2002 (10) TMI 97 - SC - Central Excise

Whether both the units are separate and independent? Held that - At the stage of issuance of show cause notice particularly when the view of the Department is that one firm is a fictitious business firm or a dummy of the other it would be easier and more appropriate to examine the matter together. Therefore it was not necessary to split up the show cause notice in respect of M/s. Komalagowre Textiles and M/s. Selvaganapathy Textiles. However if appropriate objections are raised before the authorities concerned the same may be examined and if necessary separate proceedings may be held in regard to M/s. Komalagowre Textiles and M/s. Selvaganapathy Textiles. When the stand of the Department is that one firm is a fictitious business firm or a dummy of the other it was not proper for the High Court to have interfered at the stage of issue of show cause notice. Liability to pay duty would depend upon the finding of facts which can be arrived at after adjudication is complete. Therefore the show cause notice for the period 1-4-99 to 31-3-2000 could not have been quashed by the Division Bench. Appeal allowed. Set aside the order made by the Division Bench and restore that of the learned Single Judge.

Summary

Issues:
1. Joint show cause notice under the Central Excise Act, 1944 to two textile units.
2. Legality of joint proceedings against separate textile units.
3. Validity of show cause notice for the period 1999-2000.
4. Jurisdiction of the High Court to interfere with the show cause notice.
5. Liability determination based on findings after adjudication.

Analysis:

1. The appellant issued a joint show cause notice under the Central Excise Act, 1944 to two textile units, alleging that dummy units were used for duty evasion. The Department contended that both units were under the control of the respondent, justifying joint liability.

2. A Writ Petition challenged the joint proceedings, arguing that the units operated independently with separate registrations. The High Court directed the Department to bifurcate the notice for separate units, citing a previous decision. The Single Judge dismissed the petition, emphasizing the right to raise objections and issue separate notices if necessary.

3. On appeal, the Division Bench differentiated between two assessment periods. It held the respondent liable for the earlier period but not for the later period due to a change in registration. The Division Bench stressed the importance of factual findings post-enquiry for liability determination.

4. The Supreme Court found the High Court's interference premature, stating that liability hinges on post-adjudication facts. It emphasized the need for a comprehensive examination before determining duty payment obligations.

5. The Supreme Court set aside the Division Bench's decision, reinstating the Single Judge's ruling. The Court allowed the appeal without costs, highlighting the importance of thorough examination and factual findings in determining liability under the Central Excise Act, 1944.