Clubbing of clearances requires proof of dummy units; separate partnership concerns with distinct products cannot be denied exemption.

Clubbing of clearances for denial of small scale industry exemption is justified only where evidence shows one unit is a facade or dummy of the other, with common funding, financial flow back, shared profits, and no real separate identity. Common family links, shared premises, common equipment, mutual accommodation, or cross-use of labour and infrastructure, by themselves, are insufficient. On the facts, the two partnership concerns were separate, made different products, and the material did not establish common funding or profit-sharing. The clearances therefore could not be clubbed, and the demand and penalties were not sustainable.

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Issues: Whether the clearances of the two partnership units could be clubbed for the purpose of denying separate small scale industry exemption, and whether the demand and penalties were sustainable.

Analysis: Clubbing of clearances is justified only where the evidence establishes that one unit is merely a facade or dummy of the other, supported by common funding, financial flow back, shared profits, and real lack of separate identity. Common family connections, shared facilities, mutual financial accommodation, use of common premises or equipment, and cross-utilisation of labour or infrastructure, by themselves, do not establish that the units are one and the same. On the facts, the two units were separate partnership concerns, manufactured different products, had no established common funding or profit-sharing, and the material relied upon was found to be insufficient to prove that one was a dummy of the other.

Conclusion: The clearances could not be clubbed, and the demand and penalties were not sustainable.

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