Aggregate clearances clubbed for excise exemption where separate units were found to be an artificial split

A concessional excise exemption applied only where a manufacturer's aggregate clearances stayed within the prescribed limit. The two units at Bathinda and Panchkula were run by the same partners under the same firm name, and the split into separate partnership deeds and factories was treated as an artificial arrangement to secure exemption. Their clearances were therefore required to be clubbed, and the duty demand for the relevant period was upheld.

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Issues: Whether the appellant's two units at Bathinda and Panchkula, run by the same partners under the same firm name, were to be treated as one partnership firm for the purpose of computing aggregate clearances and denying exemption under the concessional excise notification, thereby sustaining the duty demand.

Analysis: The notification granted exemption only where the manufacturer's aggregate clearances remained within the prescribed limit, which was Rs. 200 lakhs and later Rs. 300 lakhs. The facts showed that the Bathinda unit had exceeded the exemption limit and the Panchkula unit had not, but both units were operated by the same partners under the same firm name. The split into separate partnership deeds and factories was held to be an artificial arrangement to obtain the benefit of exemption. On that basis, the clearances of both units had to be clubbed, and the duty demand for the relevant period was found justified.

Conclusion: The exemption was rightly denied, the two units were correctly treated as one firm for duty purposes, and the demand of duty was upheld against the appellant.

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