Clubbing of clearances for SSI exemption failed where independent units were not served notice before demand and penalties were imposed.

Clubbing a small-scale unit's clearances with those of other independent manufacturing units for denial of SSI exemption was held unsustainable where no show cause notice had been issued to those other units. Because their clearances were directly proposed to be included and their separate existence and control were in dispute, they were entitled to notice and an opportunity to meet the allegation that all units were owned and controlled by one person. A unilateral clubbing determination without hearing the affected units was impermissible. The Revenue's precedent was distinguished because it concerned dummy units without separate existence. The demand and penalties were set aside for want of notice.

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Issues: Whether the demand and penalties based on clubbing the clearances of the appellant with those of other independent manufacturing units could be sustained when no show cause notice was issued to those other units.

Analysis: The dispute concerned a small-scale unit whose clearances were proposed to be clubbed with the clearances of six other existing firms and companies for denial of SSI exemption. The decisive defect was that no show cause notice had been issued to those other units, even though their clearances were directly sought to be included and their separate existence and control structure were in issue. The absence of notice deprived them of an opportunity to meet the allegation that all units were owned and controlled by one person. A unilateral determination on clubbing, without hearing the units whose clearances were to be added, was held to be impermissible. The precedent relied upon by the Revenue was distinguished because it involved dummy units without separate existence.

Conclusion: The proceedings were vitiated for want of notice to the other units, and the demand and penalties could not be sustained.

Final Conclusion: The appeal succeeded and the impugned order was set aside.

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