Specific notice required before clubbing clearances and denying SSI exemption in job-work unit disputes

Clubbing of clearances and denial of SSI exemption cannot be pursued unless the show cause notice specifically puts all affected units on notice of that basis. On a prima facie examination, the Tribunal found that the notice charged the units under penal provisions but did not clearly propose clubbing of the job-work units' clearances with the main unit, nor clearly state denial of SSI benefit on the footing of use of the main assessee's brand name. That procedural defect, supported by case law cited for the assessee, justified interim stay and keeping recovery in abeyance pending disposal of the appeals.

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Issues: Whether interim stay and waiver of pre-deposit should be granted where the show cause notice did not specifically propose clubbing of clearances of the job-work units with the main unit and the demand was founded on denial of SSI exemption.

Analysis: The show cause notice and the impugned order were examined on a prima facie basis. The notice charged the units under penal provisions but did not state that the clearance value of the individual units was required to be clubbed with the main unit. The notice also did not clearly set out denial of SSI benefit on the footing that the other units were using the brand name of the main assessee. On that footing, the Tribunal found a prima facie procedural defect in the Revenue's case, since clubbing of clearances cannot be sustained without putting all affected units on notice. The existence of supporting case law in favour of the assessee strengthened the prima facie case.

Conclusion: Interim stay was granted and recovery was directed to remain in abeyance pending disposal of the appeals.

Ratio Decidendi: Clubbing of clearances and denial of an exemption on that basis cannot be proceeded with unless the affected units are specifically put to notice in the show cause notice.

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