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Amit Talwar Vs. CCE, Delhi-I - (Customs, Excise and Service Tax Appellate Tribunal) (08 May 2018)

In absence of mutuality of interest and financial flow back from one firm to another, clubbing of clearances is not permissible



In facts of present case, Trueline Appliances Private Limited (TAPL) and 3D International (3D) were engaged in the activity of importing and trading of various items like home appliances, shoes, furniture, hardware items, stationary items etc. Amit Talwar and Sumit Sehgal were the Directors of TAPL as well as Partners in 3D. The Departmental Officers carried out search operations at various premises associated with the TAPL as well as 3D and also residential premises of the Directors/Partners and recovered various documents as well as pen drives, computers etc. Subsequently, searches were also conducted at the premises of various C & F agents as well as super stockists. Statements were recorded from Directors as well as various connected persons including Marketing Manager. At the time of search operations, various goods were also seized at the godown premises of TAPL as well as 3D. After completion of investigation of the alleged Central Excise duty evasion, show cause notice was issued. Separate show cause notices were also issued proposing confiscation of the seized goods.

The case was adjudicated vide the impugned order in which duty demands were raised and penalty were imposed against TAPL, 3D, Directors and Partners. Penalties were also imposed on various C & F agents. The seized goods were ordered for confiscation. Aggrieved by the impugned order, appeals have been filed.

TAPL is a Private Limited company with Shri Amit Talwar and Sh. Sumit Sehgal as Directors. The same two persons are Partners in 3D. Both the entities are shown as functioning from the same premises; have both undertaken the activity of importing various goods and selling the same at higher prices after affixing MRP stickers. The goods imported in the name of both TAPL as well as 3D have been stored at the same godown where the MRPs have been manipulated and have also been sold through the same set of C & F agents even though the latter were appointed only by TAPL. It is established during the course of investigation that, the price lists circulated by TAPL have also been adopted for selling of goods imported in the name of 3D. The modus-operandi adopted is not challenged by the Appellants. It stands admitted that, such activity amounts to manufacture in terms of Section 2(f)(iii) of Central Excise Act, 1944 . The demand raised is w.e.f. June 2012.

It is settled position of law that, in the absence of mutuality of interest and financial flow back from one firm to another, clubbing of clearances is not permissible merely on the ground that, both firms are in the common premises and affairs of all firm are looked after by one person. It is further seen that, the goods imported through TAPL as well as 3D have been separately tabulated by the Revenue and demand also was tabulated on that basis but the value of clearances was finally clubbed for purposes of determining the entitlement to SSI exemption. Since, TAPL as well as 3D have separate existence and have separate registration for VAT, Income Tax etc. each one will be entitled to the benefit of SSI exemption separately.

Demand has been made jointly and severally from both TAPL as well as 3D. It is well settled that demand cannot be made jointly and severally. The demand can only be made from that entity which has manufactured the goods in question. The activity carried out by TAPL as well as 3D will amount to manufacture as per Section 2(f)(iii) of the Act and hence, Central Excise duty is required to be paid on the basis of MRP but such Excise duty payable is required to be computed after extending the benefit of SSI exemption separately to TAPL as well as 3D. Further, the demand made jointly and severally from two parties cannot be upheld. The case is required to be remanded to the Adjudicating Authority to work out the demand denovo separately from TAPL as well as 3D after extending the benefit of SSI exemption separately to the two companies.


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