Dummy unit doctrine applied: clearances clubbed where common control, shared resources and surrounding facts proved artificial fragmentation.

Four associated units were treated as dummy units where the same person controlled the appellant and the other units, manufacture took place from the appellant's premises or rooms under its control, and raw materials, machinery and accounts were managed through the appellant. Separate excise, income-tax and sales-tax registrations did not prove independent existence because there was no supporting evidence of separate manufacture, raw material purchases, sales, labour or machinery. The absence of proof of monetary flow-back was not decisive, as dummy character could be established from surrounding facts and circumstances. Clearances were therefore clubbed, and the duty demand and penalties were sustained.

---

---

Issues: Whether the four associated units were merely dummy units created to split clearances and avail the exemption under Notification No. 175/86-C.E., thereby justifying clubbing of clearances, confirmation of duty demand, and imposition of penalty.

Analysis: The evidence showed that the same person controlled the appellant concern and the other units, the manufacturing activity was carried out from the appellant's premises or rented rooms under its control, raw materials and machinery were supplied by the appellant, challans were prepared in the names of the other units at its direction, and the accounts were maintained by the same employee. The separate registrations under excise, income-tax and sales tax did not establish independent existence in the absence of proof of separate manufacture, purchase of raw materials, sale transactions, labour or machinery. The absence of proof of monetary flow back was not fatal, since dummy character could be established from the surrounding facts and circumstances.

Conclusion: The units were correctly treated as dummy units, the clearances were rightly clubbed, and the duty demand and penalties were sustainable.

---