👍👍👍Clearance of two entities having same partners is to be clubbed for SSI exemption limit

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Himalaya Equipments Vs C.C.E. & S.T. (CESTAT Ahmedabad)

CESTAT Ahmedabad held that value of clearance of two entities having same partners are to be clubbed and excise duty on clearance exceeding the eligible limit of SSI exemption is duly payable.

Facts- This appeal is directed against Order-In-Original passed by the Commissioner Central Excise, Ahmedabad-III whereby, the differential demand of Central Excise Duty confirmed against M/s. Himalaya Equipments on the ground that one other unit M/s. Himalaya Engineers and Manufactures having same partners of equal sharing, the clearance of M/s. Himalaya Engineers and Manufacturers is required to be included in the value of M/s. Himalaya Equipments and consequently, exceeding the eligible limit of SSI exemption under notification no. 8/2003-CE, the appellant is liable to pay the excise duty. Being aggrieved by the Order-In-Original, the appellant filed the present appeal.

Conclusion- From observation of the learned Commissioner (Appeals) which is based on the circular No. 6/1992- dated 29.05.1992, it is absolutely clear that a firm consisting of certain partners having more than one factory, all these factories should of course be combined. In the said circular, the exception was carved out only in respect of companies on the ground that each company has a separate entity from the share holders. However, in the present case the entities are partnership firms under common partners has to be combined for the purpose of SSI exemption therefore, the judgments relied upon by the learned counsel are of no help to the appellant as the same is on different fact.

We find that in the present case, the appellant have heavily emphasized on the fact that both the factories have separate set up in respect of other aspects therefore, cannot be treated as one. As we stated above, the findings clearly provides that even two different factories of same manufacturer needs to be combined therefore, in the present case the clubbing is not on the basis of the common facility between both the units but because of the common ownership, being same partners in both the firm. Therefore, in our considered view the adjudicating authority has rightly clubbed the value of clearance of both the units and demanded excise duty from M/s. Himalaya Equipments.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

This appeal is directed against Order-In-Original passed by the Commissioner Central Excise, Ahmedabad-III whereby, the differential demand of Central Excise Duty confirmed against M/s. Himalaya Equipments on the ground that one other unit M/s. Himalaya Engineers and Manufactures having same partners of equal sharing, the clearance of M/s. Himalaya Engineers and Manufacturers is required to be included in the value of M/s. Himalaya Equipments and consequently, exceeding the eligible limit of SSI exemption under notification no. 8/2003-CE, the appellant is liable to pay the excise duty. Being aggrieved by the Order-In-Original, the appellant filed the present appeal.

02. Shri Amal Dave, learned counsel appearing on behalf of the appellant submits that it has been admitted in the adjudication order that the appellant and M/s. Himalaya Engineers & Manufacturers have separate registration, bank account and all other registrations and licenses with various government authorities and despite this position, the value of M/s. Himalaya Engineers and Manufacturers was clubbed with that of the present appellant. He further submits that firstly, for clubbing the value of the other unit i.e. M/s. Himalaya Engineers & Manufacturers, the show cause notice should have been issued to M/s. Himalaya Engineers & Manufacturers and without issuance of show cause notice, the value of the said unit cannot be clubbed with the value of the appellant. He submits that this issue has been settled in various judgments:-

  • PREMIER HEAVY ENGINEERING COMPANY Vs. CCE- 2016 (337) ELT 332 (Guj.)
  • GST (EAST), NEW DELHI V/S. UNITECH CONTAINERS PVT. LTD.-2017 (358) ELT 99 (Del.)
  • CCE, CHENNAI V/s. URBANE INDUSTRIES- 2015 (325) ELT 726 (Mad.)
  • SREE NIRMAL INDUSTRIES V/s. CCE, COIMBATORE- 2014 (300) ELT 469 (Tri.-Chennai)
  • PAP FLON ENGINEERING CO.P. LTD. V/s. CCE, Ahd-I- 2022 (381) ELT 500 (Tri.-Ahmd.)

2.1 He further submits that even though the partners are common in both the firms, both have separate legal entity therefore, the value of clearance cannot be clubbed for denying exemption. He placed reliance on the following judgments:-

  • SHAKTI ENGINEERING WORKS V/s. CCE- 1998 (40) ELT 95 (Tribunal)
  • ASSOCIATED ENGINEERING PROJECTS V/s. CCE & ST, MEERUT-I- 2019 (370) ELT 756 (Tri.-All)
  • OF C.EX., MYSORE V/S. GANESH ENTERPRISE- 2010 (262) ELT 1007 (Tri.-Bang.)

03. Shri Rajesh Agarwal, learned Superintendent (AR) appearing on behalf of the revenue reiterates the finding of the impugned order.

