Clubbing of clearances needs proof of sham existence or financial flowback, not just common premises and family links.

For excise exemption purposes, two units can be clubbed only if the evidence shows they are not independently functioning legal entities. Common premises, shared facilities, family connection, leased machinery and movement of goods between units were insufficient where the record also showed separate dealings with public authorities, separate accounts, separate assessments, payment of rent and electricity charges, and no established financial flowback. On those facts, the concerns were not shown to be a sham or paper arrangement, and clubbing of clearances was unjustified.

---

---

Issues: Whether M/s. Naveen Enterprises and M/s. Kinjal Electricals (P) Ltd. were a single entity in law so that the clearances of both units could be clubbed for denial of excise exemption benefits.

Analysis: The lower authorities had proceeded mainly on physical and operational commonalities such as common premises, shared facilities, family relationship between the persons behind the units, use of leased machinery, and predominant movement of goods from one unit to the other. The decisive consideration, however, was whether there was any financial flowback or other material showing that the two concerns were not independently functioning legal entities. The record showed separate dealings with public authorities, separate accounts, separate assessments, payment of rent and electricity charges, and no established arrangement of financial flowback. The cited circumstances, even taken cumulatively, were insufficient to conclude that the second concern was a mere sham or paper entity created for evasion of duty.

Conclusion: The two concerns were not shown to be one entity in law, and clubbing of their clearances was unjustified. The appeal succeeded and the assessee obtained relief.

Ratio Decidendi: A finding that two concerns are one for excise purposes requires cogent evidence of sham existence or financial flowback, not merely common premises, shared facilities, or family relationship.

---