Finetech Pipe Products vs Salem

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH – COURT No. I

Excise Appeal No. 41832 of 2017
(Arising out of Order-in-Original No. 25/2017 (CE-Commissioner) dated 25.04.2017 passed by
Commissioner of Central Excise, No. 1, Foulks Compound, Anai Road, Salem – 636 001)

M/s. Fine Tech Pipe Products ...Appellant
No. 1/359, Puliampatti Main Road,
Polavapalayam,
Nambiyur, Gobi Taluk,
Erode – 638 458.
Versus
Commissioner of GST and Central Excise ...Respondent
Salem Commissionerate,
No. 1, Foulke’s Compound,
Anai Medu,
Salem – 636 001.
With
i. Excise Appeal No. 41831/2017 (Shri V. Periyasamy Prop. Finetech Pipe Products)
ii. Excise Appeal No. 41838/2017 (Smt. P. Gowri Then Prop. of Finetech Pipe Products)

APPEARANCE:
For the Appellants : Mr. M. Karthikeyan, Advocate
For the Respondent : Ms. O.M. Reena, Authorised Representative
CORAM:
HON’BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
HON’BLE MR. AJAYAN T.V., MEMBER (JUDICIAL)

FINAL ORDER Nos. 41159-41161 / 2026

DATE OF HEARING : 06.05.2026
DATE OF DECISION : 30.10.2026

Per Mr. VASA SESHAGIRI RAO

The present three appeals arise out of Order-in-
Original No. 25/2017 (CE-Commissioner) dated 25.04.2017
passed by the Commissioner of Central Excise, Salem (the

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“impugned order”), concerning the period April 2010 to
March 2015. Appeal No. E/41832/2017 has been filed by
M/s. Finetech Pipe Products (FTPP), challenging the
confirmation of duty, interest and penalty. Appeal No.
E/41831/2017 has been filed by Shri V. Periyasamy,
proprietor of FTPP, and Appeal No. E/41838/2017 by Smt. P.
Gowri, then proprietrix of M/s. Finetech Polymers and
subsequently a director of M/s. Finetech Polymers Pvt. Ltd.,
challenging the personal penalties imposed upon them. As
the appeals arise from the same order and involve common
facts and issues, they are taken up together for disposal by
this common order.

2. Brief facts of the case are that M/s. Finetech Pipe
Products (FTPP), a proprietorship concern of Shri V.
Periyasamy, manufactured HDPE hoses and pipes falling
under Heading 3917 of the Central Excise Tariff Act, 1985, at
Nambiyur, Erode, and claimed SSI exemption under
Notification No. 8/2003-CE dated 01.03.2003. During a visit
in June 2013, officers found three other concerns operating
in or near the area: M/s. Finetech Polymers (FTP), later
converted into a private limited company; M/s. Hi-Life Pipe
Products (HPP), a partnership concern situated across the
public road at R.S. No. 25/2A and closed in 2013; and M/s.

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HiTech Agro Flux Products (HAFP), a partnership concern
which shifted across the road in September 2013 and
obtained an independent TANGEDCO electricity connection,
EB No. 772, from February 2014. On 05.09.2013, documents
and two pen drives were seized from Shri C.A. Baluswamy,
who was described as the accounts officer for the four
concerns. The pen drives were opened at the DPU office on
20.01.2015; as TALLY software was not installed, the files
could not then be read and only directory names were
printed. The devices were sealed at the close of that session.
On 23.03.2015, after TALLY software had been installed, the
devices were reopened and printouts relating to sales
ledgers, purchase ledgers and profit-and-loss accounts were
taken in the presence of Shri V. Periyasamy and signed by
him.

3. Show Cause Notice No. 54/2015 (CE-
Commissioner) dated 05.06.2015 proposed clubbing the
clearances of FTP, HAFP and HPP with those of FTPP, denial
of SSI exemption under Notification No. 8/2003-CE for May
2010 to March 2015, and recovery of Rs. 2,76,59,025/- on
the combined clearances. It separately proposed recovery of
Rs. 58,25,989/- for alleged clandestine clearances during
May 2010 to March 2012, substantially on the basis of the

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pen-drive data, and appropriation of Rs. 9,25,803/- towards
that demand. By the impugned order, the Commissioner
confirmed the demands, appropriated the said amount,
imposed a penalty of Rs. 3,34,85,014/- on FTPP, Rs.
1,00,00,000/- on Shri V. Periyasamy and Rs. 50,00,000/- on
Smt. P. Gowri. Cross-examination of Shri C.A. Baluswamy
was conducted on 27.02.2017. The three appeals challenge
the order to the respective extent indicated above.

4.1 The Ld. Advocate Shri M. Karthikeyan appearing
for the appellants, submitted that each concern had a
separate legal constitution and operated as an independent
manufacturing unit. The appellants relied on separate
registrations and licences, separate premises and machinery,
separate electricity connections, bank accounts, books of
account, raw-material purchases and sales, and independent
labour arrangements. They contended that the Department
had not established that goods shown as manufactured or
cleared by one concern were in fact manufactured or cleared
by another.

4.2 The Ld. Counsel submitted that the Department’s
case rested substantially on family relationships, proximity of
premises and administrative or commercial overlap. These

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circumstances, it was argued, were not sufficient without
cogent evidence that the concerns lacked independent
manufacturing existence or that their clearances were liable
to be clubbed under Notification No. 8/2003-CE. The
appellants relied upon the CBEC circular and judicial
precedents referred to in the record and submitted that the
separate registrations, accounts and transactions supported
their independent status. They denied any established
diversion of profits or common financial pool.

4.3 The Ld. Counsel also challenged the electricity-
consumption calculations and the electronic records
recovered from the pen drives. Electricity consumption, it
was submitted, could be only corroborative and could not,
without reliable production parameters and independent
evidence, establish actual production or clandestine removal.
The appellants disputed the authenticity, integrity and
admissibility of the electronic printouts, relying on Section
36B of the Central Excise Act, 1944, and challenged the use
of statements without compliance with the safeguards
governing their evidentiary use.

