2005 (98) ECC 246 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Chennai

Shri P.G. Chacko, Member (J) and Shri Jeet Ram Kait, Member (T)

Bright Gems Co. & Expo Gems Co.

Versus

CCE, Madurai

Appeals No. E/38 & 82/1993

[Arising out of Order-in-Original No. 29/92 dated 27.10.92 passed by the Collector of Central Excise, Madurai]

Final Order No. 569 & 570/2004, dt. 15.7.2004, Certified on 27.7.2004

Demand (C. Excise)

Clubbing of clearances -- One unit lent loan without interest to the other would not ipso facto give rise to mutuality of interest between the units. Common partners of common employees are also not conclusive criteria for such mutuality. Separate SSI registration, separate Central Excise licence/registration, separate Sales Tax and Income Tax assessments and separate premises with separate machinery and labour. Mutuality of interest Not tenable -- Sec. 11A of CEA.

Exemption (C. Excise)

Notification No. 106/90-CE with effect from 16.5.90. The Commissioner, in the impugned order, clubbed their clearances with those of "Bright Gems", thereby disentitling assessee from benefit -- But tribunal find that there is in mutuality of interest -- assessee is well within the ambit of the expression "aggrieved person" under section 35B of the Central Excise Act.

Appeal is allowed

PRESENT :

Shri R. Raghavan, and Shri T.S. Balasubramanian, Advocates for the appellants.

Shri C. Mani, DR for the respondent.

Per : P.G. Chacko (Oral)

These appeals are against an order passed by the Commissioner of Central Excise in adjudication of a show-cause notice dated 24.1.1991 wherein a demand was raised on one of these appellants on the basis of clubbing of its clearances with those of the other appellant. The demand is on M/s. Bright Gems Company ("Bright Gems", for short). Their clearances of specified goods have been clubbed with those of M/s. Expo Gems Company ("Expo Gems", for short) for the purpose of computation of aggregate value of clearances and consequent demand of duty. The finding recorded by the Commissioner is that, upon such clubbing of clearances, the aggregate value of clearances of "Bright Gems" exceeded the exemption limit prescribed under SSI Exemption Notification No. 175/86-CE (as amended) for the period 1986-87 to July 1990. The operative part of the Commissioner's order reads as under:

"I hereby confirm the demand of duty amounting to Rs. 64,479.28 (Rupees sixty four thousand four hundred and seventy nine and paise twenty eight only) on M/s. Bright Gems Company under Section 11A (2) of Central Excises and Salt Act, 1944. I also impose a penalty of Rs. 10,000 (Rupees Ten Thousand Only) On M/s. Bright Gems Company under Rules 9(2), 51A and 173Q of Central Excise Rules, 1944."

2. In Appeal No. 38/93, M/s. Bright Gems Co. is aggrieved by the above demand of duty and penalty. In the other appeal, M/s. Expo Gems Co. is aggrieved by the Commissioner's finding that their clearances were clubbable with those of "Bright Gems" for purposes of Notification No. 175/86 ibid.

3. On examining the records, we find that the appellants are two partnership firms. One Shri P. Ganesan, one Shri P. Karthikeyan and one Smt. M. Banumathi are the partners of "Bright Gems". Shri P. Karthikeyan and Smt. M. Banumathi were also partners of "Expo Gems", alongwith Smt. G. Pushpavathy, wife of Shri P. Ganesan. "Bright Gems" was constituted in 1980 and the other firm (Expo Gems) in 1985. The two firms have separate registration under the Central Excise Act, separate SSI registration and separate Sales Tax & Income Tax assessments. They also have separate premises, separate machinery for manufacturing activities, separate work force and so on. The Commissioner, nevertheless, clubbed their clearances after finding that there was mutuality of interest between them. This finding, in turn, is based on a finding of fact that "Bright Gems" lent a loan of Rs. 37,927 without claim of interest of "Expo Gems". There is also a finding to the effect that an employee (Smt. Mahalakshmi) of "Bright Gems" assisted "Expo Gems" in accounting matters and that Shri P. Ganesan (partner of Bright Gems) assisted his wife (partner of Expo Gems), without remuneration, in the affairs of the latter firm.

4. We have heard both sides. It is submitted by learned Counsel for the appellants that the findings of the Commissioner are not enough to sustain the Department's allegation of mutuality of interest between the two firms. We have also heard learned DR on this aspect. The Commissioner found mutuality of interest between the two manufacturing units on the basis of the fact that one of them lent a loan without claim of interest to the other. The fact found is that "Bright Gems" gave a loan free of interest to "Expo Gems". However, there is no finding that "Expo Gems" did likewise earlier or later. That one unit lent loan without interest to the other would not ipso facto give rise to mutuality of interest between the units. Common partners or common employees are also not conclusive criteria for such mutuality. Thus mutuality of interest has not been established in the impugned order. The Commissioner himself has acknowledged that Commonality of partners between the two firms is not enough for clubbing of their clearances. As we have already noted, the two firms were in existence from 1980 and 1985, with separate SSI registration, separate Central Excise licence/registration, separate Sales Tax and Income Tax assessments and separate premises with separate machinery and labour. Yet the adjudicating authority recorded a finding of mutuality of interest for clubbing of clearances of the two firms. We are unable to sustain this finding.

5. It has also been submitted by learned counsel that many of the contentions raised by "Bright Gems" in their reply to the show-cause notice were not considered by the Commissioner. The party had claimed the benefit of exemption under Notification No. 106/90-CE with effect from 16.5.90. They had also claimed abatement of Additional Sales Tax from invoice price in valuation of their product under Section 4(4)(d)(ii) of the Central Excise Act. They had also raised the plea of time-bar. Counsel has submitted that these contentions were, by and large, ignored by the adjudicating authority. After a perusal of the reply to the show-cause notice and the impugned order, we find force in these submissions of the counsel.

6. Having rejected the Commissioner's finding that there was mutuality of interest between the two firms, we rule out clubbing of clearances and set aside the demand of duty which was raised on "Bright Gems" on the basis of clubbing of their clearances with those of "Expo Gems". Consequently, the penalty also gets vacated. Appeal No. 38/93 is allowed.

7. Though there is no demand of duty or penalty on "Expo Gems" under the impugned order, yet they are aggrieved by a finding recorded against them by the Commissioner. The Commissioner, in the impugned order, clubbed their clearances with those of "Bright Gems", thereby disentitling them to the benefit of SSI exemption under Notification No. 175/86-CE (as amended). Thus "Expo Gems" has a genuine grievance against the Commissioner's finding. They are well within the ambit of the expression "aggrieved person" under Section 35B of the Central Excise Act. Now that we have set aside the above finding of the Commissioner, The grievance of "Expo Gems" stands redressed. Therefore, their appeal is also disposed of.

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