SSI exemption and clubbing of clearances: majority shareholding alone did not justify treating the subsidiary as the same unit.

SSI exemption under Notification No. 08/2001 was upheld because the respondent remained a registered independent unit with its own brand name, while land, immovable properties and trademarks continued to belong to it under the share purchase arrangement. Majority shareholding by Hindustan Lever Ltd. did not, by itself, establish that the respondent was a sham, a front company, or the same unit as the holding company. No financial flow back was shown, and dividend receipt could not be treated as such flow back. The authorities on clubbing were distinguishable because the relevant notification did not contain equivalent clubbing language, so the clearances could not be aggregated on these facts.

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Issues: Whether the respondent was entitled to Small Scale Industry exemption under Notification No. 08/2001 despite the Government of India holding only 26% share and Hindustan Lever Ltd. holding 74% share, and whether the clearances of the respondent and the holding company could be clubbed on the ground that they were one and the same unit with financial flow back.

Analysis: The relevant facts showed that the respondent was a registered independent unit with its own brand name and that the land, immovable properties and trademarks remained its properties under the share purchase arrangement. The mere fact of majority shareholding by Hindustan Lever Ltd. did not by itself establish that both entities were one and the same or that the respondent was a sham or front company. The record also did not show any financial flow back, and dividend receipt by the holding company could not be treated as such flow back. The notification relied upon did not contain the same clubbing language as the notification considered in the cited Supreme Court decision, and the authorities concerning clubbing of subsidiary and holding company clearances were therefore distinguishable.

Conclusion: The respondent was eligible for the SSI exemption and the clearances could not be clubbed on the facts of the case.

Ratio Decidendi: Majority shareholding, without evidence of common manufacture, identity of units, or financial flow back, is insufficient to deny SSI exemption or to club clearances where the governing notification does not expressly provide for such clubbing.

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