SSI exemption cannot be denied by clubbing separate companies absent financial flow back; limitation also failed for lack of suppression.

Separate private limited companies with distinct registrations are not to be clubbed for SSI exemption merely because they share management, a common director, or recorded inter-unit payments; absent cogent evidence of financial flow back, mutuality of interest, or other facts showing a single manufacturer, the SSI benefit remains available. Where the units were registered, filed declarations, underwent audit, and the department already knew the material facts, those disclosures do not amount to suppression or concealment, so the extended limitation period is not invokable and the notice is time-barred. The assessee's relief was upheld.

---

---

Issues: (i) Whether the clearances of two separately registered private limited companies could be clubbed to deny the benefit of SSI exemption on the basis of common management, common director and certain inter-unit payments. (ii) Whether the extended period of limitation was invokable when the relevant facts were already within the department's knowledge.

Issue (i): Whether the clearances of two separately registered private limited companies could be clubbed to deny the benefit of SSI exemption on the basis of common management, common director and certain inter-unit payments.

Analysis: Both units were separately registered under the Companies Act and the Central Excise law and manufactured different products. The Board's Circular No. 6/92 clarified that limited companies, whether public or private, are separate entities distinct from their shareholders and each company is entitled to a separate exemption limit. The mere fact that one director managed both units did not establish that they were one manufacturer. The payments made by one unit to the suppliers of the other were reflected in the books and constituted commercial transactions. No evidence showed profit sharing, manipulation of accounts, or a real financial flow back sufficient to treat the units as a single entity.

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

Issue (ii): Whether the extended period of limitation was invokable when the relevant facts were already within the department's knowledge.

Analysis: The units were registered with the department, classification and declarations were filed, audits were conducted, the premises were visited, and show cause proceedings had earlier involved both units. The department therefore had knowledge of the material facts. In these circumstances, the declaration relied upon by the Revenue did not amount to suppression or concealment so as to justify the extended period.

Conclusion: The extended period of limitation was not invokable and the show cause notice was time-barred.

Final Conclusion: The Revenue failed on both substantive clubbing and limitation issues, and the impugned order granting relief to the assessee was upheld.

Ratio Decidendi: Separate private limited companies with distinct registrations are not to be clubbed for SSI exemption merely because of common management or recorded inter-se commercial dealings, unless there is cogent evidence of financial flow back, mutuality of interest, or other facts showing that they are in substance a single manufacturer.

---