1992 (1) TMI 126 - HC - Central Excise

Exemption - SSI exemption - Clubbing of clearances - Writ jurisdiction - Show cause notice stage - Held that - Mere blood relationship or sharing of staff, some temporary common employment, similarity of product is also not sufficient to draw an inference that the two units should be clubbed together

Issues Involved:
1. Maintainability of the writ petition against a show cause notice.
2. Clubbing of clearances of two industrial units for excise duty purposes.
3. Jurisdiction of the Central Excise authorities in issuing the show cause notice.

Issue-Wise Detailed Analysis:

1. Maintainability of the Writ Petition Against a Show Cause Notice:

The respondents raised a preliminary objection regarding the maintainability of the writ petition against the show cause notice, arguing that the petitioner should first submit objections to the authority and, if necessary, appeal under the Central Excises and Salt Act, 1944. They cited the case of Assistant Collector of Central Excise, Chandan Nagar v. Dunlop India Ltd. and Others, where it was held that Article 226 should not be used to circumvent statutory procedures unless there are extraordinary circumstances. The court also referenced the decision in Dalmia Industries Ltd. v. Union of India, emphasizing that statutory remedies should be exhausted before seeking judicial intervention.

In contrast, the petitioner cited cases such as Laxmindra Theertha Swamiar v. Commissioner, Hindu Religious Endowments, and Raj Packwell v. Union of India, arguing that a writ of prohibition is appropriate when an inferior tribunal exceeds its jurisdiction. The court noted that in cases where jurisdiction is exceeded, alternative remedies are irrelevant, and immediate judicial intervention is warranted to prevent unnecessary harassment.

2. Clubbing of Clearances of Two Industrial Units for Excise Duty Purposes:

On the merits, the petitioner argued that merely because two concerns are owned by different family members, they cannot be considered a single establishment. The petitioner cited several cases, including Khoja Lime Udyog v. R.P.F. Commissioner and Pratap Press v. Delhi Press Worker's Union, which held that two units cannot be considered one merely due to common ownership or proximity. The petitioner emphasized that there was no mutuality of business interest, common funding, or financial flow-back between the two units.

The respondents, however, contended that the units should be treated as one due to their close relationship, shared premises, and common management. They cited Quality Steel Industries v. Collector of Central Excise, arguing that these factors justified clubbing the clearances.

The court found that the facts mentioned in the show cause notice did not justify the presumption that the two units should be treated as one. The court emphasized that there was no evidence of common funding or financial flow-back, which are crucial for such a determination. The court referenced several decisions, including International Dyestuff Mfg. Co. v. Collector of Central Excise, to support this conclusion.

3. Jurisdiction of the Central Excise Authorities in Issuing the Show Cause Notice:

The court examined whether the Central Excise authorities had jurisdiction to issue the show cause notice. It concluded that the notice was issued without any substantial basis or material evidence to support the claim that the two units should be clubbed. The court noted that the petitioner had complied with all legal requirements, including obtaining a separate licence, registering the unit, and maintaining separate accounts.

The court held that the issuance of the show cause notice was unjustified and beyond the jurisdiction of the Central Excise authorities. The court emphasized that it would be a waste of time and resources to require the petitioner to contest the notice before the excise authorities, given the lack of evidence supporting the notice.

Conclusion:

The writ petition was allowed, and the show cause notice dated 29-8-1990 was quashed. The petitioner was entitled to the exemption as provided under the Rules and in accordance with the law. The court underscored that judicial intervention was necessary to prevent unnecessary harassment and to uphold the legal rights of the petitioner. The parties were left to bear their own costs.

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