4.4 The Ld. Counsel further disputed the invocation
of the extended period and the personal penalties. It was

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submitted that the concerns had separate statutory
registrations and records, and that neither the necessary
intent to evade duty nor any specific conduct by Shri V.
Periyasamy or Smt. P. Gowri satisfying Rule 26 of the Central
Excise Rules, 2002, had been established.

5.1 The Ld. Authorized Representative Ms. O.M.
Reena supported the impugned order and submitted that the
investigation disclosed that the concerns operated under the
effective control and management of Shri V. Periyasamy and
were interconnected rather than independent manufacturers.

5.2 The Ld. Authorized Representative relied on
common or adjoining premises and access, security and
office facilities, common accounting staff, alleged sharing of
labour, electricity and expenses, common dealers and
marketing arrangements, use of transport vehicles across
the concerns, inter-unit entries and the alleged parallel sales
ledgers. According to the Revenue, the combined effect of
these circumstances, the electricity analysis, the statements
and the electronic records established that the concerns had
been created or used to distribute clearances, avail SSI
exemption beyond the permissible limit and remove goods
without payment of duty.

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6. Upon consideration of the rival submissions and
the record, the following questions arise for determination:-
i. Whether the clearances of FTP, HAFP and HPP are liable
to be clubbed with those of FTPP for the purpose of SSI
exemption under Notification No. 8/2003-CE dated
01.03.2003?
ii. Whether the Department has established clandestine
manufacture and removal of excisable goods,
warranting confirmation of the demand of Rs.
58,25,989/-?
iii. What is the effect of the findings on the demands,
limitation, interest and penalties imposed on FTPP, Shri
V. Periyasamy and Smt. P. Gowri?

7. We now proceed to examine the questions
framed for determination, seriatim.

Question No. (i): Whether M/s. Finetech Polymers Pvt. Ltd.
(FTP), M/s. HiTech Agro Flux Products (HAFP) and M/s. Hi-
Life Pipe Products (HPP) were dummy units of M/s. Fine
Tech Pipe Products (FTPP), warranting clubbing of their
clearances with those of FTPP for the purpose of SSI

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exemption under Notification No. 8/2003-CE dated
01.03.2003?
8. Before embarking on the discussion as to
whether common ownership or ownership amongst relatives
would be a decisive factor in clubbing the value of
clearances, it would be relevant to know the constitution of
the four units, as set out below: -
Sl.
No.
Name of the
unit
Constitution
as on the date
of detecting
the offence
Names and
relationship of
proprietors,
partners and
directors
Remarks
1 Finetech Pipe
Products (FTPP)
Proprietorship Mr. V.
Periyasamy,
proprietor
Started as a partnership firm in
1995 and converted into
proprietorship in 2008.
2 Finetech
Polymers Private
Limited(FTP)
Private
Limited
company;
Central Excise
Registration
Certificate
obtained on
29.10.2012
1. Mrs. P.
Gowri, wife of
Mr. V.
Periyasamy; 2.
Mr. V.
Periyasamy; 3.
Mr. P.
Rammurugu,
brother of Mrs. P.
Gowri; 4.
Mr. V.P.
Pasupathi, father
of Mrs. P. Gowri
Started as a partnership firm
with six partners in 2002.
Became a proprietary unit with
Mrs. P. Gowri as proprietrix in
2008. Dissolved in December
2012 and became a Private
Limited company in July 2013.
3 Hitech Agroflux
Products(HAFP)
Partnership 1. Mr. V.
Periyasamy; 2.
Mr. P.
Vellaisamy,
father of Mr. V.
Periyasamy
Started in 2009.
4 Hi-life Pipe
Products(HPP)
Partnership 1. Mr. V.
Periyasamy; 2.
Mrs. P. Gowri
Started as a partnership firm
with five partners in 1997. In
2008, reconstituted with the
present two partners.

9. On examination of the constitution of the units,
we find that the concerns had different legal forms and
ownership/partnership compositions during the material

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period. FTPP was a proprietorship concern of Shri V.
Periyasamy; FTP was initially a separate concern of Smt. P.
Gowri and was later converted into a private limited
company; HAFP and HPP were partnership concerns. The
appellants relied upon CBEC Circular No. 6/1992 (F. No.
213/15/92-CX.6) dated 29.05.1992, which clarifies that
concerns constituted with different combinations of family
members as partners are to be treated separately for
determining eligibility to SSI exemption. Reliance was also
placed on the decision of the co-ordinate Bench in CCE,
Mangalore v. Sushil Chemicals & Others, 2008-TIOL-1291-
CESTAT-Bang, wherein the Tribunal, while upholding the
Commissioner’s reliance on the said Circular, observed: -
“6.1…………….to put it differently, mutuality of interest
among two units or several units of a group of family
members cannot be a reason for clubbing the clearances.
Moreover, the law does not prohibit family members from
establishing different proprietary and partnership concerns.
No law can prevent the units of a group working for the
common benefit of the group….”

The above clarification and decision support the proposition
that family relationship or common ownership, by
themselves, do not justify clubbing the clearances of
separately constituted concerns. The applicability of this
principle must, however, be assessed against the evidence
concerning each unit’s constitution, manufacturing activity,

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financial arrangements and actual operations during the
period in dispute.

10. The adjudicating authority treated the concerns
as a single manufacturer by relying on common ownership or
family relationship, access and pathways, security
arrangements, building configuration and the absence of
clearly demarcated boundaries. It also referred to Section 4
of the Central Excise Act, 1944. Section 4 deals with
valuation; the question whether clearances of separately
constituted units can be clubbed must instead be answered
by applying Notification No. 8/2003-CE and the relevant legal
principles to the evidence. The common layout and access
arrangements, or the explanation concerning VASTU, cannot,
by themselves, establish that the concerns lacked
independent existence.

