Clubbing of clearances requires notice to the other unit first, or the exercise fails for breach of natural justice.

Clearances of two units cannot be clubbed for central excise purposes to deny small-scale exemption unless the unit whose independence is questioned is issued a show cause notice and heard. The Tribunal held that where separate existence, premises and registrations are relied on, natural justice requires notice to the other unit before its clearances are treated as part of the assessee's turnover. The precedent on splitting notices was distinguished because both units had been served there, unlike the present case. The clubbing exercise was therefore vitiated for breach of natural justice, and the impugned order was set aside on that aspect, while the undisputed duty demand was sustained.

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Issues: Whether the clearances of the appellant and the other unit could be clubbed for central excise purposes without issuing a show cause notice to the other unit.

Analysis: The demand related to clubbing of clearances of two units for the purpose of denying small-scale exemption. The Tribunal found that the other unit was independently established, with separate premises and registrations, and that the earlier remand had required compliance with natural justice. The authority relied on a precedent concerning splitting of notices, but the Tribunal held that that precedent was distinguishable because notice had been issued to both units there, whereas in the present case no notice had been issued to the other unit whose clearances were sought to be clubbed. When the very existence or independence of the other unit is questioned, that unit must be given an opportunity to answer the allegation before its clearances are clubbed.

Conclusion: The clearances could not be clubbed without issuing a show cause notice to the other unit. The impugned order was set aside on that ground and the appeal was allowed, though the undisputed duty demand was upheld.

Final Conclusion: Non-issuance of notice to the other unit vitiated the clubbing exercise, so the adjudication could not stand on that aspect.

Ratio Decidendi: Where the department seeks to club the clearances of two units and the independence of the other unit is in dispute, the unit concerned must be put to notice and heard before clubbing can validly be ordered; otherwise the proceedings are vitiated for breach of natural justice.

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