SSI exemption cannot be denied by clubbing clearances of separate legal entities absent express notification basis.

For SSI exemption, clearances of a separately incorporated and independently registered manufacturer cannot be clubbed with those of its holding company merely because of shareholding or control. The exemption notification did not contain any express basis for treating interconnected, holding, or subsidiary companies as one unit for denial of benefit, and the parties maintained separate registration, records, and accounts. Transaction value principles under the Central Excise Act were held not to govern SSI exemption clubbing. Accordingly, denial of the exemption on clubbing grounds was unsustainable where separate legal existence and independent manufacture were established.

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Issues: Whether the clearances of a holding company could be clubbed with those of an independently registered small scale industrial unit so as to deny the benefit of Notification No. 9/2000-C.E. dated 01.03.2000.

Analysis: The exemption notification did not incorporate any concept of interconnected undertaking, holding company, or subsidiary company for the purpose of denying SSI benefit. The appellants were separately incorporated, separately registered with the Central Excise authorities, and maintained independent records and accounts. In such circumstances, the mere fact that the holding company held a large shareholding could not justify clubbing of clearances. The distinction drawn by the Revenue from transaction value principles under Section 4 of the Central Excise Act, 1944 was not accepted for SSI exemption purposes. The reasoning adopted in the cited Tribunal decision supported the view that separate legal entities are to be treated separately for SSI exemption where independent manufacture and separate existence are established.

Conclusion: The clearances of the holding company could not be clubbed with those of the appellants, and denial of SSI exemption was unsustainable. The issue is decided in favour of the assessee.

Ratio Decidendi: For SSI exemption, clearances of a separately incorporated and independently registered manufacturer cannot be clubbed with those of its holding company merely because of shareholding or control, unless the exemption notification itself provides for such clubbing or the factual and legal basis for ignoring separate existence is established.

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