SSI clubbing and clandestine removal require proof of financial interdependence and corroborative evidence, not suspicion.

Clearances of separately registered SSI units could not be clubbed to deny exemption where each unit had separate premises, machinery, workforce, registrations, utilities, and independent purchases and sales, and the Revenue failed to prove mutuality of interest, financial flow-back, or that the units were dummies. A common family connection or shared management was insufficient by itself. The demand for clandestine manufacture and clearance also failed because it was based on assumptions and uncorroborated data, without tangible evidence of unaccounted production, removal, transport, buyers, or receipt of sale proceeds. In the absence of corroborative material, the allegation of clandestine removal was unsustainable.

---

---

Issues: (i) Whether the clearances of the respondent units could be clubbed so as to deny the benefit of small scale industry exemption. (ii) Whether the demand based on alleged clandestine manufacture and clearance of excisable goods was sustainable.

Issue (i): Whether the clearances of the respondent units could be clubbed so as to deny the benefit of small scale industry exemption.

Analysis: The units were separately registered, separately incorporated or constituted, had separate premises, machinery, work force, registrations, electricity and telephone connections, and conducted purchases and sales independently. The Revenue did not establish mutuality of interest, financial flow back, or that the units were mere dummies of one another. Common family relationship, common management involvement, or inter se dealings by themselves were insufficient to justify clubbing.

Conclusion: The clearances could not be clubbed and denial of SSI exemption was not justified.

Issue (ii): Whether the demand based on alleged clandestine manufacture and clearance of excisable goods was sustainable.

Analysis: The demand rested mainly on data and assumptions, while the sales tax proceedings had not supported clandestine sales. No corroborative evidence of actual unaccounted manufacture, removal, transport, buyers, or receipt of sale proceeds was brought on record. The quantity and value allegedly cleared from each unit were also not properly identified before apportioning duty. In the absence of tangible evidence, the allegation could not stand.

Conclusion: The demand on account of clandestine removal was unsustainable.

Final Conclusion: The impugned order was upheld and the Revenue appeals failed.

Ratio Decidendi: For clubbing of clearances in SSI matters, the Revenue must prove financial interdependence and mutuality of interest, and a charge of clandestine removal must be supported by tangible corroborative evidence, not mere assumption or family relationship.

---