By TIOL News Service

CHENNAI, AUG 06, 2015: THE issue pertains to demand of duty on account of both clandestine clearances and clubbing of clearance of 21 units located in Tamil Nadu, Andhra Pradesh and Kerala on account of mis-use of small scale exemption benefit. Show Cause Notices had been issued to 13 Private Limited Companies, 8 proprietary concerns, one Shri M.S Jain and certain other persons. The demand was based on clubbing of clearances of the 21 manufacturing units. Apart from this demand, separate demands were also raised on 14 of the 21 units as also on Shri M.S. Jain in respect of goods which had allegedly been cleared by the 14 units clandestinely. The Commissioner in adjudication, confirmed demand against 7 units with penalties on them and also on Shri M S Jain. However, he dropped the demand on account of clubbing of clearances of 21 units.

Revenue challenged the order of Commissioner so far as it relates to dropping the demand on account of clubbing of clearances. Though revenue filed 21 appeals before the Tribunal, no appeal was filed in respect of Shri M.S.Jain.

The Tribunal vide its order- 2004-TIOL-769-CESTAT-MAD dismissed all 21 appeals by holding that the appeals of the Revenue, wherein clearances of goods by the 21 units are sought to be clubbed for the purpose of denial of SSI exemption on grounds integrally connected with the role of Shri M.S. Jain, cannot be maintained for want of appeal as against Shri M.S. Jain.

Revenue is in appeal before the High Court challenging the order of the Tribunal.

After hearing both sides, the High Court held:

It is of no consequence that merely because M.S. Jain, one of the person who suffered the penalty order, did not file any appeal, it does not change the colour of the stand of the department in the show cause notice. It is the specific case of the department that the clearances of all these units and the proprietory concerns should be clubbed together for the purpose of denying the benefit of notification. However, the Department can always sustain its allegations, de hors the statement of M.S.Jain, if there are other materials to support its case. Merely because the case of M.S. Jain has not been appealed against, it does not, and would not, dilute the case of the Department.

The Tribunal was clearly in error in holding that merely because no appeal has been filed against M.S. Jain, all the other appeals cannot be maintained. Accordingly, the matter is remanded to the Tribunal for considering the issue on merits.

(See 2015-TIOL-1767-HC-MAD-CX)