Clubbing of clearances fails where dummy unit allegations lack proof of common funding, flow back, or shared property.

Clearances of Unit-2 could not be clubbed with Unit-1 because the factual foundation for treating Unit-2 as a dummy unit was not established. The alleged absence of real manufacturing activity was insufficient without evidence of common funding, financial flow back, or sharing of property. Unit-2 was recognised as a registered and separately assessed unit, and it was shown to be paying sales tax and other duties. On that record, the basis for clubbing clearances failed and the assessee succeeded on the issue.

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Issues: Whether the clearances of Unit-2 could be clubbed with those of Unit-1 on the allegation that Unit-2 was a dummy unit, in the absence of evidence of common funding, financial flow back, or sharing of property.

Analysis: The Order-in-Appeal was upheld because the record did not establish the essential factual basis for clubbing clearances. The show cause notice alleged that Unit-2 had no real manufacturing activity and was floated as a dummy unit, but no evidence was produced to show common funding, flow back of funds, or sharing of property. Unit-2 was shown to be in existence as a registered unit, independently assessed, and paying sales tax and other duties. In these circumstances, the basis for treating one unit as a dummy of the other was not made out.

Conclusion: The Revenue's challenge to clubbing of clearances failed and the assessee succeeded on this issue.

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