Clubbing of clearances fails without proof of a dummy unit and a principal unit masking the same business.

Clubbing of clearances is sustainable only when the department establishes that one unit is the principal concern and the other is a dummy unit used to camouflage its clearances. A demand raised against both units without identifying which entity is the principal and which is the dummy is legally unsound, especially where the notice rests only on common partners and some common facilities. On the stated facts, the units were found to operate independently, with no flow back of money and separate factory locations, so the duty and penalty demand could not survive and the relief granted by the appellate authority was upheld.

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Issues: Whether the clearances of two units could be clubbed on the basis of common partners and common facilities, and whether duty and penalty could be demanded from both units when no principal unit and dummy unit were identified.

Analysis: Clubbing of clearances is sustainable only where one concern is the principal unit and the other is merely a dummy unit floated to camouflage the clearances of the principal concern. If the department proceeds to demand duty from both units without identifying which one is the dummy and which one is the principal unit, the foundation for clubbing becomes legally unsound. On the facts, the notice alleged only common partners and some common facilities, while the demand was raised against both firms. The appellate authority had found that the units were functioning independently, with no flow back of money and with factories at different places.

Conclusion: The demand based on clubbing of clearances was not sustainable, and the relief granted by the appellate authority was upheld in favour of the assessee.

Final Conclusion: The Revenue failed to establish that either unit was a mere dummy of the other, so the duty and penalty demand could not survive.

Ratio Decidendi: Clubbing of clearances is permissible only when the department establishes that one unit is the principal unit and the other is a dummy unit used to mask the principal unit's clearances; a demand against both units without such identification is legally unsustainable.

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