SSI exemption and clubbing of clearances cannot sustain demand where the entity was never made a noticee.

SSI exemption could not be denied to an entity that was not made a noticee in the show cause notice, and clubbing its clearances with those of the noticee was beyond the scope of the proceedings. Because the clubbing itself was unsustainable in law, the duty demand raised on that basis could not be maintained. The consequential interest and penalties also fell with the main demand, as they were founded on the same defective premise. The appeals were therefore allowed.

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Issues: Whether the demand, interest and penalties could be sustained when SSI exemption was denied to a unit that was not made a party to the show cause notice and its clearances were clubbed with those of the noticee.

Analysis: The denial of SSI exemption to LASTPL and the clubbing of its clearances with LSCPL were found to be beyond the scope of the proceedings, since LASTPL was not made a noticee in the show cause notice. An adjudication that proceeds against a non-noticee on the basis of denial of exemption to that entity cannot be sustained in law. Once the clubbing itself was held unsustainable, the demand raised against LSCPL and the penalties imposed on the appellants also could not survive.

Conclusion: The demand and penalties were held to be unsustainable, and the appeals were allowed.

Ratio Decidendi: Duty demand cannot be sustained on the basis of denial of exemption and clubbing of clearances of an entity that was not made a party to the show cause notice.

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