SSI exemption and clubbing of clearances fail where internal transfers are wrongly counted twice in duty computation.

Internal transfers between a proprietary concern and a private limited company cannot be treated as third-party clearances to deny small scale industry exemption or sustain duty demand where the Department's computation duplicates the same goods as both raw material and final product. On the facts stated, the aggregation method based on inter-unit movement of ingots was unsustainable, and the demand could not rest on clearances not alleged in the show cause notice. The Commissioner (Appeals) order was upheld and the Revenue's appeal failed, leaving the assessee entitled to the SSI exemption.

---

---

Issues: Whether the clearances of the proprietary concern and the private limited company could be clubbed for the purpose of denying small scale industry exemption under Notification No. 1/93 dated 28.2.93 as amended, and whether duty demand could survive on the basis of the method adopted by the Department.

Analysis: The demand was founded on aggregation of the value of clearances between the two concerns, including internal movement of ingots from one concern to the other. The record showed that no clearances to third parties by the proprietary concern were alleged in the show cause notice. The method adopted by the Department resulted in counting the same commodity twice, once as raw material clearance and again as part of the final product. On the facts, even if the two concerns were treated as one, the Department's computation remained unsustainable because the alleged internal transfers did not justify denial of the exemption or the raised demand.

Conclusion: The clubbing-based duty demand was not sustainable, and the assessee remained entitled to the SSI exemption.

Final Conclusion: The order of the Commissioner (Appeals) was upheld and the Revenue's appeal failed.

Ratio Decidendi: For SSI exemption, internal transfers between interconnected concerns cannot be treated as third-party clearances so as to create a duplicated turnover basis for denying exemption or confirming duty demand, unless the demand is supported by a legally sustainable computation on the actual clearances to the market.

---