2026-VIL-1852-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Clubbing of clearances of separately constituted units for SSI exemption under Notification No. 8/2003-CE - Appellant, a proprietorship manufacturing HDPE pipes and hoses, claimed SSI exemption, and the Department alleged that three other concerns of family members were dummy units and demanded duty on the combined clearances - Whether the clearances of the other concerns are liable to be clubbed with those of the Appellant - HELD - The concerns had different legal forms and ownership compositions, and family relationship or common ownership by themselves do not justify clubbing. Common layout and access, sharing of computers, accounting facilities and office staff, common marketing through dealers, reciprocal use of available vehicle capacity and the common hoarding do not by themselves establish that the units lacked independent existence. The invoices showed distinct brand names and logos, and no connection in the course of trade was established with the Appellant's brand. Trial balance entries do not disclose the nature of the transactions, and the Department did not establish by payment records that one concern discharged the electricity liability of another. Though financial flow-back is not an indispensable condition, the evidence as a whole is insufficient to establish that the concerns were dummy units - Clubbing is not sustainable and the demand attributable to it is set aside - Clandestine manufacture and removal on the basis of data in pen drives - Demand was confirmed on the basis of sales ledgers, purchase ledgers and financial records recovered from pen drives seized from the accounts officer of the concerns, with printouts signed by the proprietor - Whether clandestine manufacture and removal is established - HELD - The record does not establish that the devices were sealed at the time of seizure or explain their custody in the intervening period. The proprietor's signature shows only that the printouts were taken in his presence and does not establish that the data remained unchanged. The Department did not identify the source computer, the manner of extraction or produce the certificate under Section 36B(4) of the Central Excise Act, 1944, and electronic printouts cannot be relied upon without compliance with Section 36B. The statements were relied upon without addressing the safeguards under Section 9D, and the demand cannot be sustained solely on disputed statements where the electronic record is not independently corroborated. Parallel accounts without corroboration by evidence such as unaccounted raw-material procurement, production capacity, identified purchasers and receipt of sale proceeds are insufficient - The demand for clandestine removal and the consequential appropriation are set aside - Interest and penalties on the manufacturer under Section 11AC read with Rule 25 and on the proprietor and another person under Rule 26 of Central Excise Rules, 2002 - Penalties were imposed on the proprietorship concern, its proprietor and the then proprietrix of a related concern, who was alleged to have actively assisted the proprietor - Whether interest and penalties can be sustained - HELD - Penalty on the manufacturer and interest are founded on the demands confirmed, and as those demands are unsustainable they cannot survive. The notice and the impugned order do not identify the specific conduct satisfying the ingredients of Rule 26, and the finding that she actively assisted the proprietor does not specify the acts attributable to her. Relationship or association with the concerns without proof of the requisite conduct is insufficient - The interest and penalties on all the Appellants are set aside and all the three appeals are allowed.
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