Clubbing of clearances under excise SSI exemption requires proof of dummy arrangement, not just common ownership or funding links.

For excise small scale exemption, clubbing of clearances between a proprietary concern and a private company requires proof that the units are not genuinely independent and that their structure is a camouflage or dummy arrangement. One view treated common control, funding and shareholding links as sufficient to justify clubbing and lifting the corporate veil to deny SSI benefit. The contrary view held that separate constitution, different locations, independent manufacturing capability, distinct infrastructure and registrations were decisive, and that common ownership or financial accommodation alone was insufficient. The Members differed, so no final majority determination was reached on clubbing or SSI eligibility.

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Issues: (i) Whether the clearances of a proprietary concern and a private limited company, both controlled by the same person, could be clubbed for denial of small scale exemption; (ii) Whether the financial and shareholding link between the two units justified lifting the corporate veil and treating them as one entity for excise purposes.

Issue (i): Whether the clearances of a proprietary concern and a private limited company, both controlled by the same person, could be clubbed for denial of small scale exemption.

Analysis: One view held that the arrangement showed creation of a fresh legal entity funded by the existing concern, with common control and a colourable device to secure SSI benefits, so the clearances could be clubbed. The contrary view held that the units were separately constituted, located at different places, had independent manufacturing capability, separate infrastructure and registrations, and that mere common ownership or financial accommodation was not enough to club clearances absent proof that one unit was a dummy or camouflage for the other.

Conclusion: The Members differed on this issue.

Issue (ii): Whether the financial and shareholding link between the two units justified lifting the corporate veil and treating them as one entity for excise purposes.

Analysis: One view applied the principle that the corporate veil may be lifted where the structure is used to evade duty or where the same person is effectively controlling both entities, relying on the presence of dominant shareholding, funding arrangements and common control. The dissenting view distinguished the controversy from related-person valuation, holding that lifting the veil was not warranted merely because one unit had advanced a loan to the other and the proprietor had substantial shareholding in the company, in the absence of evidence of misuse of form or non-independence in manufacture.

Conclusion: The Members differed on this issue.

Final Conclusion: The order did not produce a final majority determination on clubbing of clearances or entitlement to SSI exemption, and the matter remained unresolved on account of the difference of opinion.

Ratio Decidendi: For excise SSI exemption, common ownership or financial assistance alone does not justify clubbing of clearances unless the Revenue establishes that the units are not independent and that the form adopted is a mere camouflage or dummy arrangement.

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