11. The Department also relied upon the alleged
sharing of an electricity connection between FTP and HAFP,
discrepancies between recorded production and power
consumption, the alleged absence of essential machinery,
entries relating to generators, and the non-production of
separate production and wage registers. These allegations
require examination with reference to the records and

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manufacturing facilities of each unit. We shall accordingly
examine the electricity and production records, the
availability of machinery and generators, and the labour and
manufacturing arrangements relating to HAFP and HPP to
determine whether the evidence establishes independent
manufacturing operations or supports the allegation that the
clearances of the four units are liable to be clubbed.

Common Office Facilities
12. The adjudicating authority sought to deny SSI
exemption on the ground that computers used for
maintaining accounts and preparing invoices were kept in a
common laboratory within the premises shared by the
Appellant and FTP, and that office staff were common to all
four units. We find that such arrangements, by themselves,
do not establish that the units lacked independent existence.
There is no prohibition against SSI units sharing accounting
facilities or office staff. Considering the scale of their
operations, maintaining separate computers and employing
separate staff for each unit could unnecessarily increase
overheads and impair their competitiveness. The
engagement of accountants to maintain accounts, statutory
records and returns for multiple units is also a recognised
business practice. Accordingly, the sharing of computers and

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office staff, without further evidence establishing financial or
operational integration, cannot justify clubbing the
clearances of the units.

Common Marketing
13. The adjudicating authority relied upon the
marketing of HDPE pipes and suction hoses by the four units
across Tamil Nadu, their supplies to M/s. Fine Pipe Agency at
Madurai, the Appellant’s visiting card describing that agency
as its depot, and the common transportation of goods to
dealers according to their orders. On this basis, it inferred
that the units marketed their products through a common
depot and dealers and should therefore be treated as a
single entity for SSI exemption. However, the findings
recorded in the impugned order also indicate that the goods
were supplied to dealers against specific orders and that
common marketing through the depot and dealers existed
only to some extent. We find that the use of a common
depot or the supply of goods to common dealers does not,
by itself, establish that the units were one manufacturer.
There is no prohibition against a dealer purchasing goods
from more than one independent manufacturer. In the
absence of evidence establishing financial flow-back,
centralised control over manufacture or other circumstances

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demonstrating that the units lacked independent existence,
common marketing cannot furnish a valid basis for clubbing
their clearances or denying SSI exemption.

14. The adjudicating authority relied upon the lease
deeds dated 20.03.2002 and 23.11.2002, observing that
persons who owned, or were partners in firms owning, the
leased buildings had also signed the deeds on behalf of the
lessee firms. It inferred mutuality of interest and concluded
that the four units had been fragmented to avail SSI
exemption irregularly. The appellants contended that the
deeds represented ordinary lessor-lessee arrangements and
that the appellants submitted that the adjudicating authority
had acknowledged that the deeds related to a period beyond
the scope of the proceedings. We find that the execution of
lease deeds by persons acting in their respective capacities
as lessors and lessees does not, by itself, establish mutuality
of interest or financial integration. The deeds, particularly
when they relate to a period outside the period under
investigation, cannot sustain the finding of clubbing without
other cogent evidence establishing that the units lacked
independent existence.

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Common Transportation Facilities
15. The adjudicating authority relied upon the use of
three vehicles owned by the Appellant, FTP and HAFP for
transporting goods belonging to the units, without inter-unit
freight charges, and concluded that the arrangement
demonstrated mutual dependence. The appellants explained
that each of these units owned a vehicle and that
consignments were accommodated in available space in
vehicles travelling to the same destination, thereby reducing
transportation costs. We find that reciprocal use of available
vehicle capacity by units that each own a vehicle is a
commercially reasonable arrangement and does not, without
more, establish that their independent identities have been
lost. The record does not establish that transportation was
centrally controlled in a manner demonstrating financial or
operational integration. The impugned order also does not
explain how goods manufactured by HPP were transported or
how its transportation expenses were accounted for. In the
absence of supporting evidence, the shared use of vehicles
cannot sustain the finding that the units were created to
evade duty.

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Common Brand Name
16. The adjudicating authority held that the four
units marketed their products under the brand name
“FINETECH”, relying upon the hoarding at the main gate,
writings on the premises, the logos appearing on invoices
and the common ISI certification number displayed on the
hoarding. The appellants disputed this conclusion,
contending that the units marketed their products under
distinct brand names.

17. We have examined the invoice images on record.
HAFP’s invoice bears the brand name “HITECH” and a distinct
logo, while FTP’s invoice bears “FINETECH POLY” with a
different logo. The ISI certification number and logo appear
on the Appellant’s invoice but not on those of HAFP and FTP.
These documents corroborate Shri Periyasamy’s statement
dated 20.01.2015 that HAFP and FTP marketed their
products under the respective names “HITECH” and “FINE
TECH POLY”, copies of which he furnished to the officers. The
word “FINETECH” appearing on the common hoarding and on
the premises does not, by itself, establish that the goods
manufactured by HAFP and FTP bore the Appellant’s brand.
Notification No. 8/2003-CE dated 01.03.2003 defines “brand
name” by reference to a name or mark indicating a

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connection in the course of trade between the goods and the
person using it. As the impugned order does not establish
such a connection between the goods manufactured by HAFP
and FTP and the Appellant, the allegation of common brand
usage cannot be sustained as a ground for clubbing their
clearances.

Inter-unit Transactions and Transfer of Funds
18. The adjudicating authority relied upon entries in
the trial balances for 2010–11 and 2011–12, certain inter-
unit receipts and payments, and the alleged payment of
electricity charges of one unit by another to infer mutual
financial flow and deny separate SSI benefits. The appellants
contended that the entries represented job-work charges and
other business transactions, that the nature of the
transactions could have been verified from the relevant
ledger accounts, and that isolated entries during two
financial years could not establish regular financial
integration throughout the demand period.

19. A trial balance records ledger balances but does
not, by itself, disclose the nature or purpose of the
underlying transactions. The statements and accounts
referred to in the record make the underlying ledger entries

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material to deciding whether the entries represented job-
work charges and ordinary business transactions, as
explained by the appellants, or financial arrangements
showing that the concerns were not independent. The
impugned order does not adequately reconcile the
explanations with the underlying entries or identify a
sustained pattern of profit diversion or common funding. The
absence of demonstrated flow-back is not treated as an
indispensable legal test in every case; it is one relevant
evidentiary circumstance to be assessed with the entire
record.

