Clandestine removal and clubbing of clearances require corroboration; SSI exemption cannot be denied on presumptions alone.

Clandestine removal and clubbing of clearances to deny SSI exemption require reliable corroboration, not assumptions or presumptions. In this CESTAT Hyderabad note, the Department had no proof of excess electricity consumption, unaccounted raw materials, identified buyers, or other supporting evidence, and it also failed to show mutuality of interest, financial flow back, or suppression of production. The other units were separate legal entities with independent registration, premises, machinery and accounts, so there was no material to treat them as non-existent or to attribute their clearances to the respondent. On that basis, denial of SSI exemption under Notification No. 16/97-CE was not justified.

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Issues: Whether the Department proved clandestine removal and clubbing of clearances so as to deny the respondent SSI exemption under Notification No. 16/97-CE dated 01.04.1997.

Analysis: The allegations of clandestine manufacture and clearance were found to rest on assumptions and presumptions. There was no reliable corroboration in the form of proof of excess consumption of electricity, unaccounted purchase of raw materials, identified buyers of alleged unaccounted goods, or other supporting evidence. The record also showed that the other units were separate legal entities with independent registration, premises, machinery and accounts, and there was no material to establish that they were non-existent or that the respondent had routed clearances through them. In the absence of evidence proving mutuality of interest, financial flow back, or suppression of production, the denial of SSI exemption was not justified.

Conclusion: The Department failed to establish clandestine removal or clubbing of clearances, and the respondent remained entitled to SSI exemption.

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