B.S.B.K. Engineers Pvt. Ltd vs Cce, Noida

[Arising out of Order-in-Appeal No.30/CE/APPL/NOIDA/06 DATED 07.02.2006 passed by the Commissioner (Appeals), Customs & Central Excise, Noida]

For approval and signature:

HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL)

HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

1. Whether Press reporters may be allowed to see the

order for publication as per Rule 27 of the CESTAT

(Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the

CESTAT (Procedure) Rules, 1982 for publication in

any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy

of the Order?

4. Whether Order is to be circulated to the Departmental

authorities?

__________________________________________________

B.S.B.K. Engineers Pvt. Ltd. Appellant

Vs.

CCE, Noida  Respondent

Present for the Appellant : Shri. B. Garg, Advocate

Present for the Respondent: Shri.R.K. Grover, DR

Coram:HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL)

HONBLE MR.S.K. MOHANTY, MEMBER (JUDICIAL)

Date of Hearing/Decision: 01/01/2015

FINAL ORDER NO. 50

PER: RAKESH KUMAR

The appellant in their factory at Surajpur, NOIDA manufactured ash handling equipment. The appellant is a Pvt. Ltd. Company with four Directors, Shri Ajay Kumar, Shri Rohit Kumar Gupta, Shri Gautam Gupta and Mrs. Neera Gupta. The appellant have rented a part of their plot of the factory to M/s.Macawber Beekay Pvt. Ltd. (MBPL). MBPL is also a Private limited company with several Directors of which two Directors

Shri Ajay Kumar and Shri.Rohit Kumar are also the Directors of the appellant Company. The other Directors of MBPL are different. MBPL manufacture dense phase pneumatic conveyor system. During the period of dispute i.e. 2002 to 2005 both the units were availing SSI exemption separately. The departments case against the Appellant company is that of in the holding company of MBPL and hence their clearances are to be clubbed, and if the clearances of the two units are clubbed the appellant would not be eligible for SSI exemption. It is on this basis that the duty demand of Rs.18,63,830/- has been made against the appellant for the period from 2002-2003 to 2004-05 vide show cause notice dated 15.07.2005. The S.C.N., besides the duty demand, also sought recovery of interest on this duty under section 11 AB and also sought imposition of penalty on the appellant under section 11AC on them. Basis of the Departments allegation against the appellant company that they fully own and control the other unit MBPL is that the Directors of the appellant company have 53.85% share holding of the MBPL and also that both the companies have their registered office located at the same address L 8, Green Park Extension, New Delhi-110006. Besides this it is also alleged that from the annual report of MBPL for the year ending 31st March, 2002 and of the subsequent year, it is seen that their plant and machinery has been mortgaged to a Bank as security for working capital loan sanctioned by the Bank to BSBK. In view of the above, it has been alleged that the appellant and MBPL are not independent entities.

2. The SCN was adjudicated by the Jt. Commissioner vide Order-in-Original dated 13.10.2005 by which above mentioned duty demand was confirmed against the appellant alongwith interest thereon under section 11AB and penalty of equal amount was imposed on them under section 11AC. On appeal being filed to Commissioner (Appeals) against this order, the Commissioner (Appeals) vide Order-in-Appeal dated 07.02.2006 dismissed the appeal against which this appeal has been filed.

3. Heard both the sides.

4. Shri Bipin Garg, Advocate the ld. Counsel for the appellant, pleaded that the SSI exemption Notification provides that when a manufacturer availing the benefit of SSI Notification owns some other manufacturing units also, for the purpose of determining his eligibility of this exemption and quantum of exemption, the clearance of all the units have to be clubbed together, that according to the Department MBPL is a subsidiary company of the appellant and mainly on this ground the clearances of the two units are sought to be clubbed, that the appellant for being treated as holding company of MBPL must be as per the Provisions of section 4 (1) (b) (ii) of the Companies Act, 1956, must hold more than half in nominal value of the equity share capital of MBPL, that in this case, this condition is not satisfied as there is no share holding of the appellant company in MBPL and the shares held by the Directors of M/s.BSBK in their individual capacity in MBPL cannot be treated as the share holding of appellant company in MBPL, that besides this the other conditions of treating the two company, as holding companies and subsidiary company, as prescribed in section 4 of the Companies Act are not satisfied, that in view of this, the appellant company it cannot be treated as holding company of MBPL, that merely on account of the plant and machinery of MBPL being mortgaged to a bank as security for working capital loan for the appellant company it cannot be concluded that the appellant company owns MBPL, that the condition for clubbing the clearances of the two units for the purpose of SSI exemption, is, thus, not satisfied, that in any case, the proceedings against the appellant company are not sustainable as no show cause notice was issued to MBPL whose clearances are sought to be clubbed with the clearance of the appellant company and that in view of the above submissions, the impugned order is not correct.

