Natural justice bars clubbing clearances of alleged dummy units without notice and hearing to those units.

Excise liability based on clubbing the clearances of alleged dummy units cannot be sustained where those units were treated as having no independent existence without being given notice and hearing. The record showed separate sales tax and income tax registrations, banking transactions, and documents in the units' own names, so denial of their separate status for central excise purposes required observance of natural justice. In the absence of such notice to the connected units and persons, the clubbing demand and impugned order were set aside, while the matter was left open for fresh decision after hearing all concerned.

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Issues: Whether the order confirming excise liability by clubbing the clearances of alleged dummy units could be sustained when no show cause notice had been issued to those units and their independent legal existence was disregarded without hearing them.

Analysis: The alleged connected units were separately registered for sales tax and assessed separately for sales tax and income tax, and the record showed banking transactions and documents in their names such as purchase files, sales bills, bank receipts, job work challans and income tax returns. If their legal existence was to be denied for central excise purposes and their clearances were to be clubbed with those of the main appellant, notice and opportunity had to be given to those units and persons as well. The absence of such notice amounted to a violation of natural justice, and the pre-judgment that the units had no independent existence could not be sustained.

Conclusion: The clubbing demand and the impugned order were set aside for breach of natural justice; the matter was left open for fresh decision after notice and hearing to all concerned.

Final Conclusion: The assessee succeeded because the adjudication was vitiated by denial of hearing to the alleged dummy units, though the authority was permitted to re-decide the dispute afresh in accordance with law.

Ratio Decidendi: A determination that alleged dummy units have no independent existence for excise purposes cannot be sustained without notice and hearing to those units, where their separate legal existence is otherwise evidenced by independent registrations and records.

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