22 July 2019


Customs, Excise and Service Tax Appellate Tribunal

Anil Sales Corporation and Ors. Vs. C.C.E. Delhi-I




Correct value of clearances intended to nil rate of duty should include value of clearances of one arm factory belonging to same manufacturer

Present appeals have been filed against order in original passed by Commissioner of Central Excise. Central Excise officers carried out such operations simultaneously in premises. During search, relevant records were resumed including certain Kachi Parchis and delivery challans. Statements were recorded by officers from connected persons. Upon completion of investigations, SCN was issued proposing to club value of clearances made in name of ASC as well as Jain and to restrict benefits in terms of SST Notifications No. 08/2013 dated 1st March, 2003. Value of clearances made without accounting finished goods and clearing them clandestinely without payment of duty also to be included. In terms of Central Excise duty amounting to Rs. 1,58,42,752/- was demanded along with interest. Penalty of an equal amount was also proposed.

Supreme Court in case of Modi Alkalies & Chemicals Ltd. has laid down that, two basic features which prima facie show interdependence between two units and whether another unit is a dummy unit, are pervasive financial control and management control. Free flow back of finance between two firms establishes that, there was mutuality on interest between two firms and that two were inter joined in their management and flow of funds.

In terms of para 2 of Notification 8/2003 : MANU/EXCT/0060/2003
dated 1.3.2003, correct value of clearances intended to nil rate of duty should include value of clearances of one arm factory belonging to same manufacturer. In facts and circumstances of present case, findings of adjudicating authority that, clearance of two firms are to be clubbed for period 2006-2007 to 2008-2009 and benefit of SSI exemption is to be determined is upheld.

Regarding charge of clandestine clearances, various employees of both firms have in their statements confirmed that, goods were being cleared without payment of duty on basis of only delivery challans/kachi parchis. Many of buyers who have been interrogated have also confirmed fact in their statements that, goods were received without invoice but only under cover of Kachi parchis. Statements recorded from as many as 13 persons do not bear signature of officer regarding such statements. It cannot be presumed that, statements were recorded by competent officers of Central Excise department under Section 14 of Central Excise Act, 1944. These are very serious observations which need to be taken note of.

Total demand for central excise duty has been calculated by including value of clearances evidenced by kachi parchis in addition, turnover of both firms have been clubbed. Impugned order is set aside and remanded to original adjudicating authority with direction to re-quantify demand by excluding those attributable to clandestine clearance. However, clubbing of value clearances of both firms is upheld. Duty demands as well as penalties are required to be dropped out in de novo proceedings after giving an opportunity of hearing to all Appellants. Appeal disposed off.


Modi Alkalies & Chemicals Ltd. .MANU/SC/0638/2004
: 2004 (171) ETL 155 SC

Tags : Demand Penalty Validity

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