Clubbing of sister concerns and clandestine removal require independent evidence; uncorroborated statements and records were insufficient here.

Clearances of alleged sister concerns cannot be clubbed with an assessee's turnover for SSI exemption denial unless the other units are put on notice and their independent status is examined; on the facts, separate premises, registrations, bank accounts, electricity connections and returns pointed against treating them as dummy units, so the clubbing-based duty demand failed. Allegations of clandestine manufacture and removal must rest on cogent independent evidence; retracted statements, notebooks and buyer statements, without corroboration such as raw-material discrepancies, excess power use, transport, delivery or sale proceeds, were insufficient, so the charge was rejected. Confiscation and personal penalties under the Central Excise Rules also fell once the demand and confiscation foundation failed.

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Issues: (i) whether the clearances of the alleged sister concerns could be clubbed with the assessee's clearances for denial of SSI exemption and duty demand; (ii) whether the findings of clandestine manufacture and removal were supported by admissible evidence; (iii) whether confiscation of the seized goods and the personal penalties imposed under the Central Excise Rules were sustainable.

Issue (i): whether the clearances of the alleged sister concerns could be clubbed with the assessee's clearances for denial of SSI exemption and duty demand?

Analysis: The alleged units were shown to have operated from different premises with separate registrations, bank accounts, electricity connections and tax returns. Before their clearances could be treated as those of dummy units and clubbed with the assessee's turnover, they were required to be put on notice and given an opportunity to establish their independent character. No such notice was issued to the other units whose clearances were aggregated. Clubbing of clearances without hearing the concerned units offended natural justice and could not be sustained.

Conclusion: The clubbing of clearances and the consequential duty demand based on such clubbing were unsustainable and failed.

Issue (ii): whether the findings of clandestine manufacture and removal were supported by admissible evidence?

Analysis: The case of clandestine removal rested mainly on statements recorded during investigation, some of which were later retracted, and on seized notebooks. The adjudication did not rest on corroborative documentary evidence showing unaccounted raw materials, excess consumption of electricity, transport, delivery, receipt of sale proceeds or other material indicia of clandestine manufacture. The notebooks were not shown to establish production beyond the statutory records, and the buyers' statements did not prove suppression of manufacture or removal. In the absence of cogent independent evidence, the charge of clandestine removal could not stand.

Conclusion: The allegations of clandestine manufacture and removal were not proved and were rejected.

Issue (iii): whether confiscation of the seized goods and the personal penalties imposed under the Central Excise Rules were sustainable?

Analysis: The confiscation was founded on the same infirm material and on retracted statements, without reliable proof that the goods were non-duty-paid. Once the demand and the clandestine-removal allegations failed, the foundation for confiscation disappeared. Personal penalty under Rule 26 requires personal dealing with excisable goods coupled with knowledge or reason to believe that the goods were liable to confiscation. Since confiscation itself could not survive and the evidence of culpable conduct was lacking, the penalties also could not be maintained.

Conclusion: The confiscation and the personal penalties were set aside.

Final Conclusion: The impugned order did not survive judicial scrutiny and the appeals succeeded with consequential relief.

Ratio Decidendi: Clearances of alleged dummy units cannot be clubbed and duty demanded without putting those units to notice and proving the case by independent corroborative evidence; retracted statements and uncorroborated materials are insufficient to sustain clandestine removal, confiscation, or penalties.

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