The Jharkhand High Court has held that clearances value of proprietor and private limited company cannot be clubbed for determining central excise duty without any documentary support.
The bench of Acting Chief Justice Sujit Narayan Prasad and Justice Arun Kumar Rai while remanding the matter back, observed that when the consideration has been given by the original authority by taking into consideration the various documents, i.e., Stock Register for Brush Holder etc. and hence, it was incumbent upon the appellate authority to re-appreciate the said documents for the purpose of coming to the conclusion and not only by going through the identity of both the firms, i.e., one being the Proprietary concern and another a Private Limited Company.
Background
The petitioner/department challenged the order passed by the learned Customs, Excise & Service Tax Appellate Tribunal (CESTAT) by which the issue with respect to the value of clearance of MM and MMPL are to be clubbed for determining the Central Excise duty is payable by MMPL, in favour of the assessee.
The department, on specific intelligence that M/s Mica Mold, Sundarnagar, Jamshedpur (MM) in collusion with M/s Mica Mold (p) Ltd. (MMPL) are indulged in evasion of duty by misusing small scale Exemption Notification No.08/2003-CE as amended as well as clandestine removal of the goods, factory as well as office premises of MM/MMPL, their office premises, residential premises of proprietor of MM/Director of MMPL and residential premises of staff of MM were searched at a time.
During search some incriminating documents were recovered. The Indian currency worth Rs. 1.31 crore were also recovered from the office premises of MM & MMPL, which was detained.
Similarly during a search operation at residential premises of one of the staff of MM, Indian currency notes worth Rs.3.0 crore were recovered and detained. Subsequently, out of detained Indian currency notes, currency notes 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 have wrongly availed SSI exemption 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. The investigation revealed that MM has removed goods from its own premises as well as from the factory of MMPL with intent to evade central excise duty. Thus MM during the period from 2003-04 up to 07.11.2007 by suppression of materials facts in collusion with MMPL evades Central Excise duty.
MMPL has been created by Arun Agarawal, proprietor of MM, subsequently and both the factories MM and MMPL belong to him and his Hindu Undivided Family. Arun Agrawal has been managing and controlling business activity of both MM and MMPL.
The documents showed that orders were placed on MM, but goods were supplied by MMPL and also payments were received by MMPL. This not only confirms financial complexity and mutuality of financial interest, but also confirms financial flow back from MM to MMPL. There are also evidences that though purchase orders, initially placed on MM, were got amended in the name of MMPL who supplied the goods, payments were received by MM and MMPL as also financial flow back from MMPL to MM.
As per the department MM has been sharing profit with MMPL as Arun Agrawal as proprietor of M/s Mica Mold has forgone some business interest in favour of M/s Mica Mold Pvt Ltd. The sharing of profit is not found among commercially independent firms and the same is visualised only when mutuality of financial interest existed between M/s Mica Mold and M/s Mica Mold Pvt. Ltd and the plea of Arun Agrawal in certain instances that though purchase orders were issued to MM, the bills were raised, by mistake, by MMPL. It duly confirms that a common system of billing by a common set of staff was in vogue both for MM and MMPL because had it been otherwise such a mistake in billing would have never occurred.
Arun Agrawal has written to their buyers that they are also to inform them to kindly amend the purchase order in the name of M/s Mica Mold, because their company became Pvt. Ltd. now. It means M/s Mica Mold Pvt. Ltd. also belongs to him only and he wants to transfer the orders from his first firm M/s Mica Mold to second firm M/s Mica Mold Pvt. Ltd in order to split the value of clearances into two firms.
The case was decided against the Assessee and the adjudicating authority confirmed the amount along with interest and penalty.
The Assessee/Respondent filed an Appeal before the learned CESTAT, Kolkata. The CESTAT, Kolkata remanded the matter after setting aside the Penalty.
Issue Raised
The issue raised was whether the value of clearances of MM and MMPL are to be clubbed for determining Central Excise duty payable as MMPL.
Arguments
The department contended that the stock register other documents were found in the declared office of MMPL factory premises and finding so recorded that merely because office is common and Directors of the Private Limited Company are the sons of the Proprietor of the firm are not only two reasons as has been found to be available by the Assessing Officer, rather, in addition to the wo reasons other reasons have also been there which led the Assessing Officer to answer in favour of the department.
Conclusion
The court disposed of the appeal and remitted back the matter before the Tribunal for passing order afresh on consideration/appreciation of the relevant documents which are available on record.
Case Title: Commissioner of GST & Central Excise Versus M/S Mica Mold
Case No.: Tax Appeal No.45 of 2018
Date: 04/09/2024
Counsel For Petitioner: Amit Kumar
Counsel For Respondent: Sumeet Gadodia