Clubbing of clearances upheld where one concern was found to be only a paper entity without independent manufacture.

Cement paint was found to have been manufactured by M/s. Mangalam Paints, while M/s. Super Paints and Chemicals was held to exist only on paper. The documentary record, seized correspondence, absence of the required declaration under Notification No. 111/78-C.E., and statements of connected persons showed that Super Paints had no independent manufacturing activity and that Dr. M.I. Itty led both concerns. On those facts, the authorities treated the clearances as clubbed and upheld duty demand, confiscation and penalties. The precedents on separate entities were found inapplicable because the second concern was not an manufacturer.

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Issues: Whether cement paint was actually manufactured by M/s. Mangalam Paints on behalf of M/s. Super Paints and Chemicals, so as to justify the duty demand, clubbing of clearances, confiscation and penalties.

Analysis: The documentary record, including the indenture between the two concerns, the seized correspondence, the absence of the statutory declaration under Notification No. 111/78-C.E., and the statements of persons connected with the premises, showed that M/s. Super Paints and Chemicals did not have manufacturing activity and functioned only on paper. The evidence indicated that M/s. Mangalam Paints had the manufacturing facility and produced the cement paint, while Dr. M.I. Itty controlled the affairs of both concerns. The authorities relied on material showing that the goods were removed and marketed from Mangalam Paints, and no convincing evidence was produced to establish independent manufacture by Super Paints and Chemicals. The cited precedents on separate entities and clubbing were held inapplicable because, on the facts found, the second concern was not an actual manufacturer.

Conclusion: The duty demand, clubbing of clearances, confiscation and penalties were upheld, and the challenge by the assessee failed.

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