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Issues: (i) Whether the clearances of the three units could be clubbed so as to deny the small scale industry exemption; (ii) whether the extended period of limitation could be invoked for the duty demand.
Issue (i): Whether the clearances of the three units could be clubbed so as to deny the small scale industry exemption.
Analysis: Clubbing of clearances is justified only where the units are shown, on evidence, to be not independent in reality and there is material to establish mutuality of business interest and financial flow back. Common employees or adjoining premises by themselves do not establish that the units are one and the same for excise purposes. The finding that the Department failed to prove financial flow back or mutuality of business interest meant that the factual basis for clubbing was absent.
Conclusion: The demand based on clubbing of clearances and denial of the exemption was not sustainable; this issue was decided in favour of the assessee.
Issue (ii): Whether the extended period of limitation could be invoked for the duty demand.
Analysis: The extended period can be invoked only where there is deliberate or wilful suppression of material facts. Once the facts relating to constitution and functioning of the units were disclosed and no suppression was established, the extended limitation could not be applied. The notice, therefore, could not sustain the demand for the entire period claimed by the Department.
Conclusion: The extended period of limitation was not available to the Department; this issue was decided in favour of the assessee.
Final Conclusion: The appellate challenge failed, and the assessee succeeded on the substantive valuation and limitation questions.
Ratio Decidendi: For excise clubbing, the Department must prove mutuality of business interest and financial flow back; absent suppression of material facts, the extended period of limitation cannot be invoked.
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