20. As regards electricity charges, the adjudicating
authority relied upon entries in the profit-and-loss accounts
of FTPP and FTP relating to payments allegedly made
towards the electricity expenses of other concerns. In his
statement dated 14.05.2015, Shri Periyasamy denied
interchange of payments and attributed the discrepancy to a
possible error in recording the service-connection number.
The impugned finding relies on the service-connection
number appearing in the accounts but does not establish, by
reference to the underlying payment records, that one
concern actually discharged another concern’s electricity

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liability. The entries, without that verification, do not
establish financial integration.

Manufacturing Activity of HAFP After Relocation
21. The adjudicating authority questioned the claim
that HAFP shifted its manufacturing activity to premises
across the road in September 2013, observing that
production continued to be recorded between September
2013 and January 2014 although the electricity connection at
the new premises was obtained only on 24.02.2014. It also
relied upon the production recorded in February 2014, when
the reported electricity consumption was only 35 units, to
infer that manufacturing might have continued in the original
common premises or that production by other units had been
accounted for in HAFP’s records. The appellants submitted
that HAFP alone manufactured suction hoses, that the other
units were not equipped to manufacture those products, and
that HAFP used its own generator pending the electricity
connection.

22. In his statement dated 27.09.2013, Shri
Periyasamy identified suction hoses as the product
manufactured by HAFP and stated that each concern had a
separate generator. The impugned order questions the

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supporting documentation for the generators, but the
evidence must be considered in its entirety and not merely
by the absence of a particular invoice or by an inference
from electricity consumption alone. The Department has not
established that the other concerns possessed the machinery
necessary to manufacture HAFP’s identified product or that
HAFP’s recorded production was actually undertaken by
another concern. The electricity figures, in the
circumstances, do not independently establish that HAFP
lacked manufacturing activity.

Insufficiency of Evidence for Clubbing
23. The appellants further submitted that paragraph
11 of the Show Cause Notice recorded that the evidence then
available was insufficient to establish clubbing, necessitating
a further visit by the officers on 30.12.2014. They contended
that the subsequent visit yielded no additional material
sufficient to substantiate the allegation. We have considered
this submission along with the evidence discussed in the
preceding paragraphs. The fact that a further investigation
was undertaken is not, by itself, determinative; what matters
is whether the evidence ultimately gathered and relied upon
establishes that the units lacked independent existence or
that their clearances were liable to be clubbed. The material

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must therefore be assessed cumulatively, in the light of the
nature and evidentiary value of the individual circumstances
examined above. The ultimate conclusion on clubbing must
follow from that assessment.

24. The DPU visited the premises on 13.06.2013 and
05.09.2013; during the latter visit, invoices, RG-1 registers
and two pen drives were seized. Statements were recorded
from Shri V. Periyasamy, Smt. P. Gowri and Shri C.A.
Baluswamy on the dates recorded in the impugned
proceedings. The offence case was registered on 22.01.2014,
and the officers revisited the premises on 30.12.2014. The
pen drives were examined in January and March 2015, and
further statements of Shri Periyasamy were recorded. This
chronology shows the course of the investigation but is not,
by itself, proof either of clubbing or of clandestine removal.
The material gathered must be assessed for what it actually
proves in relation to each allegation.

25. The Ld. Counsel relied upon several decisions.
Since the legal principles emerging therefrom are
substantially consistent, reference is made only to the
leading case laws directly governing the issues involved.

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26. The following decisions of the Co-ordinate
Benches of the Tribunal deal with the principles governing
clubbing of clearances of separately constituted units for
determining eligibility to SSI exemption. The decisions in
M/s. Jagjivandas & Co. and M/s. Electro Mechanical Engg.
Corpn. were followed by dismissal of the Department’s
appeals by the Hon’ble Supreme Court, while the decision in
M/s. Jagatjit Auto Industries was followed by dismissal of the
Department’s statutory appeal by the Hon’ble Punjab and
Haryana High Court. These decisions elucidate the
evidentiary principles applicable in determining whether
separately constituted units are, in substance, independent
manufacturers or dummy units of another concern. We
consider the relevant decisions below: -
i. M/s Jagjivandas & Co., Thane Vs CCE, Bombay II - 1985
(19) E.L.T. 441 (Tribunal)
The issue arising for decision in that case whether the
clearances of 2 other units should be clubbed with the
clearances of the appellant so as to deny the benefit of
erstwhile Notification No. 176/77 dated 18.06.77 which
granted exemption based on value of clearances as in
this case. Appellant in that case contended that the units
were separate and distinct, and therefore benefit under
the said notification should not be denied. The

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adjudicating authority, held the issue against the
appellant, inter alia, on the grounds that: they have a
common telephone (2); some of the partners of the
three concerns are common (3); the office premises in
Bombay are common (6); some of the machineries of
the appellant were used by the other 2 units (7); a letter
was written to the Government of Maharashtra by
Jagjivandas & Co. requesting the Government to
combine the units of energy consumed by the five units
(belonging to the same management) for calculating
their quota of electric energy (8); and mutual flow of
funds amongst the units without charging interest.
Allowing the appeal, CESTAT observed and held as
follows: -
“6………………It is well known that in bigger cities telephones
are difficult to obtain and, therefore, if the three firms
which consist of relations gave out common telephone as
their address, it cannot be considered a strong
circumstance for concluding that their manufacture or
clearances were on behalf of one. About Item 6 (common
office premises), we agree with his argument that in most
of commercial towns and cities this practice is common
and this by itself would not prove that firms are one and
the same. This circumstance would have to be ignored.
About the eighth item of the evidence about the letter
written to Government of Maharashtra for combining units
of energy consumed by 5 units (there were two more units
namely, Kamlesh Metal Industries and Jeevan Fabricators;
these two have not been proceeded against in these
proceedings)- in these days of shortage of power if for
making proper use of power, a letter like the one under
reference was addressed to Maharashtra Government, the
same would not weigh against the appellants for
concluding their clearances to be common…….About Item

