Clubbing of clearances and extended limitation upheld where facade units concealed main-unit manufacture; demand reworked on cum-duty basis.

Where goods were found to have been cleared by the main unit in the guise of two facade units, clubbing of the three units' clearances was sustained and the extended limitation period was held invocable because the arrangement showed suppression and intent to evade duty. Prior departmental awareness of registrations and returns did not defeat limitation in those circumstances. However, when the demand was re-quantified, the sale price had to be treated as cum-duty price and the excise duty element deducted from the assessable value. Duty demand and penalties were upheld in principle, but the quantum required recomputation on a cum-duty basis.

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Issues: (i) Whether the clearances of the three units could be clubbed and treated as clearances of one unit for excise duty purposes; (ii) whether the extended period of limitation was invocable; (iii) whether the assessee was entitled to cum-duty benefit in re-quantification of duty.

Issue (i): Whether the clearances of the three units could be clubbed and treated as clearances of one unit for excise duty purposes?

Analysis: The Revenue's appeal against the first adjudication was treated as having been filed against all noticees, and the earlier order stood set aside in remand. Once the matter went back to the stage of the show cause notice, the adjudicating authority was free to take an independent view. On the evidence appreciated in the impugned order, the other two units were found to be facade units and the goods cleared in their names were held to have been manufactured by the main unit. The dropping of the Modvat demand against the other units did not alter this finding, because the duty demand was founded on clandestine removal by the main unit.

Conclusion: Clubbing of clearances was upheld against the assessee.

Issue (ii): Whether the extended period of limitation was invocable?

Analysis: The finding of clandestine manufacture and clearance in the guise of other units established suppression of facts and intention to evade duty. In those circumstances, the departmental officers' prior awareness of registrations and returns did not prevent invocation of the extended period.

Conclusion: The extended period of limitation was correctly invoked against the assessee.

Issue (iii): Whether the assessee was entitled to cum-duty benefit in re-quantification of duty?

Analysis: The demand had to be recalculated on the footing that the sale price represented cum-duty price, so that the duty element was excluded from the assessable value. The settled legal position required deduction of excise duty from the sale price while reworking the demand and consequential penalty.

Conclusion: Cum-duty benefit was allowed in favour of the assessee.

Final Conclusion: The duty demand and related penalties were sustained in principle, but the quantification was directed to be recomputed by extending cum-duty benefit.

Ratio Decidendi: Where goods are found to have been cleared by the main unit in the guise of other units, clubbing and invocation of the extended period are sustainable, but the assessable value must be reworked on a cum-duty basis.

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