Clubbing of clearances requires proof of one manufacturer, mutuality of interest and financial flow back before duty demands can stand.

Clubbing of clearances from separately registered units is impermissible unless the department proves that they are, in substance, one manufacturer. Separate machinery, leased premises, distinct registrations and the absence of proof of mutuality of interest, common funding, financial flow back or unity of control meant the units could not be treated as mere facades. Common family links, shared premises, common accounts or security arrangements were held insufficient by themselves. The demand of duty, along with penalties and confiscation, was therefore unsustainable, and the failure to examine the relevant financial transactions and administrative guidance further undermined the clubbing exercise.

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Issues: Whether the clearances of the appellant units could be clubbed on the footing that they were not independent manufacturers, and whether the demand of duty and consequential penalties and confiscation could be sustained.

Analysis: The units were separately registered under the relevant tax and excise laws, maintained separate machinery and had leased portions of the premises, and the record did not establish that they were merely facades of one entity. The essential tests for clubbing, namely mutuality of interest, common funding, financial flow back and unity of control, were not examined or proved. Factors such as common family connections, common premises, common accounts or common security arrangements were held insufficient by themselves. The adjudication also failed to deal with the applicable administrative guidance on treatment of different firms and did not properly examine the financial transactions of the units before denying separate exemption benefits.

Conclusion: The clearances could not be clubbed and the demand of duty, penalties and confiscation were unsustainable.

Ratio Decidendi: Clubbing of clearances of separately registered units is impermissible unless the department proves that they are in substance one manufacturer through mutuality of interest, common funding and financial flow back, with the separate entities being a mere facade.

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