2018 (9) TMI 489 - AT - Central Excise

Natural justice prevails in excise duty case; show cause notice crucial for fair decision

The Tribunal emphasized the importance of natural justice principles in determining excise duty liability by requiring the issuance of show cause notices ... Validity of SCNs - repeated SCNs - principles of audi alteram partem - SSI Exemption - Clubbing of Clearances - Held that:- The grounds of appeal are repetition of allegation in the SCN. Further, this Tribunal has observed that earlier Order-in-original (first round) dated 09.01.2009 was bad for violation of principles of natural justice audi alteram partem - appeal of Revenue is dismissed - decided against Revenue. Issues:1. Clubbing of turnover of multiple units for excise duty liability determination.2. Compliance with principles of natural justice in issuance of show cause notices.3. Applicability of clubbing of incomes of dummy units with principal unit for duty calculation.Issue 1: Clubbing of turnover for excise duty liability:The case involved the clubbing of turnover of six units to determine excise duty liability, with initial findings holding four units as dummy units. However, the Tribunal in the first round of litigation observed that the legal status of these units can only be determined after issuing show cause notices, emphasizing the principles of natural justice. The Tribunal set aside the earlier order and granted liberty for re-decision following due process.Issue 2: Compliance with principles of natural justice:In the re-adjudication proceedings, the Commissioner dropped the proceedings initiated by the show cause notice, questioning whether the units were dummy and if their income should be clubbed with the principal unit. The Commissioner found that there was no evidence of financial flow between the units, and the allegation of interconnectedness lacked clarity. The Commissioner emphasized the importance of issuing show cause notices and following natural justice principles before concluding the legal status of the units.Issue 3: Applicability of clubbing incomes of dummy units:The Revenue appealed the adjudication order, arguing that duty can only be demanded from the principal unit when clubbing multiple units' clearances. The respondent-assessee, supported by case law, contended that clubbing could only occur if one unit was the principal unit and the other a dummy unit. The Tribunal upheld the impugned order, citing the need for clarity on principal-dummy unit distinction before demanding duty. The Tribunal dismissed the appeal, emphasizing the violation of natural justice in the initial order and finding no merit in the Revenue's claims.In summary, the judgment addressed issues related to clubbing turnover for excise duty liability, the importance of following natural justice principles in issuing show cause notices, and the necessity for clarity on principal-dummy unit distinction before demanding duty. The Tribunal dismissed the Revenue's appeal, upholding the impugned order and emphasizing the need for due process and clarity in determining excise duty liabilities.