Clubbing of clearances for small scale exemption requires proof of dummy status or financial interdependence; common ownership alone is insufficient.

Clearances of a proprietary unit and a partnership unit could be clubbed for denial of small scale exemption only if the units were shown to be dummy concerns with mutuality of interest, financial flow back, or pervasive financial and managerial control. The record did not establish such interdependence: the units were located at different places, had separate constitutions and business operations, and common ownership or participation by one person in both entities was insufficient by itself. The absence of notice to the partner of the allegedly dummy firm also weighed against clubbing. On these facts, denial of small scale exemption was unsustainable and the demand and penalties were set aside.

---

---

Issues: Whether the clearances of a proprietary unit and a partnership unit could be clubbed for denial of small scale exemption on the ground that one unit was a dummy of the other and that there was common control or financial interdependence.

Analysis: The exemption was available to each manufacturer if the units were independent and complete in themselves. Clubbing of clearances could be justified only where one unit was a dummy of the other, or where the evidence showed mutuality of interest, financial flow back, or pervasive financial and managerial control. The record did not establish any such interconnection. The two units were situated at different places, had separate constitution and business operations, and the mere fact that one person was proprietor of one unit and partner in the other was insufficient to treat both as one manufacturer. The absence of notice to the partner whose firm was branded as dummy also weighed against the clubbing exercise.

Conclusion: The clearances could not be clubbed and denial of small scale exemption was unsustainable; the demand and penalties were set aside.

---