Dummy unit allegations failed where separate manufacture, accounts, and legal existence barred clubbing of clearances and exemption denial.

Three smaller manufacturing units could not be treated as dummy or sham units of the main manufacturer because the record showed separate machinery, separate electricity connections, separate registrations, and actual manufacture from the raw-material stage. Transactions between the units were supported by invoices and accounts and were treated as principal-to-principal. As the relied-upon documents were not tested by statements and the allegations of common control and financial accommodation remained unproved, there was no basis to ignore their separate legal existence or club their clearances. The small scale exemption under Notification No. 231/85 therefore could not be denied.

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Issues: Whether the three smaller units were dummy or sham units of the main manufacturer so as to warrant clubbing of clearances and denial of small scale exemption under Notification No. 231/85.

Analysis: The Department relied on resumed documents to allege common control, financial accommodation, use of the main unit's brand name, and only nominal manufacturing activity by the smaller units. The adjudicating authority, however, found from the record that the smaller units had separate machinery, separate electricity connections, separate registrations, and evidence of actual manufacture from the raw-material stage. The transactions between the units were supported by invoices and accounts and were treated as on a principal-to-principal basis. The Tribunal noted that the authenticity of the relied upon documents was not tested through statements of the persons concerned, and that the allegations remained inferential rather than proved by reliable evidence. In the absence of proof of common ownership, mutuality of interest, or effective control sufficient to ignore separate legal existence, the units could not be treated as sham or dummy units.

Conclusion: The allegation of dummy or sham units was not established, clubbing of clearances was not justified, and the benefit of Notification No. 231/85 could not be denied.

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