Clubbing of clearances and unproved clandestine removal cannot sustain duty demand or personal penalties

Jointly raising a differential duty demand by clubbing clearances of separate manufacturing units was unsustainable where the governing exemption precedent applied to the facts, so the small scale exemption denial was set aside. The allegation of clandestine removal also failed because the original authority had already found no reliable evidence of the goods, quantities, concerned units, or a legally sustainable basis to fasten liability, and no ground was shown to disturb that finding. With the duty demands set aside, the personal penalties could not survive independently, and consequential relief followed.

---

---

Issues: (i) Whether the clearances of the different manufacturing units could be clubbed for denying the small scale exemption and demanding differential duty; (ii) Whether the allegation of clandestine removal was established so as to sustain the duty demand and the connected personal penalties.

Issue (i): Whether the clearances of the different manufacturing units could be clubbed for denying the small scale exemption and demanding differential duty.

Analysis: The demand was raised jointly against several manufacturing units on the footing that they were independent units using the brand name of another concern and that their clearances had to be aggregated for eligibility under the exemption notification. The Tribunal held that the notice and demand were not sustainable because the duty had been demanded from all the units jointly, and the governing precedent on clubbing of clearances applied squarely to the facts.

Conclusion: The clubbing-based differential duty demand was unsustainable and was set aside.

Issue (ii): Whether the allegation of clandestine removal was established so as to sustain the duty demand and the connected personal penalties.

Analysis: The Original Authority had already dropped the clandestine removal demand for want of reliable evidence showing the particular goods, quantities, concerned units, and legally sustainable basis for fastening liability. No convincing ground was shown to disturb that finding. Once the duty demands were set aside, the personal penalties could not survive independently.

Conclusion: The clandestine removal demand and the connected penalties were set aside.

Final Conclusion: The Revenue's appeal failed, the assessees' appeals succeeded, and all duty demands and penalties were annulled with consequential relief.

Ratio Decidendi: Where a joint demand for clubbing of clearances is unsustainable on the governing exemption law and the clandestine removal allegation lacks proof, the duty demand and consequential penalties cannot be maintained.

---