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3,….. There are a number of decisions that commonness of
partners would not invariably show that the clearances of
the firms are on behalf of one another. Considering all the
circumstances, we do not attach much importance to this
piece of evidence……. Occasional use of Jagjivan Dass and
Co’s buffing machine by the remaining two firms by itself
would not make the three concerns working for and on
behalf of one another on this circumstance alone…….While
frequent use might raise a strong inference against a party
but from stray use such conclusion may not be possible to
be drawn. …….Shri Lakshmi Kumaran, learned S.D.R.
argued that there was free mutual flow of finance between
the three concerns without charging any interest and
therefore it had to be held that they were under the same
management. Shri Sahni, learned Advocate for the
appellants in this connection explained that such
commercial transactions were common in trade circles. In
any case the partners in the three firms were close
relatives and these transactions were accounted for in the
accounts books. In our opinion these are their duty as
common mutual transactions between three firms and the
mere fact that they did not charge interest against one
another on these transactions when they are doing so
against others could not be a conclusive circumstance to
find against the appellants that their clearances were for
and on behalf of one another.”

Civil Appeal filed by the department against the afore-
said decision was dismissed by the Hon’ble Supreme
Court, vide 1989 (44) ELT A24 (S.C).

ii. M/s. Amar Plast Industries – 2000 (115) ELT 482
(Tribunal)
In that case, the benefit of erstwhile SSI notification
no. 175/86 dated 01.03.1986 was proposed to be
denied alleging that the appellant, after reaching the
exemption limit, deliberately and wilfully fragmented
their units by sharing finance, shed, machineries etc.

24


and created a new unit, namely, M/s. Film Plast
Packaging with the sole and mala fide intention of
evading Central Excise duty on the goods manufactured
by them by taking advantage of the afore-said
notification. The adjudicating authority, having held the
issue in favour of the appellant, department
approached CESTAT challenging the decision of the
adjudicating authority to not club the value of
clearances. Rejecting the appeal filed by the
department, CESTAT held as under: -
“11. This ground of Revenue that all the three units have
common office premises, common telephones, common
electric generator and cutting and mixture machines and
as such clubbing of their clearances deserves to be allowed
is legally not tenable in the light of the law laid down by
the Tribunal in Jagjivandas & Co., Thane v. CCE, Bombay,
1985 (19) E.L.T. 441 (Tribunal)….”.


iii. M/s. Electro Mechanical Engg. Corpn. (& 3 others) –
2003 (152) ELT 194
Facts of the case show that M/s Electro Mechanical
Engg. Corpn. (appellant no.1) was, inter alia, engaged
in the manufacture of Iron and Steel Structure. On
receipt of information that appellant no.1 had floated
two front units [appellant nos. 2 and 3 in the appeal) in
order to fraudulently avail the benefit of SSI Exemption
Notification No. 1/93-C.E., dated 28-2-1993, surprise

25


raid was carried out on the premises of all the 3 firms.
During investigation, it was revealed that all these
firms were situated in the inter-connected premises,
had common office / office-equipments, closely related
partners and common employees. It also became
known that appellant no. 4 (upon whom penalty was
imposed), who was the proprietor of appellant no. 1,
was also a partner in the other 2 firms (appellant nos.
2 & 3). SCN was issued demanding duty alleging that
the proprietor of the firm was managing the affairs of
all the 3 units and fraudulently availed the benefit of
the afore-said SSI exemption notification.
Appellants contested the correctness of the show cause
notice arguing that: all the three firms were
independent and there was no flow back of money from
one firm to another; they were carrying on their
business independently and purchasing the raw
material also independently; no mutual finance interest
was involved between these firms and as such the firms
could not be treated as dummy units of the appellant;
and the work was being looked after by Shri Rajwansh
Bedi, as he besides being the proprietor of the
appellant was also a partner in the other two firms but
each firm was purchasing the raw material with its own

26


money.The adjudicating authority, however, did not
accept the version of the appellants and confirmed the
demand by clubbing the value of clearances of all the 3
firms (appellant nos.1 to 3) as he found that: appellant
no. 1 during the Period January, 1997 to March, 1997
borrowed Rs. 13 lakhs from appellant no. 3 and also
lent almost an equal amount to appellant no. 2 without
charging interest; all the three firms had a common
accountant who was drawing salary from the appellant
no. 1; one pressing machine belonging to appellant no.
2 was found installed in the premises of appellant no.
1; appellant no. 2 had no facility of shearing machine,
press machine and roll forming machine; and a few
orders procured by appellant no. 1 were later on
executed by appellant no. 3. Allowing the appeals filed
by the appellants (1 to 4), CESTAT observed and held
as under: -
“7. There is no tangible evidence on the record to prove
the financial flow back from one firm to another which is
most essential for clubbing the clearances of the units. In
this context, reference may be made to the case of Indian
Metal Indus. v. CCE, Bhuvaneshwar, 1999 (108) E.L.T. 593
(T), wherein it has been so ruled. Similarly, in the case of
CCE, Rajkot v. Amar Plast Indus., 2000 (115) E.L.T. 482
(T), it has been held that use of common premises,
telephone, common electric generator and cutting/mixing
machines are not enough for clubbing the clearances of the
units in the absence of evidence of financial flow back from
one unit to another.
8. On the strength of proximity of relationship or the
situation of the units or because there were some common

