Dummy unit analysis rejects clubbing where independent infrastructure and genuine manufacturing activity are evidenced.

A unit is not a dummy merely because of common partnership, job work, family links, or financial assistance if substantive evidence shows independent manufacturing activity. Separate factory premises, machinery, workmen, power connection, registrations, approvals, procurement, storage, repair records, electricity bills, salary registers, and direct dealings with the department supported genuine independent existence. The job work arrangement under the relevant notifications did not by itself prove a facade, and brand name reliance was excluded because it was not part of the show cause notice or adjudication order. On these facts, the unit's clearances could not be clubbed and small scale industry exemption remained available.

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Issues: Whether the second unit was a dummy of the first unit so that its clearances were liable to be clubbed for denial of small scale industry exemption.

Analysis: The existence of a dummy unit must be established on substantive evidence showing absence of independent manufacturing activity, lack of separate infrastructure, or artificial splitting of business. The record showed that the unit had its own factory, machinery, workmen, power connection, registrations, statutory approvals, separate procurement and storage, repair records, electricity bills, salary registers, and independent dealings with the department. The fact that one partner was common, that there were business or family links, or that some job work and assistance existed, was not enough to negate independent existence. The job work arrangement under the relevant notifications did not, by itself, establish that the unit was a facade. The brand name issue could not be relied upon because it was not part of the show cause notice or the adjudication order.

Conclusion: The unit was not a dummy of the other unit and its clearances were not liable to be clubbed; the assessee was entitled to small scale industry exemption.

Ratio Decidendi: A unit cannot be treated as a dummy merely because of common partnership, job work, or financial assistance when it otherwise has independent factory infrastructure, separate operations, and evidence of genuine manufacturing activity.

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