Clubbing of clearances for SSI exemption upheld where separate units functioned as one manufacturing arrangement with common control.

Separate registrations did not prevent clubbing of clearances where four units shared common administration, infrastructure, machinery, finance and management, and goods moved freely between premises without proper documentation or duty discharge; their operations were treated as a single manufacturing arrangement for SSI exemption. Suppression of these material facts, despite departmental awareness of the separate units, justified invocation of the extended period of limitation because the full operational arrangement was not disclosed. The credit dispute on endorsed gate passes was not finally decided on the existing record and was remanded for fresh examination of the evidentiary value of the documents.

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Issues: (i) whether the clearances of the four units were liable to be clubbed on the footing that they functioned as a single entity for the purpose of small scale exemption; (ii) whether the extended period of limitation was invocable; (iii) whether denial of credit on endorsed gate passes required reconsideration.

Issue (i): whether the clearances of the four units were liable to be clubbed on the footing that they functioned as a single entity for the purpose of small scale exemption.

Analysis: The units shared common administrative staff, electricity generation, water chilling facilities, packing and weighment arrangements, machinery used across premises, and there was free movement of raw materials, intermediates and finished goods between the premises without proper documentation or duty discharge. The partners were closely related and the financial and managerial control was substantially common. On these facts, the separate registrations and separate legal forms did not prevent the factual conclusion that the units operated as one manufacturing arrangement.

Conclusion: The clearances were correctly clubbed and the units were treated as a single entity for SSI exemption purposes.

Issue (ii): whether the extended period of limitation was invocable.

Analysis: Although the units were known to the department, the material facts relating to common operations, free movement of goods, common use of facilities without consideration, and movement of raw materials and finished goods without lawful procedure were not disclosed. The department's awareness of separate registrations and common partners did not amount to knowledge of the full operational arrangement. The non-disclosure of these material facts amounted to suppression and misdeclaration.

Conclusion: The extended period of limitation was rightly invoked.

Issue (iii): whether denial of credit on endorsed gate passes required reconsideration.

Analysis: The documents produced before the Tribunal indicated a prima facie case that the credit claim had not been examined in depth and that the issue turned on the evidentiary value of the gate passes and endorsements.

Conclusion: The denial of credit was set aside and the matter was remanded for re-examination.

Final Conclusion: The demand and penalties were sustained on the clubbing and limitation issues, while the credit dispute was sent back for fresh consideration.

Ratio Decidendi: Where multiple units, though separately registered, operate with common infrastructure, common control, and free inter-unit movement of goods without lawful documentation or duty discharge, their clearances may be clubbed for SSI exemption and concealment of such operational facts justifies invocation of the extended limitation period.

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