Clubbing of clearances fails where separate units show independent functioning and no flow-back, control, or profit sharing.

Clearances of separately incorporated units cannot be clubbed merely because they received interest-free loans or shared some management features. Clubbing requires evidence of real control, profit sharing, flow back of funds, or a mere facade created for tax evasion; those factors were absent where the units had separate incorporation, licences, registrations, bank accounts, transactions, and independent functioning. The concept of a related person under valuation rules is distinct from a dummy unit, and common directors or financial assistance alone do not establish either status. On these facts, denial of exemption under Notification No. 175/86-C.E. was unsustainable, and the extended period and penalty could not be invoked.

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Issues: Whether the clearances of five independently incorporated units could be clubbed on the basis of interest-free loans and common management, and whether the units could be treated as dummy units or related persons so as to deny exemption under Notification No. 175/86-C.E. and invoke the extended period and penalty.

Analysis: The decisive factors for clubbing are real control, money flow back, profit sharing, and the creation of a mere facade for tax evasion. Mere financial assistance, interest-free loans, common directors, or some managerial overlap do not by themselves establish that separate units are dummy units. A related-person concept under the valuation provisions is distinct from the concept of a dummy unit. On the facts found, the units had separate incorporation, licences, registrations, bank accounts, transactions, and independent functioning, with no material showing total control, profit sharing, or flow back of funds to the main unit.

Conclusion: The clearances could not be clubbed, the units could not be treated as dummy units, and the denial of exemption was unsustainable; the appellants succeeded.

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