Clubbing of clearances requires cogent proof of one unit, mutual interest, or financial flow back before denying exemption.

Clearances of two units could not be clubbed for denial of small scale industry exemption because the evidence showed separate registrations, sheds, power connections, machinery and invoices, with lease rent and conversion charges paid independently. Mere common partners or family relationship was insufficient to establish that the units were one, and the Department failed to prove mutuality of interest or financial flow back. A notice issued only to one unit was also found unsustainable in the circumstances. The demand of duty, interest and penalty was therefore held not sustainable, and the impugned order was set aside with consequential relief.

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Issues: Whether the clearances of the two units could be clubbed for denial of small scale industry exemption and consequent demand of duty, interest and penalty could be sustained.

Analysis: The units had separate registrations, separate sheds, separate power connections, separate machinery and cleared goods under their own invoices. The record showed payment of lease rent and conversion charges and there was no material to establish financial flow back or mutuality of interest. Mere commonality of some partners or family relationship was held insufficient to treat the units as one. The notice proposing clubbing, issued only to one unit though the existence of both units was projected as separate, was also treated as unsustainable. The authorities relied on by the Revenue were distinguished on facts because they involved absence of machinery, common manufacturing premises, or clear evidence of a single manufacturing unit.

Conclusion: The clearances could not be clubbed, and the demand of duty, interest and penalty was not sustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Clubbing of clearances is not justified unless the Department establishes, on cogent evidence, that the units lack independent existence by reason of mutuality of interest, financial flow back, or other material showing that they are in substance one unit.

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