SSI exemption and clubbing of clearances cannot rest on holding-subsidiary status alone without proof of mutuality of interest.

Clearances of a subsidiary could not be clubbed with those of its holding company for denying small scale industry exemption under Notifications Nos. 175/86 and 1/93 merely because of the corporate relationship. The later notifications were narrower than Notification No. 85/85 and did not permit automatic clubbing on that basis. Clubbing could still be justified if the Revenue proved mutuality of interest or flow-back of funds between the units, but no such allegation or proof was made in the show cause notice or on the record. The Revenue's challenge therefore failed.

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Issues: Whether the clearances of a subsidiary company could be clubbed with those of the holding company for denying small scale industry exemption under Notification No. 175/86 dated 01.03.1986 and Notification No. 1/93 dated 28.02.1993, and whether such clubbing could be sustained in the absence of allegations or proof of mutuality of interest or flow-back of funds.

Analysis: The notifications applicable to the assessee did not contain the wider language found in Notification No. 85/85 dated 17.03.1985, which expressly referred to clearances made by or on behalf of a manufacturer. On a comparison of the three notifications, the Court held that the ratio of the earlier decision concerning Notification No. 85/85 could not be applied mechanically to the later notifications. The later notifications did not permit clubbing merely because one unit was a subsidiary of another. Clubbing could still be examined where the Revenue established mutuality of interest or flow-back of funds between the units, but no such case had been made in the show cause notice or on the record.

Conclusion: Clearances of the subsidiary could not be clubbed with those of the holding company merely on the basis of the corporate relationship, and the Revenue's challenge failed.

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