2015 (11) TMI 1162 - HC - Central Excise

SSI Exemption - Valuation - clubbing of clearances - inclusion of value of clearances - Dummy units - Non Speaking order - Held that - If there is an element of independent existence of a unit, the Department has to issue Show Cause Notice to such unit to sustain the plea for the purpose of clubbing the clearances. In the instant case, though there is material to that effect, no notice has been issued and the Tribunal remanded the matter for issuance of notices and that has been accepted by the assessee and not by the Department. - department should have issued notice to all the units. However, learned counsel appearing for the respondent / assessee states that in respect of the other matter for which no appeal has been filed, they are not aggrieved and that the order of the Tribunal need not be set aside only on the ground that it has called upon the department to issue notice to the two units namely CTGC and GCC. According to him, the issue is only regarding the clubbing of clearances which could be agitated on merits before the authority as and when Show Cause Notice is issued in terms of the orders of the Tribunal. The authority concerned is directed to issue show cause notice to allthe parties, afford them an opportunity of hearing and pass appropriate orders afresh, on merits and in accordance with law. - Matter remanded back.

Summary

Issues Involved:
1. Necessity of separate show cause notices to dummy units.
2. Validity of the Tribunal's order remanding the matter without providing reasoning.

Issue-wise Detailed Analysis:

1. Necessity of Separate Show Cause Notices to Dummy Units:
The primary issue concerns whether separate show cause notices are essential for dummy units when their clearances are clubbed with the main assessee. The Tribunal's order remanded the matter for issuance of fresh show cause notices to M/s. Core Tech Glass Composites Pvt. Ltd. (CTGC) and M/s. Glass Composites Company (GCC), which the Department contested. The Tribunal's decision aligns with previous judgments emphasizing the necessity of issuing show cause notices to all involved entities. In Ogesh Industries vs. Collector of Central Excise, Kanpur, the Tribunal held that without a show cause notice to the alleged dummy unit, the proceedings are invalid. Similarly, in Ramsay Pharma (P) Ltd. vs. Commissioner of Central Excise, Allahabad, the Tribunal invalidated proceedings due to the absence of a show cause notice to the other unit when clubbing clearances. The consistent view is that to sustain the plea for clubbing clearances, the Department must issue notices to all units, ensuring due process and adherence to principles of natural justice.

2. Validity of the Tribunal's Order Remanding the Matter:
The second issue questions whether the Tribunal's remand order is a non-speaking order, lacking discussion on the original authority's reasoning for not issuing separate show cause notices. The Tribunal's two-page order remanded the case for issuing fresh show cause notices without elaborating on the original authority's findings. The High Court noted that the Tribunal should have provided its reasoning or findings, aligning with the principle that orders must be reasoned and speaking. The High Court referenced several decisions, including Alpha Toyo Ltd vs. Collector of Central Excise, New Delhi, where the Tribunal emphasized that mere managerial control or common directors are insufficient to deem units as dummy without evidence of profit sharing or total control. The High Court concluded that the Tribunal's remand for issuing notices was appropriate, but it should have provided a detailed rationale.

Conclusion:
The High Court directed the concerned authority to issue show cause notices to all parties involved, providing them an opportunity for a hearing and passing appropriate orders afresh, on merits and in accordance with law. The appeal was disposed of with these observations, emphasizing the necessity of due process and detailed reasoning in judicial orders.