2024 (4) TMI 370 - CESTAT ALLAHABAD

SSI Exemption - value of clearances - error in calculation in SCN - clubbing of clearances - submission of appellant is that after excluding the value of clearances for export and the value of traded goods the value of clearances will be only Rs 1.41 crores which is well within the exemption limit as provided by the N/N. 8/2003-CE.

HELD THAT:- The appellant-I is engaged in the manufacture and clearance of plastics caps & closures for bottles falling under Chapter No. 39235010 and trading of plastic bottles falling under Chapter sub-heading 39233090 of first schedule to the Central Excise Tariff Act, 1985. Undisputedly the issue involved in the matter is for the financial year 2013-14 and 2014-15 (upto November 2014). It is also not in dispute that the M/s L S Plastics started the production in the year 2014-15 only and hence the issue of the clubbing of clearances of the Appellant – I with the clearances of M/s L S Plastics is only relevant for that period.

Value of Clearances - HELD THAT:- Appellants have before Commissioner (Appeals), not challenged the basis of demand as per para 14.4 of the Show Cause Notice they have only stated that they have submitted the copy the ledgers duly certified by the Chartered Accountant. Appellant could have pointed out from sale invoice wise chart, made in Annexure A1, Annexure A2 & Annexure A3 as to which were the export sales included in the value of clearances for making this demand. Even, except for referring to the table in para 14.1, there is no other submission made by the appellant. As we find that the basis of demand is para 14.4 read with Annexure A1, Annexure A2 & Annexure A3, which has not been challenged there are no merits in the submissions made by the appellant in this regards.

Clubbing of Clearances - HELD THAT:- There is no dispute that the beneficiary of all the activities undertaken by Appellant-I and M/s L S plastic is same family. Appellant 3 who is proprietor of M/s L S plastics is drawing remuneration of Rs 2,00,000/- and partnership interest to the extent of 10% in the partnership firm. It is also well established and not disputed appellant-II who enjoys partnership interest of 70% in the partnership firm and remuneration of Rs 4,00,000/- actually controls all the operation of M/s L S Plastic.

In MCDOWELL AND CO. LIMITED VERSUS COMMERCIAL TAX OFFICER [1985 (4) TMI 64 - SUPREME COURT], this Court examined the concept of tax avoidance or rather the legitimacy of the art of dodging tax without breaking the law. This Court stressed upon the need to make a departure from the Westminster principle based upon the observations of Lord Tomlin in the case of IRC v. Duke of Westminster that every assessee is entitled to arrange his affairs as to not attract taxes. The Court said that tax planning may be legitimate provided it is within the framework of law. Colourable devices, however, cannot be part of tax planning. Dubious methods resorting to artifice or subterfuge to avoid payment of taxes on what really is income can today no longer be applauded and legitimised as a splendid work by a wise man but has to be condemned and punished with severest of penalties.

As appellant-II and appellant-III were the persons responsible for planning for evasion of duty, penalties imposable under Rule 26 of the Central Excise Rules 2002. The fact is noted that penalty equivalent to the duty evaded has been imposed on the partnership firm in which appellant-II and appellant-III are partners. Penalty on appellant-II may be reduced to Rs. 50,000/- only and on appellant-III it reduced to Rs. 75,000/-. With above modification impugned order is upheld.

Appeal of appellant-I is dismissed and the appeals by appellant-II and appellant-III are partly allowed to the extent of reducing penalties imposed on them - appeal allowed in part.