SSI exemption and clubbing of clearances cannot rest on subsidiary status alone absent mutuality of interest or fund flow

Clearances of a subsidiary company could not be clubbed with those of another unit merely because of subsidiary status for denial of SSI exemption under Notification No. 1/93-C.E. Independent incorporation, absent flow back of funds or mutuality of interest, did not justify treating the units as one for exemption purposes. The departmental precedent was distinguished as turning on different notification wording. On that basis, clubbing solely on subsidiary status was not justified and denial of the SSI exemption was unsustainable.

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Issues: Whether clearances of a subsidiary company could be clubbed with those of another unit solely on the ground of subsidiary status for denying the benefit of small scale industry exemption under Notification No. 1/93-C.E. dated 28-02-1993.

Analysis: The basis for clubbing was examined against the terms of the exemption notification and the settled principle that independent incorporation of units, without flow back of funds or mutuality of interest, does not justify treating them as one unit for exemption purposes. The mere fact that one unit is a subsidiary company was found insufficient to attract clubbing of clearances. The earlier decision relied on by the department was distinguished because it turned on different notification wording.

Conclusion: Clubbing of clearances on the sole ground of subsidiary status was not justified, and denial of the SSI exemption was unsustainable.

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