27


employees, the value of clearance of two units cannot be
clubbed unless there is evidence to prove that there was
mutuality of the business interest and the units were
having financial flow back. In this context, reference may
be made to the case of Renu Tandon v. UOI, 1993 (66)
E.L.T. 375 (Raj.), wherein it has been so ruled by the
Rajasthan High Court. The Tribunal has also in the case of
SKN Gas Appliances v. CCE, New Delhi, 2000 (120) E.L.T.
732 (T), has taken the view that sale of plant and
machinery by one unit to another, use of telephone of one
unit by another, the situation of Head Office of both the
units in the same premises, some of the employees being
common, were insufficient to hold that one unit was
merely fecade of the other. Similarly, in the case of Rang
Udyog v. CCE, Ahmedabad, 1996 (83) E.L.T. 648 (T), it
has been observed that the allegations that the partners in
the two partnership firms were related to each other or
common, that there were common workers, common
machineries, and that the same person was looking after
the affairs of both the firms, were not sufficient for
ordering the clubbing of the clearances of both the firms in
the absence of the evidence that the firms were funding
the expenses of each other or that there was flow back of
the profit or money from one firm to another. This
judgment of the Tribunal had been even upheld by the
Apex Court as reported in 1999 (106) E.L.T. A-66. This
very view has been reiterated in the case of CCE,
Ahmedabad v. Ambica Scale Mfg. Works, 1996 (86) E.L.T.
229 (T) and Binod Kumar Maheswari v. CCE, Calcutta,
1997 (90) E.L.T. 83 (T).
9. In the case of Prabhat Dyes & Chemicals v. CCE, 1992
(62) E.L.T. 469 (T), it has been held by the Tribunal that
relationship between the persons of one firm and
proprietor of another firm, combined purchase of raw
material, interest free loan by one to the other were
insufficient to club the value of the clearances of both the
firms, when they both were separately registered as SSI
units and also with the Income-tax and Sales Tax
authorities. This very view has been taken by the Tribunal
in the case of G.D. Indus. Engineers, Faridabad v. CCE,
Chandigarh, 1983 (14) E.L.T. 1994 (Tribunal).
10. Therefore, keeping in view the ratio of the law laid
down in the above referred cases the circumstances relied
upon by the Commissioner, could not be said to be
conclusive for clubbing the value of the clearances of three
firms (appellants no. 1 to 3). …………”.

28


Civil Appeals filed by the department against the afore-
said Order of CESTAT were dismissed by the Hon’ble
Supreme Court, vide 2008 (229) ELT 321 (SC).

iv. M/s. Jagatjit Auto Industries – 2014 (309) ELT 301 (Tri.
Del)
This was a case wherein the department clubbed the
clearances of the Appellant unit owned by the son with
the clearances of M/s Saron Mechanical Works owned
by the father, the units having been established at
different points of time as in the present appeals under
discussion. Commissioner (Appeals), having held the
issue in favour of the appellants, the department filed
appeals with CESTAT. While dismissing the appeals filed
by the department, a Co-ordinate Bench of CESTAT
observed as follows: -
“5…………..Merely because a common electricity connection
was used by both the units by itself will not make it a
dummy of another. Similarly, a common accountant or a
common store-room for raw materials cannot be held to be
reason for clubbing the clearances of both the units, when
there is no dispute about both the units being complete in
themselves and manufacturing goods independently of
each other.”

Statutory Appeals filed by the department against the
afore-said Order of CESTAT were dismissed by the
Hon’ble Punjab & Haryana High Court as reported in

29


2016 (332) ELT 80 (P&H) in the case of CCE Vs Saron
Mechanical Works.

27. The ratio emerging from the foregoing decisions
is that clubbing of clearances for SSI exemption must be
based on evidence showing that the units were not genuinely
independent. Family relationships, common premises,
facilities, staff or business transactions, by themselves, are
insufficient. The evidence must be considered as a whole to
determine whether the units were actually operating as a
single manufacturing concern. No single circumstance is
conclusive; its significance must be assessed along with the
other evidence on record.

28. Applying these principles, we have considered
the relationships between the persons connected with the
four concerns, their shared facilities, accounting, marketing,
transportation, inter-unit transactions and manufacturing
activities. The issue is whether the evidence as a whole
establishes that the concerns were operating as a single
manufacturer during the relevant period.

29. The Department relied, inter alia, on data
recovered from the pen drives, stated to contain sales

30


ledgers, purchase ledgers and financial records of the
concerns. The appellants dispute the evidentiary value of the
printouts, including on the ground of non-compliance with
Section 36B of the Central Excise Act, 1944. Shri V.
Periyasamy’s signature on the printouts is a relevant
circumstance; however, the evidentiary value of the records
must be assessed in the light of the manner of retrieval and
production, the objections concerning authenticity and
admissibility, and the explanations regarding the entries. The
signature alone does not resolve those issues.

30. The location and infrastructure of the concerns
must be considered with reference to the relevant period.
M/s. Hi-Life Pipe Products was situated across the public road
and closed in 2013, while M/s. HiTech Agro Flux Products
shifted across the road in September 2013 and obtained an
independent TANGEDCO electricity connection from February
2014. These circumstances are relevant to determining
whether the concerns operated independently during the
period in dispute. Their significance must be assessed
alongside the evidence concerning each unit’s manufacturing
facilities, production and financial affairs.

31


31. On an overall assessment of the evidence
discussed in the preceding paragraphs, we find that the
Department has not established that the four concerns were
merely dummy units or that their separate existence
concealed a single manufacturing arrangement. This
conclusion does not rest on treating financial flow-back as an
indispensable condition for clubbing, but on the insufficiency
of the evidence as a whole to establish the allegation.
Accordingly, the clubbing of clearances for the purpose of
Notification No. 8/2003-CE dated 01.03.2003 is not
sustainable. Question No. (i) is answered in favour of the
appellants, and the demand attributable to such clubbing
cannot be sustained.

Question No. (ii): Whether clandestine manufacture and
removal have been established?
32. The demand of Rs. 58,25,989/- for alleged
clandestine clearances during May 2010 to March 2012 is
based substantially on data extracted from two pen drives
seized from Shri C.A. Baluswamy, Accounts Officer of the
units. We examine the chronology of seizure and extraction
recorded in the Order-in-Original, the appellants’ objections
to the admissibility of the electronic evidence and

32


statements, and the corroborative material relied upon by
the Revenue.

