Separate legal entities and dummy-unit allegations cannot sustain clubbed clearances without proof of the real manufacturer.

Separate notices and separate duty demands issued to distinct companies did not support clubbing of clearances on a dummy-unit theory, because the record did not establish which entity was the real manufacturer and which was a dummy. The principle that distinct limited companies are separate legal entities applied, so common management alone was insufficient to ignore their separate existence. As the duty demand itself failed, the related penalties also could not survive. The impugned order was therefore set aside and consequential relief followed.

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Issues: Whether the duty demand and penalties were sustainable when the department issued separate show cause notices and separate demands against each unit, but sought to club their clearances on the allegation that one unit was a dummy of the other and both were controlled by the same management.

Analysis: The separate issuance of show cause notices and separate confirmation of demands against each unit indicated that the department itself proceeded on the basis that each unit was a distinct entity. If the units were one and the same, the demand ought to have been raised against the actual manufacturer after identifying which unit was real and which was dummy. The record did not establish that one company was a dummy of the other in the manner necessary to ignore their separate existence. In these circumstances, the principle that distinct limited companies are separate legal entities applied, and the allegation for clubbing of clearances could not be sustained. Once the duty demand failed, the penal consequences also could not survive.

Conclusion: The duty demand and penalties were unsustainable and were set aside.

Final Conclusion: The appeals succeeded and consequential relief followed, with the impugned order annulled.

Ratio Decidendi: Where the department itself issues separate notices and separate demands to distinct companies without establishing which entity is the real manufacturer and which is a dummy, the clearances cannot be clubbed and duty or penalties cannot be sustained merely on allegations of common management.

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