2016 (1) TMI 384 - AT - Central Excise

SSI Unit - dummy units - Clubbing of clearance - SCN was issued to one of the partners of M/s Prashant Industries only calling upon to show-cause for imposition of penalty, though penalty has been dropped by the adjudicating authority. - Held that - it is settled law that when the Revenue proposes to club the clearances of two units, the show-cause notice has to be issued to both the units. Clubbing clearance of M/s Prashant Industries, without issuing any show-cause notice to them, with the clearance of the present appellants, also affects M/s Prashant Industries inasmuch as the order holds M/s Prashant Industries as a dummy unit. To hold them so without, following the principle of natural justice cannot be appreciated. - Demand of duty and penalty set aside - Decided in favor of assessee.

Summary

Issues:
1. Clubbing of clearances of two units for duty demand and penalty imposition without issuing show-cause notice to both units.

Analysis:
The judgment by the Appellate Tribunal CESTAT Bangalore dealt with the confirmation of duty demand and penalty imposition against the appellants, M/s Arjun Industries, by clubbing their clearance with another unit, M/s Prashant Industries. The key issue raised was the failure to issue a show-cause notice to M/s Prashant Industries before clubbing their clearances with the appellants'. It was noted that M/s Prashant Industries had not been served any show-cause notice proposing to club their clearance with that of the appellants. This lack of notice violated the principle of natural justice, as established in legal precedents such as Hindustan Foam Industry Vs. Collector of Central Excise and Commissioner Vs. Shiva Exim Enterprises. The Tribunal emphasized that when Revenue intends to club clearances of two units, show-cause notices must be issued to both units to ensure fairness and adherence to natural justice principles.

The judgment highlighted that clubbing the clearance of M/s Prashant Industries without proper notice not only affected the appellants but also unjustly labeled M/s Prashant Industries as a dummy unit. The Tribunal referenced previous decisions to support the importance of following natural justice principles in such cases. Citing the Tribunal's decision in Hindustan Foam Industry case and the Supreme Court's confirmation in Commissioner Vs. Shiva Exim Enterprises, the judgment underscored the significance of issuing show-cause notices to all concerned units when clubbing clearances for duty demand and penalty imposition. The failure to do so was deemed a violation of natural justice and unfair to the units involved.

In light of the above analysis, the Appellate Tribunal CESTAT Bangalore set aside the impugned order and allowed the appeal in favor of the appellants, M/s Arjun Industries. The judgment granted consequential relief to the appellants, emphasizing the importance of upholding natural justice principles in matters of duty demand and penalty imposition. The decision served as a reminder of the necessity to ensure procedural fairness and adherence to legal principles, particularly when clubbing clearances of multiple units for regulatory purposes.