2016 (11) TMI 695 - AT - Central Excise

Evasion of Central Excise duty - SSI exemption - clubbing of clearances - creation of dummy units - Held that - If the proposal is made to discount the legal existence for the purpose Central Excise levy and to take the main appellant as the legal entity behind all excisable operations, then it is necessary to issue notice, with allegations/evidences, to these purported dummy units also. These units are having legal existence with reference to other statutory authorities. It is all the more reason to put them in notice as their existence as an independent units is being questioned. It is a well settled principle that their legal status can be settled only upon issuing notice to them. It would appear that at the notice stage itself, it is presumptively concluded that these units have no existence and apparently do not require any notice. Such pre-judicial presumptions is against the principles of natural justice - reliance placed on the decision of the Hon ble Madras High Court in CCE, Chennai vs. Urbane Industries 2015 (11) TMI 1162 - MADRAS HIGH COURT . Demand set aside - Matter remanded back.

Summary

Issues:
Determining excise duty liability based on alleged creation/utilization of dummy units to avail SSI exemption.

Analysis:
The case involved four appeals against a common impugned order of the Commissioner of Central Excise, Delhi I, where the main appellant, engaged in printing activities, was accused of evading Central Excise duty by using dummy units to show split turnover for SSI exemption. The impugned order held that out of six units, two were not connected with the appellant, while the other four were considered dummy units, leading to the clubbing of clearances and confirmation of excise liability.

The Tribunal considered the relationships among the main appellant and the alleged dummy units, noting the familial connections and operational interlinkages. However, it found that the impugned order lacked a categorical examination of the scope of dummy units and extended armed units. The Tribunal emphasized the need for more concrete evidence to establish the alleged bogus existence of the four units, especially since they were separately registered for sales tax and income tax, conducted transactions through banks, and maintained various legal documents.

Highlighting the violation of principles of natural justice, the Tribunal noted that none of the units were issued show cause notices before the case was decided. Citing legal precedents, the Tribunal emphasized that the legal status of these units could only be determined after affording them a proper opportunity to be heard. Consequently, the impugned order was set aside, allowing the Original Authority to re-decide the issue after ensuring due process and providing an opportunity for all units and persons involved in the proceedings.

In conclusion, the Tribunal found the impugned order unsustainable due to the lack of adherence to natural justice principles and directed a re-decision while emphasizing the importance of affording all concerned parties a fair opportunity to present their case.