33. The Order-in-Original records that the pen drives
were seized under Mahazar dated 05.09.2013 and first
opened at the DPU office on 20.01.2015, when the files could
not be accessed for want of TALLY software. It records that
the devices were then sealed and reopened on 23.03.2015,
after installation of the software, when printouts were taken
in the presence of Shri V. Periyasamy and signed by him.
The record does not establish that the devices were sealed at
the time of seizure or explain their custody and preservation
during the intervening period.

34. Shri Periyasamy’s signature on the printouts
establishes, at most, that the printouts were taken in his
presence and signed by him on that occasion. It does not, by
itself, establish that the underlying data remained unchanged
from seizure until extraction. The impugned order does not
adequately explain the custody of the devices during the
intervening period or establish that the data extracted in
March 2015 was identical to the data present at the time of
seizure.

33


35. The appellants objected that the printouts were
inadmissible for non-compliance with Section 36B of the
Central Excise Act, 1944. They contended that the
Department had not identified the primary computer system
from which the data originated, established who created the
files or when they were created, or explained the transfer of
the data to the pen drives; they also contended that the
certificate contemplated under Section 36B(4) had not been
produced. The impugned order relies on the printouts being
signed by Shri Periyasamy but does not adequately address
the source, continuity, extraction process and statutory
certification required by Section 36B.

36. The relevant statutory safeguards and their
application to electronic records were examined by this
Tribunal in the case of Commissioner of GST and Central
Excise, Chennai v. Umashankar Alloys Pvt. Ltd., 2026 (2)
TMI 472 (CESTAT Chennai). The following passages from
that decision, reproduced in the material placed before us,
are relevant: -
“ 14 . The central pillar of the Department’s case is the
reliance placed on computer printouts stated to have been
taken from pen drives seized during investigation. The
Appellant has contended that such electronic evidence
cannot be admitted unless the mandatory conditions of
Section 36B of the Central Excise Act, 1944, are strictly
fulfilled.

34


15 .We find that Section 36B is a special statutory provision
governing the admissibility of electronic records in excise
proceedings. The provision requires that electronic outputs
such as printouts or computer-generated statements can
be treated as documents only if the computer system was
regularly used, the information was fed in the ordinary
course of activities, the system was operating properly,
and the output is shown to be a faithful reproduction.
Further, Section 36B(4) mandates a certificate identifying
the electronic device, describing the manner in which such
electronic record was produced, and certifying its
authenticity by a responsible official. These safeguards are
substantive protections against manipulation and
fabrication of electronic evidence.
16 .In the present case, we find that the Department has
not identified any primary computer system from which
the alleged data originated. The pen drives seized are
merely secondary storage devices, and the Department
has not established who created the files, when they were
created, or whether they formed part of the regular
accounting or production system of the Appellant. Further,
no certificate as contemplated under Section 36B(4) has
been produced, and the manner of extraction, transfer,
and printing of data has not been explained. In such
circumstances, the statutory mandate has not been
complied with, and therefore the printouts cannot be
treated as admissible evidence.
17 .We find that the issue regarding the admissibility of
electronic evidence in the absence of statutory certification
is no longer res integra, in view of the binding precedent
laid down by the Chennai Bench of this Tribunal in
Geetham Steels Pvt. Ltd. v. CCE, reported in 2025 (3) TMI
1098 (CESTAT Chennai), as well as several other
consistent decisions. The Tribunal has categorically held
that computer printouts or electronic data retrieved from
pen drives or other secondary devices cannot be relied
upon unless the mandatory requirements of Section 36B,
particularly the certificate under Section 36B(4), are
strictly complied with.
18 .In Geetham Steels, the Tribunal held that printouts
recovered from pen drives or hard disks are inadmissible
unless strict compliance with Section 36B is shown, and
that in the absence of the statutory certificate under
Section 36B(4), such electronic material cannot be relied
upon to confirm duty demands. The Tribunal observed that
electronic records, unless duly certified, do not constitute
substantive evidence capable of sustaining clandestine
manufacture allegations.”

35


37. In Umashankar Alloys Pvt. Ltd., the Tribunal also
extracted the following observation from Popular Paints and
Chemicals v. Commissioner of Central Excise and Customs,
Raipur, Excise Appeal No. 52738 of 2016, decided on
06.08.2018: -
“Electronic records being more susceptible to tampering,
alteration, transposition, excision etc., without such
safeguards, the whole adjudication based on proof of
electronic records can lead to travesty of justice. The
provisions of Section 65B of the Evidence Act and Section
36B of the Central Excise Act are pari materia.”

The Tribunal further recorded that, in the absence of the
mandatory certificate, computer printouts cannot be treated
as admissible evidence under Section 36B.
The relevant discussion in Umashankar Alloys also states:
“19.3 In the present case also, it is an admitted position
that the required certificate under Section 36B(4) of the
Central Excise Act has not been produced. Therefore, no
reliance can be placed on the electronic printouts relied
upon by the Department.”

The decision further referred to Anvar P.V. v. P.K. Basheer,
(2014) 10 SCC 473, and Arjun Panditrao Khotkar v. Kailash
Kushanrao Gorantyal, (2020) 7 SCC 1), concerning the
statutory requirements for secondary electronic evidence
under Section 65B of the Indian Evidence Act, 1872. It also
considered Composite Impex and Shri Rajiv Dhuper v.
Principal Commissioner of Customs (Import), New Delhi,
2025 (5) TMI 1538 (CESTAT Delhi), on electronic records

36


seized from pen drives and the need to comply with the
applicable statutory safeguards. The Tribunal concluded: -
“19.8 Accordingly, we hold that the electronic printouts
relied upon by the Department cannot be treated as
substantive evidence, and cannot legally sustain the
charge of clandestine manufacture and removal.”

