2018 (2) TMI 1022 - AT - Central Excise

Tribunal sets aside order for lack of show cause notices, emphasizing natural justice principles

Ambi Ply Panels and Doors, G. Madhan Kumar, V. Sivaa Kumar, G. Vinoth Kumar, V. Veeraraghavan, G. Chendil Kumar, The Veera Silver Frames, V. Veera Rajendran, G. Kasthuri, V. Anitha, Ambigai Lumber Board Works, V. Ganesan, M. Sujatha, S. Maheswari Versus CCE & ST Salem

The Tribunal allowed the appeals, setting aside the impugned order due to technical objections raised by the appellants regarding non-issuance of show ... SSI Exemption - Dummy units - clubbing of clearances - During the course of investigation, it appeared that some records namely delivery notes, invoices of unused receipts were not only related to APPD but also to another two units viz; The Veera Silver Frames (VSF) and Sri Ambigai Lumber Board Works (ALBW) - Department took the view that although three units in the names of APPD, VSF, ALBW were apparently engaged in manufacture of Plywood and Block Boards, in reality only one unit APPD was manufacturing the said products and that the other two units were dummy units - SCN was only issued to APPD and not to VSF and ALBW - penalty - principles of natural justice. Held that: - It has been a long received rule that no one is to be condemned, punished or deprived in any judicial proceeding unless, he has had an opportunity of being heard - This is the essence of the maxim Audi Alteram Partem, namely no man should be condemned unheard. The maxim, being a cardinal principle of justice, is required to be followed in all judicial proceedings - The Central Excise Act, 1944 also similarly requires that where recovery of duties not levied or not paid or short levied or short paid etc. is proposed to be recovered from any person the Central Excise officer shall serve notice on such person, inter alia requiring him to show cause why he should not pay the amount specified in the notice. In the two show cause notices dt. 08.11.2012 & 08.01.2013 and in the statement of demand dt. 30.12.2013 the proposals for imposition of penalties under Rule 25 / Rule 26 (1) of the Rules have been made against VSF, ALBW and also Managing Partners and Partners of VSF and ALBW. All these persons should have been separately asked to show cause in the notice why proposed penalty should not be imposed on them - there are a number of Tribunal decisions which have consistently held that non-issue of SCN on the affected persons would vitiate the proceedings. The penalties imposed cannot sustain on account of their having not been asked to show cause with regard to proposal to impose such penalty, the penalties are therefore set aside. The Hon'ble High Court of Bombay, in the case of CCE Mumbai Vs Sapna Engineering [2017 (3) TMI 782 - BOMBAY HIGH COURT] held that non-issue of SCN to the unit considered as a dummy unit vitiates the entire proceedings. Since the alleged 'dummy units' namely VSF and ALBW having not been put to notice by way of issue of SCN, the entire proceedings for clubbing of value of clearances of those units with that of APPD will get vitiated ab initio. Hence the proceedings which have culminated in the impugned orders confirming differential duty liability on APPD by reason of clubbing of clearances of VSF and ALBW with that of APPD along with the imposition of penalties on APPD cannot sustain. Appeal allowed - decided in favor of appellant. Issues Involved:1. Maintainability of proceedings due to non-issuance of show cause notices (SCNs) to all concerned parties.2. Clubbing of clearances of alleged dummy units with the main unit.3. Imposition of penalties on various individuals and entities without proper SCNs.Issue-Wise Detailed Analysis:1. Maintainability of Proceedings Due to Non-Issuance of Show Cause Notices (SCNs) to All Concerned Parties:The primary objection raised by the appellants was the maintainability of the proceedings due to the non-issuance of SCNs to all concerned parties. The appellants argued that the SCNs were issued only to Ambi Ply Panels and Doors (APPD) and not to the other two units, Veera Silver Frames (VSF) and Sri Ambigai Lumber Board Works (ALBW), which were alleged to be dummy units. The Tribunal emphasized the principle of natural justice, specifically the maxim 'Audi Alteram Partem,' which mandates that no one should be condemned unheard. The Tribunal cited various precedents, including the case of Expo Combines Vs CC Bombay, where it was held that mere marking of a copy of the SCN without specifically asking the parties to show cause is not sufficient and vitiates the proceedings. The Tribunal concluded that the penalties imposed on VSF, ALBW, and their partners could not be sustained due to the non-issuance of SCNs to them.2. Clubbing of Clearances of Alleged Dummy Units with the Main Unit:The appellants contended that VSF and ALBW were not dummy units and had separate premises, workforces, machinery, and registrations with various authorities. They argued that the issue of SCNs only to APPD without putting VSF and ALBW to notice, while alleging them to be dummy units, vitiated the proceedings. The Tribunal referred to several judgments, including the case of Poly Resins Vs CC Chennai, where it was held that non-issuance of SCNs to alleged dummy units and mere marking a copy of such notice without calling upon them to show cause vitiates the entire proceedings. The Tribunal agreed with the appellants' contention and held that the proceedings for clubbing the clearances of VSF and ALBW with APPD were vitiated ab initio due to the non-issuance of SCNs to the alleged dummy units.3. Imposition of Penalties on Various Individuals and Entities Without Proper SCNs:The Tribunal examined the imposition of penalties on various individuals and entities associated with APPD, VSF, and ALBW. The appellants argued that they were not given an opportunity to show cause why penalties should not be imposed on them, as required by law. The Tribunal reiterated the principle of natural justice and the necessity of issuing SCNs to all parties against whom penalties are proposed. The Tribunal referred to the case of CCE Mumbai Vs Sapna Engineering, where it was held that non-issuance of SCNs to the unit considered as a dummy unit vitiates the entire proceedings. The Tribunal concluded that the penalties imposed on the individuals and entities associated with VSF and ALBW could not be sustained due to the lack of proper SCNs.Conclusion:The Tribunal allowed the appeals on the technical objections raised by the appellants, setting aside the impugned order in respect of the proceedings against all the appellants. The Tribunal emphasized the importance of adhering to the principles of natural justice and the necessity of issuing SCNs to all concerned parties to ensure fair proceedings. The appeals were allowed on the grounds of non-issuance of SCNs to the alleged dummy units and the individuals associated with them, which vitiated the entire proceedings.