Mutuality of interest for clubbing clearances requires stronger proof; separate units kept distinct records and operations.

Clearances of two partnership firms cannot be clubbed on mere assertions of mutuality of interest where each unit has separate excise and SSI registrations, separate tax assessments, separate premises, machinery and workforce. An interest-free loan, limited accounting help by an employee, and occasional assistance by a partner to his spouse were held insufficient to establish the common control or interdependence needed for clubbing. Common partners or common employees, by themselves, were not conclusive. On those facts, the clubbing of clearances was set aside, the duty demand was annulled, and the penalty was vacated.

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Issues: Whether the clearances of two partnership firms could be clubbed on the basis of mutuality of interest, and whether the duty demand and penalty raised on that basis were sustainable.

Analysis: The firms had separate excise registrations, separate SSI registrations, separate sales tax and income-tax assessments, separate premises, separate machinery and separate work force. The only circumstances relied upon for clubbing were an interest-free loan from one firm to the other, assistance by an employee in accounting work, and occasional help by a partner to his spouse in the affairs of the other firm. These facts were held insufficient to establish mutuality of interest. Common partners or common employees were treated as not conclusive, and the adjudicating authority's conclusion that the units were mutually interested was found unsustainable.

Conclusion: The clubbing of clearances was set aside, the duty demand was annulled, and the penalty was also vacated. The grievance of the second firm against the adverse finding was similarly redressed.

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