Clubbing of clearances and clandestine removal require independent corroborative evidence, not marital relationship, suspicion, or bare ledger entries.

Clubbing of clearances for small-scale exemption was held unsustainable where husband-and-wife units were separately registered, operated from different premises and had separate financial resources, because marital relationship and business assistance alone did not establish mutuality of interest. Confiscation of seized goods and raw materials was also set aside where the alleged clandestine manufacture of air-conditioners was not supported by tangible evidence. Denial of exemption based on aggregate clearances was remitted for reconsideration because the computation had not been properly examined. For alleged clandestine removal, the text emphasises that suspicion, solitary retracted statements and uncorroborated ledger entries cannot replace positive, independent evidence.

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Issues: (i) whether the clearances of the husband and wife concerns could be clubbed so as to deny small scale exemption and sustain duty, penalty and confiscation against the Thermotech group; (ii) whether the seizure and confiscation of the goods and raw materials from the Thermotech premises could be sustained; (iii) whether denial of exemption and confiscation in relation to Flevel International on the footing of aggregate clearances was justified; and (iv) whether the demand and confiscation relating to the 24 air-conditioners and the alleged clandestine removal of 606 air-conditioners were proved by acceptable evidence.

Issue (i): whether the clearances of the husband and wife concerns could be clubbed so as to deny small scale exemption and sustain duty, penalty and confiscation against the Thermotech group.

Analysis: The units were separately registered, carried on business from different premises and were shown to have separate financial resources. Mere marital relationship, or the fact that the husband assisted in procurement or sale, was held insufficient by itself to establish mutuality of interest or to justify clubbing of clearances. The earlier decision dropping identical clubbing allegations against the husband's concern was also taken into account. Further, the other units whose clearances were sought to be clubbed had not been put to notice.

Conclusion: The clubbing of clearances was not justified and the demand, penalty and consequential confiscation against the Thermotech group were set aside.

Issue (ii): whether the seizure and confiscation of the goods and raw materials from the Thermotech premises could be sustained.

Analysis: The allegation that the seized goods were air-conditioners manufactured without payment of duty was not supported by tangible evidence. The record did not establish that the goods were air-conditioners rather than room air coolers or traded goods, and the power installation was found insufficient for manufacture of air-conditioners. The confiscation of semi-finished goods and raw materials was also not justified once the principal allegation of clandestine manufacture was not established.

Conclusion: The confiscation of the seized goods and raw materials was unsustainable and was set aside.

Issue (iii): whether denial of exemption and confiscation in relation to Flevel International on the footing of aggregate clearances was justified.

Analysis: The notification required consideration of the aggregate value of clearances of all excisable goods. However, the adjudicating authority had not correctly examined whether the seized goods had already been included in the aggregate value and whether the relevant clearances were properly computed. The matter therefore required re-examination on the limited question of the correct aggregate turnover for exemption purposes.

Conclusion: The denial of exemption on the existing computation was not sustained and was set aside, with the question of correct aggregation remitted for reconsideration.

Issue (iv): whether the demand and confiscation relating to the 24 air-conditioners and the alleged clandestine removal of 606 air-conditioners were proved by acceptable evidence.

Analysis: For the 24 air-conditioners, the majority found that the solitary retracted statement was not supported by sufficient independent evidence, and the alternative explanation was not disproved by reliable material. For the alleged clandestine removal of 606 air-conditioners, the case rested largely on ledger entries and inferences, without adequate corroboration such as proof of unaccounted raw materials, buyers, labour, power consumption or transport movement. In tax matters, suspicion cannot replace proof, and clandestine removal must rest on positive evidence.

Conclusion: The demand and confiscation in respect of the 24 air-conditioners and the alleged clandestine removal of 606 air-conditioners were not fully sustained on the evidence accepted by the majority, and the reliefs granted by the final order were partly in favour of the assessee.

Final Conclusion: The final disposition upheld only the demand and penalty relating to the alleged clandestine removal of 606 air-conditioners and the seizure-related demand on 24 air-conditioners, while granting relief on the clubbing issue, the confiscation of seized goods and the denial of exemption based on the disputed aggregate computation.

Ratio Decidendi: In excise matters, clubbing of clearances and allegations of clandestine removal can be sustained only on the basis of cogent, independent and corroborative evidence establishing common manufacturing control or unrecorded removal; marital relationship, assistance in business, or mere ledger entries and suspicion are insufficient by themselves.

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