Clubbing of clearances and UPS battery valuation depend on tested evidence, separate identity, and goods cleared from the factory.

Clubbing of clearances for small scale exemption requires reliable evidence of common control or dummy operation; untested statements, without compliance with the statutory procedure for admitting them, cannot by themselves establish that independently constituted units are related entities. Separate incorporation, premises, accounts, registrations, bank dealings and commercial activity support independent status, and family relationship or shared facilities alone is insufficient. For UPS/inverter systems, batteries are not includible in assessable value unless they form part of the goods as cleared from the factory; where batteries are supplied separately and not removed with the main equipment, valuation must be confined to the goods actually cleared.

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Issues: (i) Whether the clearances of the connected units were liable to be clubbed with the clearances of the main unit for determining eligibility to small scale exemption; (ii) whether batteries were stored in the factory and cleared along with UPS/Inverter/CVT; and (iii) whether the value of batteries was includible in the assessable value of UPS/Inverter/CVT under Section 4 of the Central Excise Act, 1944.

Issue (i): Whether the clearances of the connected units were liable to be clubbed with the clearances of the main unit for determining eligibility to small scale exemption.

Analysis: The alleged clubbing was founded substantially on statements of various persons and on a theory of common control, common premises and related persons. The statements were not tested by examination in the manner required by Section 9D of the Central Excise Act, 1944, and could not be treated as substantive evidence without compliance with the statutory procedure. Independent material on record showed that the units had separate incorporation or constitution, separate premises or demarcated rooms, separate accounts, separate registrations, separate bank transactions and independent commercial dealings. Mere family relationship, use of some common facilities, or proximity of premises was insufficient to establish that the units were dummies or that there was financial flow back.

Conclusion: The clearances of the connected units were not liable to be clubbed, and the units were entitled to SSI exemption in their own right.

Issue (ii): Whether batteries were stored in the factory and cleared along with UPS/Inverter/CVT.

Analysis: The finding that batteries were stored in the factory and removed with UPS rested mainly on untested statements and an inference from batteries found during search. The record, including cross-examination material and invoices, indicated that batteries for online UPS were supplied separately from outside premises or godown, while only a limited number of batteries were kept in the factory for testing or for offline UPS. On the evidence accepted by the Tribunal, the batteries in dispute were not cleared from the factory along with the UPS systems.

Conclusion: Batteries were not proved to have been stored in the factory and cleared along with UPS/Inverter/CVT.

Issue (iii): Whether the value of batteries was includible in the assessable value of UPS/Inverter/CVT under Section 4 of the Central Excise Act, 1944.

Analysis: Includibility depended on whether the batteries formed part of the goods as cleared from the factory. Since the batteries in dispute were found to be supplied separately and not cleared from the factory along with the UPS, the line of authorities on complete UPS systems with battery cleared together did not apply. The assessable value had therefore to be confined to the goods as actually cleared from the factory.

Conclusion: The value of the batteries was not includible in the assessable value of the UPS/Inverter/CVT.

Final Conclusion: The demand, confiscation and consequential penalties could not survive, and the appellants were entitled to relief.

Ratio Decidendi: In a clubbing case, untested statements cannot be the sole basis for treating independent units as dummies where statutory procedure for admitting statements is not followed, and the value of bought-out batteries is not includible in the assessable value of UPS unless they are cleared from the factory as part of the goods.

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