Clubbing of clearances and reliance on unretracted admissions sustained addition of unaccounted turnover and enhanced penalty.

Common control over three interconnected units, operating from the same premises with shared machinery, staff, procurement and sales, supported clubbing of clearances and made the Revenue's appeal maintainable even though it named only one unit. The objection to maintainability failed because the respondent had not raised it earlier and the liability was treated as common. Admitted cash transactions of Rs. 25,00,000, corroborated by statements of persons connected with the units and not effectively retracted, were rightly added to turnover. On the same basis, the proprietor's penalty was enhanced because the admitted evasion showed that the original penalty was inadequate.

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Issues: (i) Whether the Revenue's appeal was maintainable where clearances of three interconnected units had been clubbed but the appeal was filed against only one unit; (ii) Whether the cash transactions of Rs. 25,00,000/- were liable to be added to turnover and whether the penalty on the proprietor was liable to be enhanced.

Issue (i): Whether the Revenue's appeal was maintainable where clearances of three interconnected units had been clubbed but the appeal was filed against only one unit.

Analysis: The units were found to be operating from the same premises with common machinery, staff, procurement and sale, and the proprietor controlled all the units. No separate production records were maintained and the respondent had not raised the objection of maintainability before the lower authorities or in cross-objections. In these circumstances, the clubbing of clearances and the demand raised on the basis of common liability could not be assailed on the ground that only one unit was specifically named in the appeal.

Conclusion: The objection to maintainability failed and the Revenue's appeal was held maintainable.

Issue (ii): Whether the cash transactions of Rs. 25,00,000/- were liable to be added to turnover and whether the penalty on the proprietor was liable to be enhanced.

Analysis: The amount of Rs. 25,00,000/- was admitted in statements of the controlling proprietor and supported by statements of other persons connected with the units. The statements were not retracted in any effective manner and there was no proof of coercion. The contention that the cash sales could not be bifurcated among the units was rejected because the respondent had itself admitted common control and liability. The original penalty was also considered inadequate in the light of the admitted evasion.

Conclusion: The cash amount was rightly added to turnover and the penalty on the proprietor was enhanced.

Final Conclusion: The order of the appellate authority was set aside, the Revenue's challenge succeeded, the cross-objections failed, and the enhanced duty and penalty consequences were sustained.

Ratio Decidendi: Admissions in recorded statements, supported by surrounding circumstances and not effectively retracted, can be relied upon to sustain clubbing of clearances and addition of unaccounted turnover in central excise proceedings.

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