2017 (12) TMI 328 - AT - Central Excise

SSI Exemption - dummy units - clubbing of clearances - Test of legality and propriety - Held that - it is seen that the entire case has been premised on the electricity consumption, or its lack thereof, in the two entities that were concerned in the alleged collaboration to evade duty. The peremptory disposal of the submission of the appellants on the justification for the electricity consumption and of the Chartered Engineer s certificate without having produced it before the adjudicating authority or during the investigation as inadmissible at the appellate stage is indicative of lack of application of mind. If the appellate authority was of the view that the defence of the appellant placed before him had not been made available to the lower authority, principles of natural justice requires that such evidence that are intended to counter the allegations leveled in the show cause notice should have been referred back to original authority or considered in detail. The impugned order fails the test of legality and propriety and is set aside to enable consideration of the material that is claimed by the Learned Consultant to be crucial - matter remanded back - appeal allowed by way of remand.

Summary

Issues:
1. Alleged creation of another unit to circumvent threshold limits for concession.
2. Liability to duty, interest, and penalties imposed on the appellant and individuals.
3. Appeal before the Commissioner of Central Excise & Customs.
4. Dispute regarding electricity consumption and production.
5. Lack of application of mind by the appellate authority.

Analysis:
1. The dispute revolved around the allegation that a separate unit, M/s SAS Polymers, was created by the appellant to evade threshold limits for concession. The lower authorities found that energy consumption figures indicated goods were manufactured by the appellant but cleared under M/s SAS Polymers' name, leading to the imposition of duty, interest, and penalties.

2. The Commissioner of Central Excise & Customs partially allowed relief to the appellant and individuals, reducing the liability and penalties based on entitlement to cum-duty benefit and the utilization of CENVAT credit. However, the penalties were still imposed on the individuals.

3. The appellate authority's decision heavily relied on the electricity consumption data between the entities involved. The finding was based on the lack of electricity consumption records, irregular activity patterns, and statements from ex-employees indicating a paper creation of M/s SAS Polymers to evade duty.

4. The appellate authority failed to consider crucial evidence, such as the Chartered Engineer's certificate, presented by the appellants to justify electricity consumption. The lack of detailed examination and the dismissal of the evidence without proper consideration indicated a lack of application of mind.

5. The judgment highlighted the importance of principles of natural justice, emphasizing that evidence intended to counter allegations should be thoroughly reviewed. Due to the appellate authority's failure to consider crucial material, the order was set aside, and the matter was remanded back to the original authority for a detailed reconsideration, ensuring the appellant has a fair opportunity to present its case.