Clubbing of manufacturing units for exemption requires financial interdependence and profit flow back, not mere shared facilities.

Clubbing of manufacturing units for small scale exemption depends on proof that apparently separate units are a single enterprise. Common ownership, shared premises, workers, records, procurement, effluent treatment facilities, or an interest-free loan are not enough by themselves; the record must show real financial interdependence and actual flow back of profits. Separate registrations, separate accounts, and absence of evidence that the units were a facade to evade exemption support separate identity. On that footing, denial of exemption based only on coordinated working was not sustainable.

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Issues: (i) Whether the two manufacturing units could be treated as a single entity for the purpose of denying small scale exemption and clubbing their clearances.

Analysis: The finding of a single entity cannot rest merely on close relationship between the owners, common premises, common workers, common attendance records, common procurement arrangements, a common effluent treatment plant, or an interest-free loan, unless the record shows real financial interdependence and a flow back of profits. Separate registration with industry and tax authorities, separate accounting of receipts and materials, and absence of evidence that the units were a facade to evade exemption materially support separate identity. Common administrative convenience, such as a joint inspection note or shared correspondence, is not decisive by itself.

Conclusion: The two units could not be clubbed as one entity, and the denial of exemption was not sustainable.

Final Conclusion: The appeals succeeded and the demand based on treating the two units as one was set aside.

Ratio Decidendi: Clubbing of otherwise separate units requires evidence of common ownership or control together with financial interdependence and actual flow back of profits; common facilities or coordinated working alone are insufficient.

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