Pvt Ltd Company for the purpose Excise Duty Assessment.
The petitioner Commissioner of GST & Central Excise, Jamshedpur filed an appeal against M/S Mica Mold through its proprietor; Arun Agarwal under Section 35 G(1) of the Central Excise Act. The appeal was filed against the order dated 22.08.2017 passed by Customs, Excise & Service Tax Appellate Tribunal, Kolkata.
The issue was with respect to value of clearance of MM AND MMPL to be clubbed for determining the Central Excise duty as payable by MMPL in favor of the assessee.
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The revenue argued that M/s Mica Mold, Sundarnagar, Jamshedpur in collusion with M/s Mica Mold (p) Ltd., Sundarnagar, Jamshedpur indulged in evasion of duty of misusing small scale Exemption Notification as well as clandestine removal of the goods.
During search incriminating documents were recovered , Indian currency worth Rs. 1.31 crore were also recovered from the office premises of MM & MMPL and detained. Along with that Rs. 3.0 crore were also recovered and detained from one of the staff of MM.
Out of detained Indian currency notes, currency notes of Rs. 1,22,56,966/- were seized under Section 110 of the Customs Act read with Section 12 of the Central Excise Act, 1944.
On scrutiny of seized documents it was found that MM had wrongly availed exemptions under Notification No.08/2003-CE dated 01.03.2003 and evaded duty on the aggregate value of clearances of MM & MMPL exceeding the specified limit as stipulated in the said notification.
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It was also found that MM had removed goods from its premises and factory of MMPL to evade central excise duty and also suppressed material facts in collusion with MMPL.
Bothe the factories of MM and MMPL belonged to Arun Agarawal, proprietor of MM and his Hindu Undivided Family. Documents were placed showing orders placed on MM, and goods supplied by MMPL along with payments received by MMPL.
Evidences also showed that purchase orders initially placed on MM, got amended in the name of MMPL who supplied goods and payments were received by MM and MMPL as also financial flow back from MMPL to MM.
The revenue argued that MM has been sharing profit with MMPL in as much as Shri Arun Agrawal as proprietor of M/s Mica Mold has forgone some business interest in favor of M/s Mica Mold Pvt Ltd. Therefore it is evident that mutuality of financial interest existed between M/s Mica Mold and M/s Mica Mold Pvt. Ltd.
Arun Agrawal has written to their buyers informing them to amend purchase order in the name of M/s Mica Mold, as their company had become Pvt. Ltd.
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Based on the investigation a Show Cause Notice ( SCN ) was issued to the respondent by the department. The case was decided against the assessee, imposing a an amount as penalty along with interest.
The assessee aggrieved by this filed an appeal before CESTAT, Kolkata. After which the matter was remanded setting aside the Penalty.
Against the order of CESTAT the present appeal was filed by the department.
The court heard both the parties submissions it was observed that most documents of MM were found in the declared office of MMPL and Stock Register of both MM and MMPL were found in common..
The original authority after considering oral testimony and documentary evidence concluded the mutuality of interest between the two units and the same had been appealed before the tribunal.
The court was of the view that the issue of clubbing together for the purpose of getting exemption requires consideration on the basis of the transaction of the business which cannot be assessed only on the basis of the fact that one unit is a Proprietary concern and another is Private Limited Company.
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After considering the impugned order and taking into consideration the matter whether value of clearances of MM and MMPL are to be clubbed for determining Central Excise duty payable as MMPL should be remitted before the tribunal for passing order afresh on consideration of the relevant documents which are available on record.
Therefore the appeal was disposed of and the appellate authority was directed to decide on the appeal [preferably within 6 months from the date of receipt of copy of order.
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