State-controlled manufacturing unit qualifies for SSI exemption, so clearances cannot be clubbed with a sister concern.

A manufacturing unit owned and controlled by the State Government fell within the SSI exemption notification that barred clubbing of clearances from a factory belonging to or maintained by the Central or a State Government. On the facts, both the respondent unit and the sister concern were under RAJFED, whose shareholding and management were controlled by the Government of Rajasthan, and the Revenue did not dispute that factual foundation. The clearances of the respondent unit were therefore not liable to be clubbed with those of the sister unit, and SSI exemption remained available.

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Issues: Whether the clearances of the respondent's unit could be clubbed with those of the sister unit for denial of SSI exemption, notwithstanding the claim that the unit was owned and controlled by the State Government and covered by the exemption notification.

Analysis: The respondent's unit and the sister concern were both owned by RAJFED, whose shareholding and management were under the control of the Government of Rajasthan. The notification governing SSI exemption excluded clubbing where specified goods were manufactured in a factory belonging to or maintained by the Central Government or a State Government. On the facts found, the respondent's unit answered that description, and the Revenue did not dispute the material factual foundation for such ownership and control.

Conclusion: The clearances of the respondent's unit were not liable to be clubbed with those of the sister unit, and the SSI exemption was available. The Revenue's appeal failed.

Ratio Decidendi: Where a manufacturing unit is shown to be owned and controlled by the State Government, the exemption notification barring clubbing of clearances from such a factory applies and the clearances cannot be aggregated with those of another unit for SSI exemption purposes.

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