Small scale exemption and clubbing of clearances: separate exemption limits applied, with demand and penalties set aside.

Administrative instructions on small scale exemption treated firms with only some common partners as separately entitled to exemption; on the material described, clubbing of clearances was not justified, so the duty demand, penalties, confiscation, redemption fine and interest were unsustainable. The extended period of limitation also failed because the relevant facts were within the department's knowledge and verification reach.

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Issues: Whether the clearances of the two units could be clubbed so as to deny small scale exemption and sustain the duty demand, penalties, confiscation, redemption fine and interest.

Analysis: The clearances could not be clubbed on the material relied upon by the adjudicating authority. The applicable Board circulars and trade notice, issued under the binding administrative instructions governing small scale exemption, recognised that where firms have only some partners in common, each firm is entitled to a separate exemption limit. The record did not justify departure from those instructions. As a result, the units were entitled to separate exemption, and the basis for invoking the extended period of limitation also failed because the facts were within the knowledge and verification reach of the department. Once clubbing was impermissible and the duty demand could not survive, the consolidated penalties, confiscation of plant and machinery, redemption fine and interest were likewise unsustainable.

Conclusion: The demand, penalties, confiscation, redemption fine and interest were not sustainable and were set aside in favour of the assessee.

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