Penalty on a dummy unit cannot survive once clearances are clubbed with the main concern.

A penalty imposed on a unit treated as a dummy concern of another business was held unsustainable. Once the unit was found to be non-genuine and its clearances were required to be clubbed with the main unit, separate penal action against the dummy unit was not justified. The tribunal noted that the real liability rested with the entity behind the fictitious arrangement and that no adequate justification had been given for the heavy penalties. The penalty on the appellant was therefore set aside.

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Issues: Whether penalty could be imposed on a unit held to be a dummy unit of another concern.

Analysis: The finding that the appellant was only a dummy unit meant that its clearances were to be clubbed with those of the main unit and the real liability rested with the entity creating the fictitious arrangement. Once the unit itself was treated as non-genuine, separate penal action against it was not justified. The settled position relied on held that penalty cannot survive against a dummy unit after such a finding, and the adjudicating authority gave no adequate justification for the heavy penalties imposed.

Conclusion: Penalty on the appellant was not sustainable and was set aside.

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