Separate corporate entities and proof of clandestine removal require strong evidence before excise demands can stand.

Separate private limited companies with common directors were not to have their clearances clubbed for excise duty where they were independently incorporated, separately registered, and operated from distinct premises with separate machinery, workforce, accounts and utility connections; common management or fund transfers alone did not establish a dummy unit. Allegations of clandestine removal also failed because the Revenue lacked tangible corroborative evidence and relied on statements from witnesses who were not produced for cross-examination, while evidence supported the trading concern's genuine existence. The result was that the duty, interest and penalties were unsustainable, and the demand was set aside on both issues.

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Issues: (i) Whether the clearances of two separately registered private limited companies, with common directors but separate premises, plant and machinery, workforce, accounts and business operations, could be clubbed for excise duty purposes. (ii) Whether the allegation of clandestine removal of goods on the invoices of a trading concern was established on the evidence, including where relied-upon witnesses were not available for cross-examination.

Issue (i): Whether the clearances of two separately registered private limited companies, with common directors but separate premises, plant and machinery, workforce, accounts and business operations, could be clubbed for excise duty purposes.

Analysis: The two units were separately incorporated and independently registered with the excise, sales tax and other authorities. They operated from distinct locations, maintained separate plant and machinery, workmen, stocks, bank accounts and utility connections, and procured raw materials independently. The existence of some common management or transfer of funds, by itself, was not sufficient to establish that one unit was a dummy of the other. The demand had been raised separately against both units without identifying any principal unit, which was inconsistent with a valid clubbing exercise. The Tribunal also applied the principle reflected in the departmental circular that separate private limited companies are not to be clubbed merely on account of common directors or overlap in management.

Conclusion: The charge of clubbing of clearances was not sustainable and was rightly set aside.

Issue (ii): Whether the allegation of clandestine removal of goods on the invoices of a trading concern was established on the evidence, including where relied-upon witnesses were not available for cross-examination.

Analysis: The trading concern was found to be in existence, and the cross-examination of a key witness supported the genuineness of its transactions. The remaining relied-upon witnesses were not produced for cross-examination despite the earlier direction, so their statements could not safely be used against the appellants. In clandestine removal matters, the Revenue was required to produce tangible and corroborative evidence such as unaccounted raw material, actual removals, buyers, transport evidence, receipt of sale proceeds, or comparable material links. Such foundational proof was absent. The alternative plea that the clearances would still remain within the small-scale exemption limit further weakened the demand.

Conclusion: The allegation of clandestine removal was not proved and the demand on that basis failed.

Final Conclusion: The impugned duty, interest and penalties were unsustainable in law, and the appellants succeeded on both the clubbing and clandestine removal issues.

Ratio Decidendi: Separate corporate entities having independent registration, infrastructure and operations cannot have their clearances clubbed merely because of common directors or some financial linkage, and clandestine removal cannot be upheld without tangible corroborative evidence and admissible witness testimony.

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