Clubbing of clearances and clandestine removal may be inferred from common control, shared facilities and private records.

Common control, shared facilities and operational interdependence between two units were treated as indicators that the clearances were artificially split to remain within the exemption threshold, so clubbing of clearances and denial of exemption under Notification No. 1/93 were upheld. Seizure of unaccounted goods from an undeclared godown and factory premises, together with recovery of kaccha challans and absence of proper stock records, was treated as sufficient corroboration for clandestine removal without duty payment, and the duty demand was sustained. The commentary states that independent manufacture was not established on these facts.

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Issues: (i) Whether the clearances of the two units could be clubbed and exemption under Notification No. 1/93 dated 26.02.93 denied on the basis of common control, shared facilities and interdependence; (ii) Whether the demand was sustainable on the allegation of clandestine removal supported by seizure of unaccounted goods and recovery of kaccha challans.

Issue (i): Whether the clearances of the two units could be clubbed and exemption under Notification No. 1/93 dated 26.02.93 denied on the basis of common control, shared facilities and interdependence.

Analysis: The units were found to be operating from the same , under close family control, with common labour, common godown, no independent plant and machinery, and shared electricity and records. The arrangement was treated as a device to bifurcate clearances and remain within the exemption threshold. In such circumstances, the factual basis for treating the units as independent manufacturers was not made out.

Conclusion: The clubbing of clearances and denial of exemption were upheld, against the assessee.

Issue (ii): Whether the demand was sustainable on the allegation of clandestine removal supported by seizure of unaccounted goods and recovery of kaccha challans.

Analysis: Goods were found in an undeclared godown and in the factory premises without Central Excise documents, and kaccha challans were recovered. The record also showed absence of proper stock maintenance and supporting entries. These circumstances furnished sufficient material to support the allegation of removal without duty payment.

Conclusion: The finding of clandestine removal and the consequential duty demand were sustained, against the assessee.

Final Conclusion: The order affirming clubbing of clearances, denial of exemption and duty demand was maintained, and both appeals failed.

Ratio Decidendi: Where two units are shown to be commonly controlled, interdependent and lacking independent infrastructure, their clearances may be clubbed for exemption purposes, and clandestine removal may be inferred from seizure of unaccounted goods and corroborative private records.

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