TSM Plastics Vs Commissioner of Central Excise & Service Tax (CESTAT Allahabad)
CESTAT Allahabad held that value of clearance of dummy unit created for evading payment of duty by availing benefit of exemption provided under exemption notification no 8/2003-CE unsustainable. Accordingly, value of all such units clubbed together for evaluating availability of exemption under notification no. 8/2003-CE.
Facts-
Appellant-I is engaged in the manufacture of Plastic caps & Other plastic articles falling under Chapter hearing No.39 of the Central Excise Tariff Act, 1985. Appellant-II and Appellant-III are partners in the partnership firm functioning under the name of Appellant-I. Appellant-II was looking after all the business affairs of Appellant-I.
Specific information was received that Appellant-I was engaged in the manufacture of excisable goods without having Central Excise registration and clearing them without payment of duty, though turnover of the company was approximately Rs.3.00 crores in F.Y. 2012-13 and approximately Rs.6 crores in F.Y. 2013-14. Thus, they had crossed the exemption limit of Rs.1.5 crores in a financial year as stipulated in Notification No.08/2003-CE dated 01.03.2003 as amended meant for small-scale industries.
Accordingly, investigations were initiated and search was conducted in the factory premises of Appellant-I on 01st December 2014 in the presence of Appellant-II. During the investigation, it was observed that appellants procured the raw materials namely 11DPE & PP Plastic granules from different suppliers such as M/s Kailashpati Polyplast Pvt. Ltd. and M/s Yashu Plastics all from Noida. Some invoices and bills issued by M/s TSM were also seen and it was observed that they had cleared the excisable goods such as Plastic Bottles with or without caps to their different customers. One of the major customers was M/s G.D. Foods Manufacturing India Pvt. Ltd., Delhi and Neemrana.
On examination, it was revealed that besides the accounts of Appellant-I, accounts of another company by the name of M/s L.S. Plastics were also being maintained in the same computer system. Appellant-III who is one of the partners in Appellant-I was the proprietor of the said unit, which was engaged in the manufacture of similar goods and they were indulging in evasion of duty by resorting to claiming exemption under Notification No.08/2003-CE dated 01.03.2003.
It was observed that the appellant-I has claimed the benefit of exemption under Notification No.08/2003CE dated 01.03.2003 even after crossing the exemption limit as provided by the said notification.
Conclusion-
Held that the clubbing can be done in case where one unit is dummy or camouflaging the others. The present case is squarely the case where the authorities have concluded that one unit was dummy unit.
Held that we do not find any merits in the submissions of the appellant in respect of the clubbing of the clearances. The impugned order holding that the clearances for the period 2014-15 are to be clubbed as appellants has clearly and being aware that their value of clearance has crossed the exemption limit as provided by the notification no 8/2003-CE had crossed the exemption limit created the dummy unit to continue operating within the exemption limit. Appellants have cleverly made a scheme for suppressing the value of clearances with intent to evade payment of duty for which they are also liable for penal action. Accordingly, penalty imposed on Appellant-I under rule 25 (1) of the central Excise Rules, 2002 read Section 11AC is justified
FULL TEXT OF THE CESTAT ALLAHABAD ORDER
These three appeals are directed against Order-in-Appeal No.NOI-EXCUS-001-APP-1759-1761-17-18 dated 28/02/2018 passed by Commissioner (Appeals) Central Goods & Service Tax, Noida. By the impugned order Commissioner (Appeals) has upheld the Order-in-Original No.07/AC/D-I/N-I/2016-17 dated 14.02.2017 wherein following has been held:-
ORDER
(i) I hereby confirm the Central Excise duty amounting to Rs. 6,17,610/- (Rupees Six) Lakh Seventeen Thousand Six Hundred Ten only) inclusive of Education Cess & SHE Cess under Section 11A(4) read with Section 11A(10) of the Central Excise Act, 1944 for the period from April 2013 to November 2014. I order that the amount of Rs 5,00,000/- (Rupees Five Lakh only) deposited by the party during investigation shall stand appropriated against this duty liability.
(ii) I also order that the party shall pay Interest at the appropriate rate on the duty of Rs 6,17,610 (Rupees Six Lacs Seventeen Thousand Six Hundred Ten only) determined above under Section 11AA of Central Excise Act, 1944.
(iii) I impose a Penalty of Rs 6,17,610/- (Rupees Six Lakh Seventeen Thousand Six Hundred Ten only) on M/s TSM Plastics under Rule 25(1) of the Central Excise Rules, 2002 read with Section 11AC (c) of the Central Excise act, 1944 for contravention of the provisions of the Central Excise Act and the Rules made there-under as pointed out herein above.
(iv) I impose a Personal Penalty of Rs.1,00,000 (One Lakh only) on Shri SK Sharma. Partner of M/s TSM Plastics, D20 Sector- 7, Noida under Rule 26 of the Central Excise. Rules, 2002 for contravention of the provisions of the Rules as pointed out herein above.
(v) I impose a Personal Penalty of Rs.1,50,000 (Rs. One Lakh Fifty Thousand Only) on Shri Sanjeev Sharma, Partner of M/s TSM Plastics, D-20, Sector-7, Noida under Rule 26 off the Central Excise Rules, 2002 for contravention of the provisions of the Rules as pointed out herein above.”
2.1 Appellant-I is engaged in the manufacture of Plastic caps & Other plastic articles falling under Chapter hearing No.39 of Central Excise Tariff Act, 1985. Appellant-II and Appellant-III are partner in the partnership firm functioning under the name of Appellant-I. Appellant-II was looking after all the business affairs of Appellant-I. Specific information was received that Appellant-I was engaged in manufacture of excisable goods without having Central Excise registration and clearing them without payment of duty, though turnover of the company was approximately Rs.3.00 crores in the financial year 2012-13 and approximately Rs.6 crores in the financial year 2013-14. Thus, they had crossed the exemption limit of Rs.1.5 crores in a financial year as stipulated in the Notification No.08/2003-CE dated 01.03.2003 as amended meant for small scale industries. Accordingly, investigations were initiated and search conducted in the factory premises of Appellant-I on 01st December, 2014 in the presence of Appellant-II. During the investigation it was observed that appellants procured the raw materials namely 1-1DPE & PP Plastic granules from different suppliers such as M/s Kailashpati Polyplast Pvt. Ltd. and M/s Yashu Plastics all from Noida. Some invoices and bills issued by M/s TSM were also seen and it was observed that they had cleared the excisable goods such as Plastic Bottles with or without caps to their different customers. One of the major customers was M/s G.D. Foods Manufacturing India Pvt. Ltd., Delhi and Neemrana.
2.2 It was observed that appellants were maintaining their financial account in a computer system loaded with Tally (software). On examination it was revealed that besides accounts of Appellant-I, account of another company by the name of M/s L.S. Plastics were also being maintained in the same computer system. Appellant-III who is one of the partner in Appellant-I was proprietor of the said unit, which was engaged in the manufacture of similar goods and they were indulging in evasion of duty by resorting to claiming exemption under Notification No.08/2003-CE dated 01.03.2003.
2.3 Searches were also conducted in the premises of M/s L.S. Plastics in presence of two independent witnesses and Appellant-III on the same date. During the search it was found that M/s L.S. Plastics started the production in August, 2014 and were manufacturing plastic bottles and clearing the same to their customer M/s G.D. Foods manufacturing India Pvt. Ltd., Delhi and Neemrana.
2.4 As per the information available in the computer system loaded with Tally (software) year wise sales turnover in respect of these two units is as under:-
