SSI exemption clubbing fails where separate units are not proved to be a facade or single business operation.

Clearances of acid slurry from two separately registered proprietary units could not be clubbed for denial of small-scale industry exemption merely because they shared premises, electricity arrangements and a labour contractor. The record did not establish that one unit was a facade or name-lender, or that the contractor controlled manufacturing so as to make the two units a single business operation. In the absence of cogent evidence of a colourable arrangement, suspicion could not replace proof, and aggregation of the clearances was held unjustified; the demand based on clubbing was set aside with consequential relief to the assessee.

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Issues: Whether the clearances of Acid Slurry manufactured by two separately registered proprietary units could be clubbed for the purpose of denying the exemption under Notification No. 83/83.

Analysis: The units were separately registered as small-scale industries and for sales tax purposes. The only common features relied upon were common premises, common electricity arrangement and engagement of labour through one contractor. The record did not show that the contractor led the manufacturing operations or that one unit was merely a name-lender for the other. In the absence of tangible evidence that the two units were in substance one business operation, suspicion or colourable arrangement could not substitute proof.

Conclusion: The clubbing of clearances was not justified and the demand based on aggregation of the two units could not be sustained; the finding is in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief to the assessee.

Ratio Decidendi: Clearances of two separately existing units cannot be clubbed for SSI exemption purposes unless the department proves with cogent evidence that one unit is only a facade or name-lender and that the manufacturing and business operations are carried on as a single unit.

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