04. We have carefully considered the submissions made by both the sides and perused the records. We find that in the present case, the limited issue is that whether the value of M/s. Himalaya Engineers and Manufacturers can be clubbed with the value of the present appellant. To arrive at the conclusion it is necessary to examine the constitution of both the firms. We find that in both the firms, the partners are same which is detailed below:-

The details of partners in M/s. Himalaya Equipments, 38/1, GIDC Estate, Dediasan, Mahsana are as under:-

Sr. No.Name of the partnerContribution While creation
1Shri Rameshkumar Chanduji Rajput25%
2Hitendra Narandas Patel25%
3Rajnikant Kantibhai Patel25%
4Amrutbhai Nenaji Solanki25%

The details of partners in M/s. Himalaya Engineers & Mfrs, 380, GIDC Estate- II, Dediasan, Mehsana are as under:

Sr. No.Name of the partnerContribution While creation
1Shri Rameshkumar Chanduji Rajput25%
2Hitendra Narandas Patel25%
3Rajnikant Kantibhai Patel25%
4Amrutbhai Nenaji Solanki25%

From the above, it can be seen that in both the firms of the partners are same with the same sharing of 25% each, in this position we are of the view that even though there is a different name of the firm but both the firms are owned by same partners therefore, there is a common ownership by same partners. As per notification no. 8/2003-CE dated 01.03.2003. The para 2 provides the condition as below:-

2. The exemption contained in this notification shall apply subject to the following conditions, namely: –

(i)…..

(ii)….

(iii)….

(iv)…

(v) where a manufacturer clears the specified goods from one or more factories, the exemption in his case shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said Table and not separately for each factory;

(vi) where the specified goods are cleared by one or more manufacturers from a factory, the exemption shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said Table and not separately for each manufacturer;

(vii) the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturers, does not exceed rupees three hundred lakhs in the preceding financial year.

From the above condition, it is clear that for the purpose of aggregating value of clearance under notification no. 8/2003-CE, the value of clearance of manufacturer must be taken for the clearance of one or more factories and as per Para 7, the aggregate value of clearance of excisable goods for home consumption by manufacturer from one or more factories should not be exceeded Rs. 300 lakhs in the preceding financial year. In the present case, as we have observed that the ownership of both the units i.e. M/s. Himalaya Equipments and M/s. Himalaya Engineers and Manufactures is with the same partners which is to be considered that the one manufacturer has cleared the excisable goods from their both the factories therefore, for the purpose of exemption limit as well as for the purpose of eligibility limit of Rs.300 lakhs, the value of clearance of both the factories have to be taken together. Therefore, we concur with the adjudicating authority that the value of M/s. Himalaya Engineers and Manufacturers is includable in the value of the appellant’s firm.

4.1 As regard the learned counsel’s heavy reliance on the judgment and for his submission that without issuance of show cause notice to other firm M/s. Himalaya Engineers and Manufacturers the clubbing is not correct. In this regard, we find that this contention of the learned counsel is applicable only in those cases where two different firms of different ownerships exists. In the present case, since both the units are owned by one owner, there is no need to issue a show cause notice to another firm which is nothing but part of the present appellant. We find that the adjudicating authority has righty referred to the decision in the case of M/s. Agarwal Rubber Pvt. Ltd. reported at 2009 (238) ELT 336 and given the finding on that basis in Para 16 (iii) of the impugned order which is reproduced below:-

“4.5 He would rely on the Circular of the Board wherein it has been very clearly held that the private limited companies cannot be equated to the partnership firm and there cannot be any clubbing of clearances and is clearly applicable to this case. It is his submission that the said Circular No. 6/92 dated 29-5-1992 is a direction issued under Section 378 and is applicable in all squares to this case.

From the above observation of the learned Commissioner (Appeals) which is based on the circular No. 6/1992- dated 29.05.1992, it is absolutely clear that a firm consisting of certain partners having more than one factory, all these factories should of course be combined. In the said circular, the exception was carved out only in respect of companies on the ground that each company has a separate entity from the share holders. However, in the present case the entities are partnership firms under common partners has to be combined for the purpose of SSI exemption therefore, the judgments relied upon by the learned counsel are of no help to the appellant as the same is on different fact.

4.2 We find that in the present case, the appellant have heavily emphasized on the fact that both the factories have separate set up in respect of other aspects therefore, cannot be treated as one. As we stated above, the findings clearly provides that even two different factories of same manufacturer needs to be combined therefore, in the present case the clubbing is not on the basis of the common facility between both the units but because of the common ownership, being same partners in both the firm. Therefore, in our considered view the adjudicating authority has rightly clubbed the value of clearance of both the units and demanded excise duty from M/s. Himalaya Equipments.

05. Accordingly, the impugned order is upheld. Appeal is dismissed.

(Pronounced in the open court on 24.03.2023)

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