Specific show cause allegations are required to deny exemption and sustain excise duty demand against alleged dummy concerns.

A show cause notice seeking denial of small-scale industry exemption and duty demand must contain specific, substantiated allegations linking each noticee to the alleged common control, dummy arrangement or suppression. The SC noted that vague assertions, unsupported corporate-veil allegations, and the absence of material showing the respondents' knowledge, behest or connivance were insufficient to found the demand. On that basis, the exemption challenge failed and the excise demand could not be sustained against the respondents.

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Issues: Whether the show cause notice and the material relied upon were sufficiently specific to justify denial of small-scale industry exemption and invocation of duty demand on the basis of alleged common control, dummy concerns, and suppression of facts.

Analysis: The allegations in the show cause notice did not specifically state the role of the noticees, nor did they show that the alleged arrangements were within their knowledge, at their behest, or with their connivance. The departmental case depended on connecting different concerns and on lifting the corporate veil, but no adequate material was placed on record to establish that the respondents were parties to any arrangement disentitling them from the exemption. The show cause notice was treated as the foundation of the demand, and vague or unsupported allegations were held insufficient to sustain proceedings or to deny the exemption.

Conclusion: The challenge to the grant of exemption failed, and the demand could not be sustained against the respondents.

Ratio Decidendi: A demand founded on a show cause notice must rest on specific and substantiated allegations showing the noticee's involvement in the alleged disqualifying arrangement; vague assertions and unproved linkage among concerns are insufficient to deny exemption or sustain excise duty proceedings.

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