Separate legal entities and clubbing of clearances: prima facie challenge justified interim waiver of pre-deposit and recovery stay.

Separate companies are to be treated as independent legal entities, so their clearances are not automatically subject to clubbing absent clear supporting material. In the reported CESTAT matter, the applicants raised a prima facie objection to clubbing of clearances and to the resulting duty and penalty demands, arguing that the demand was not properly attributable on the basis assumed in the impugned order. On that footing, and relying on the cited Supreme Court principle, the Tribunal found a prima facie case for interim protection and granted waiver of pre-deposit and stay of recovery.

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Issues: Whether the applicants were entitled to waiver of pre-deposit and stay of recovery in a matter involving clubbing of clearances and the consequential duty and penalty demands.

Analysis: The applicants raised a prima facie objection to the proposed clubbing of clearances, contending that the units were distinct legal entities and that the demand was not clearly attributable in the manner assumed in the impugned order. The Tribunal noted the reliance placed on the principle that separate companies are to be treated as independent legal entities and that their clearances are not automatically clubbed. In view of the material placed and the ratio of the cited Supreme Court decision, the Tribunal found that a prima facie case existed for grant of interim relief.

Conclusion: Waiver of pre-deposit and stay of recovery were granted in favour of the applicants.

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