Clubbing of clearances against a non-noticee was unsustainable where exemption denial was made without notice, defeating the demand and penalty.

Clubbing of clearances and denial of Small Scale Industry exemption could not sustain the demand where the separate unit was not issued a show cause notice and was not made a party to the proceedings. An adjudication that extends liability to a non-noticee goes beyond the scope of the notice and is legally unsustainable; once the exemption denial against that unit fell outside the proceedings, the foundation for the demand also failed. The consequential penalty was likewise unsustainable, and the impugned order was set aside with consequential relief.

---

---

Issues: (i) Whether the demand and consequential penalty were sustainable when the clearances of a separate unit were clubbed and exemption was denied to that unit without issuing a show cause notice to it.

Analysis: The denial of Small Scale Industry exemption to the separate unit and the clubbing of its clearances with those of the appellant unit formed the basis of the demand. However, the separate unit was not made a noticee in the show cause proceedings. An adjudication that travels beyond the scope of the notice and determines liability against a non-noticee cannot be sustained. Since the exemption denial to the separate unit was itself outside the proceedings, the foundation for clubbing the clearances and raising the demand failed.

Conclusion: The demand was held unsustainable and no penalty could be imposed.

Final Conclusion: The impugned order was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: Liability cannot be fastened by clubbing clearances or denying exemption to a person who was not issued notice and was not a party to the proceedings; such adjudication is legally unsustainable.

---