Shri Garg also pointed out that the bulk of the duty demand raised against the appellant company vide SCN dated 15.07.2005 for 2002-2003, 2003-2004 and 2004-2005 is time barred, as the facts, on the basis of which the duty demand has been raised, had become known to the Department in the course of audit of their records in January, 2003 and all the information sought by the Department had been furnished by the appellant in April, 2004 and, therefore, there is no justification for invoking longer limitation period under proviso to section 11 A(1) and for the same reason there would not be no justification for imposing penalty on the appellant company under section 11AC. He, therefore, pleaded that the impugned order is not sustainable.

5. Shri R.K. Grover, the ld. DR defended the impugned order by reiterating the findings of the Commissioner (Appeals) in it. He also cited the judgment of the Apex Court in the case of CCE, New Delhi vs. Modi Alkalies & Chemicals Ltd. reported in 2004 (171) ELT 155 (S.C.) wherein, it was held that when a company has pervasive financial and management control over the other and their manufacturing and marketing operations are interdependent, the clearances of the two units have to be clubbed for the purpose of SSI exemption. Besides this, he also relied upon the Tribunals judgment in the case of Heemanshu Traders vs. CCE, Surat reported in 2003 (153) ELT 119 (Tri.-Del.) and also in the case of Harish Mehra vs. Collector of Central Excise, Chandigarh reported in 2002 (147) ELT 1213 (Tri.-Del.) wherein, it has been held that when different units have been created solely for the purpose of availing SSI exemption, their clearances have to be clubbed together.

6. We have considered the submissions from both the sides and perused the records. The appellant company in their factory at Surajpur manufacture ash handling equipment. It is a private limited company in which Shri Ajay Kumar, Shri Rohit Kumar, Shri Gautam Gupta and Shri Neera Gupta are Directors. There is no dispute that a part of the premises of the appellant company has been rented out by them under a rent agreement to another company which is also a private limited company in which Shri Ajay Kumar and Shri Rohit Kumar are the Directors, though the other Directors are different. The second Company MBPL manufacture different product - the dense phase pneumatic conveyor system. Both the units during the period of dispute were independently availing the SSI exemption. The SSI exemption is sought to be denied to the appellant company by clubbing its clearances with the clearances of MBPL. In this regard, the Department relies upon the following evidence; (1) the Directors of the appellant company, Shri Ajay Kumar, Shri.Rohit Kumar, Shri Guutam Gupta and Mrs. Neera Gupta have 53.85% of share holding in MBPL; (2) Both the companies have their registered offices located at the same address i.e. L-8, Green Park Extension, New Delhi-110006; (3) There are two common Directors, Shri Ajay Kumar and Shri Rohit Kumar; (4) 11 equity shareholders of the appellant company have shareholding in MBPL and (5) As per the annual reports of MBPL for the year 2001-02 and subsequent financial years, its plant and machinery had been mortgaged to a Bank as security for working capital loan for appellant company and also as per annual report of the appellant company M/s.BSBK for the same years, their plant and machinery has been mortgaged to a bank as security for the working capital limits sanctioned by the Bank to MBPL. On the basis of above, it has been alleged that two Companys have mutual interest in each others business and are owned by the same person.

7. In our view, when the department seeks to club the clearances of appellant company with the clearances of another company - MBPL for the purpose of determining their eligibility for SSI exemption, and the quantum of SSI exemption the show cause notice should have been issued to MBPL also whose clearances are sought to be clubbed with the clearances of the appellant company. But we find that no SCN has been issued to MBPL. In our view on this ground alone the departments case against the appellant company would not be sustainable.

8. In terms of the provisions of the SSI Exemption Notification, the clearances of two or more units can be clubbed for determining their eligibility of the exemption only if those units are owned by the same person. In this case, the evidence relied upon by the Department at the most indicates the mutuality of interest, but it does not prove that the appellant company and MBPL. are owned by the same person. Moreover, since there is no shareholding of the appellant company in MBPL, on the basis of individual shareholding of the Directors of the appellant company in MBPL, the latter cannot be treated as subsidiary company of appellant company. Similarly, the registered offices of both the companies being at the same address or that plant and machinery of one company having been pledged to the Bank as a security for the loan sanctioned by the bank to the another, by themselves cannot be treated as the evidence that both the units are owned by the same person or that the appellant have all purvasive financial operational and management control over MBPL or vise versa. In our view, therefore, the judgement of the Apex Court in the case of CCE, New Delhi vs. Modi Alkalies & Chemicals (supra) is not applicable to the facts of this case and, thus, even on merits also, there is no justification for clubbing the clearance of the appellant company with the clearance of MBPL for determining the eligibility for SSI exemption of the appellant company.

9. In view of the above discussion, the impugned order is not sustainable. The same is set aside. The appeal is allowed.

[Pronounced in the open Court].

(S.K.MOHANTY) (RAKESH KUMAR)

MEMBER (JUDICIAL) MEMBER (TECHNICAL)

Anita

??

??

??

??

0

9