2017 (3) TMI 1209 - AT - Central Excise

Validity of proceedings - The appellants contested the legality of the proceedings itself on the ground that notice has not been served to 4 units whose existence has been questioned and whose turnover has been clubbed with the turnover of the main appellant - SSI exemption - dummy units - Held that - Hon ble Calcutta High Court in the case of CCE, Kolkata II vs. Diamond Scaffolding Co. reported in 2011 (7) TMI 854 - CALCUTTA HIGH COURT upheld the Tribunal s finding regarding the un-tenability of duty demand by clubbing clearance of other units without issue of show cause notice to such units. No notice has been served to the 4 units who were held to be dummies and whose turnover is added to arrive at the excise duty liability of the main appellant - The present adjudication is without the participation of the alleged dummy units, for a fair and proper decision. In our view, such non-issue of notice/non-participation of the other units whose turnover was added to turnover of main appellant, resulting in the present demand, puts the whole proceedings in legal jeopardy. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Violation of principles of natural justice in proceedings against the appellant, Clubbing turnover of multiple units without serving show cause notice to all units involved, Legal validity of Central Excise duty demand and penalty imposition, Applicability of case laws regarding notice issuance to alleged dummy units in proceedings.

Analysis:

The judgment by the Appellate Tribunal CESTAT New Delhi dealt with multiple issues arising from a case where the main appellant, engaged in manufacturing cardboard cartons, was alleged to have used various dummy units managed by its directors to evade Central Excise duty. The Commissioner confirmed a duty liability of ?1,21,62,597 and imposed penalties on the main appellant and its directors. The appellants contended that the proceedings violated principles of natural justice as show cause notices were not served to the other units whose turnover was clubbed to determine SSI exemption eligibility.

The learned Counsel argued that the clubbing of turnover without notice to the alleged dummy units was a violation of natural justice. They cited various case laws emphasizing the necessity of issuing show cause notices to all units involved before alleging them as dummies. The appellants maintained that the proceedings lacked legal validity due to the absence of participation by the other units whose turnover was added to the main appellant's turnover.

The Appellate Tribunal, after considering submissions from both sides and examining relevant case laws, found the absence of notice to the alleged dummy units as a valid legal objection. Citing precedents like CCE, Kolkata vs. Diamond Scaffolding Co., the Tribunal emphasized the importance of giving an opportunity to all concerned parties before determining duty liabilities. The judgment highlighted that the non-participation of the other units in the adjudication process jeopardized the legal validity of the proceedings, rendering the impugned order unsustainable.

In conclusion, the Appellate Tribunal set aside the impugned order, ruling that the proceedings were invalid due to the failure to issue notices and involve all relevant units in the adjudication process. The judgment underscored the significance of upholding principles of natural justice and ensuring fair participation of all parties involved in excise duty proceedings to maintain the legality and validity of the decision-making process.