38. The ratio in Commissioner of GST and Central
Excise v. Umashankar Alloys Pvt. Ltd., 2026 (2) TMI 472
(CESTAT Chennai), is that electronic printouts obtained from
pen drives cannot be relied upon as evidence unless the
mandatory requirements of Section 36B of the Central Excise
Act, 1944, particularly Section 36B(4), are satisfied. Applying
this ratio, the impugned order does not establish compliance
with Section 36B(4) or identify the source computer and the
manner of extraction and preservation of the data. The
presence of Shri V. Periyasamy during printing and his
signature on the printouts do not, by themselves, cure these
deficiencies. Accordingly, the printouts cannot be relied upon
to sustain the demand.

39. The appellants challenged reliance on statements
of Shri V. Periyasamy, Smt. P. Gowri and Shri C.A.
Baluswamy, invoking Section 9D of the Central Excise Act,
1944, and relying upon Geetham Steels Pvt. Ltd., 2025 (3)
TMI 1098 (CESTAT Chennai), Meena Fire Works Industries,

37


2025 (3) TMI 1058 (CESTAT Chennai), and Hitech Mineral
Industries, 2024 (1) TMI 82 (CESTAT Chennai). We note that
the impugned order does not adequately explain the
statutory basis on which the statements are relied upon as
substantive evidence without addressing the safeguards
under Section 9D following the procedure as laid down in
Geetham Steels Pvt. Ltd. Supra . In any event, the demand
cannot be sustained solely on disputed statements where the
central electronic record itself has not been shown to satisfy
the statutory conditions and is not independently
corroborated.

40. Apart from the objection to the admissibility of
the parallel accounts, the Department must establish
clandestine manufacture and removal through reliable
evidence. The alleged parallel accounts, without
corroboration, are insufficient to establish the quantities
actually manufactured and cleared without payment of duty.
Such corroboration may include evidence of unaccounted
raw-material procurement and consumption, production
capacity, transportation, identified purchasers, delivery of
goods and receipt of sale proceeds. The appellants relied
upon R.A. Castings Pvt. Ltd., 2008 (6) TMI 197 (CESTAT New
Delhi), and Umashankar Alloys Pvt. Ltd., (Supra). In the

38


present case, the evidence discussed in the impugned order
does not sufficiently establish that the quantities recorded in
the alleged parallel accounts were actually manufactured,
physically removed and sold clandestinely.

41. On a cumulative consideration, the Department
has not established that the electronic printouts satisfy
Section 36B of the Central Excise Act, 1944, or that their
source, continuity and extraction have been proved. The
statements and other circumstances do not independently
cure those deficiencies, and the alleged clandestine
clearances are not supported by sufficient independent
corroboration. The demand of Rs. 58,25,989/- for alleged
clandestine manufacture and removal during May 2010 to
March 2012 is therefore unsustainable. Question No. (ii) is
decided in favour of the appellants. The consequential
appropriation of Rs. 9,25,803/- must also be set aside.

Question No. (iii): Whether the demand, limitation, interest
and penalties are sustainable?
42. The Show Cause Notice dated 05.06.2015
covered clearances from May 2010 to March 2015 and
invoked the extended period under Section 11A(4) of the
Central Excise Act, 1944, alleging distribution of clearances

39


among the concerns, non-filing of SSI declarations under
Notification No. 36/2001-CE (N.T.) after crossing the
clearance limit of Rs. 90 lakhs, and delayed registration of
FTPP. Although separate registrations and records
maintained with other authorities do not, by themselves,
establish disclosure to the Central Excise Department, non-
filing of an SSI declaration does not automatically establish
the ingredients necessary for invoking the extended period.
Since both demands fail on merits for the reasons already
recorded, it is unnecessary to determine the precise
limitation applicable to each clearance or undertake a
separate clearance-wise computation of the normal period.

43. The penalty of Rs. 3,34,85,014/- imposed on
FTPP under Section 11AC of the Central Excise Act, 1944,
read with Rule 25 of the Central Excise Rules, 2002, is
founded on the demands confirmed in the impugned order.
As those demands are unsustainable, the penalty and
consequential interest cannot survive. The penalties imposed
on Shri V. Periyasamy (Rs. 1,00,00,000/-) and Smt. P. Gowri
(Rs. 50,00,000/-) under Rule 26 of the Central Excise Rules,
2002, are also unsustainable. The notice and impugned order
do not adequately identify the specific conduct satisfying the
ingredients of the applicable sub-rule of Rule 26. In

40


particular, the finding that Smt. Gowri “actively assisted”
Shri Periyasamy does not specify the acts attributable to her
that would attract the rule. Their relationship or association
with the concerns, without proof of the requisite conduct, is
insufficient. The appellants’ reliance on Amrit Foods v. CCE,
2005 (190) E.L.T. 433 (S.C.), and the other decisions cited
in their submissions, including those concerning the
requirement of identifying goods liable to confiscation, is
considered in this context.

44. In view of our findings on Questions Nos. (i) and
(ii), the demand arising from clubbing of clearances and the
demand for alleged clandestine removal are set aside.
Consequently, the duty demand, interest and penalties
imposed on FTPP, Shri V. Periyasamy and Smt. P. Gowri
cannot be sustained. As the demands fail on merits, no
separate determination of the precise limitation cut-off for
each clearance is necessary. Question No. (iii) is answered in
favour of the appellants.

45. For the foregoing reasons, Order-in-Original No.
25/2017 (CE-Commissioner) dated 25.04.2017 is set aside in
so far as challenged in these appeals. The demand of Rs.
2,76,59,025/- on clubbed clearances and the demand of Rs.

41


58,25,989/- for alleged clandestine manufacture and
removal are set aside. The appropriation of Rs. 9,25,803/-
towards the latter demand is also set aside. The penalties of
Rs. 3,34,85,014/- on M/s. Finetech Pipe Products, Rs.
1,00,00,000/- on Shri V. Periyasamy and Rs. 50,00,000/- on
Smt. P. Gowri, together with consequential interest, are set
aside. The appellants shall be entitled to consequential relief
in accordance with law. All three appeals are allowed.
(Order pronounced in open court on 30.10.2026)



Sd/- Sd/-
(AJAYAN T.V.) (VASA SESHAGIRI RAO)
MEMBER (JUDICIAL) MEMBER (TECHNICAL)

MK