Dummy unit test for small-scale exemption fails where partnership's independent existence and operations are evidenced.

A partnership concern was not treated as a dummy unit for small-scale exemption purposes because it was duly constituted, held an excise licence, had manufacturing machinery, issued goods under gate passes, and filed classification lists and RT-12 returns. No substantive evidence showed financial inter-connection with the proprietary concerns, and there was no worker or buyer evidence to prove it was merely an extension of those units. Common branding, family ownership, loan dealings, or shared orders were held insufficient by themselves to justify clubbing of clearances. In the absence of proof beyond suspicion of tax avoidance, clubbing was not sustainable and the partnership's clearances were kept separate.

---

---

Issues: Whether the clearances of the partnership concern could be clubbed with the clearances of the two proprietary concerns on the footing that the partnership was a fictitious or dummy unit created to avail the small scale exemption.

Analysis: The partnership concern had been duly constituted, held a Central Excise licence, possessed manufacturing machinery, cleared goods under gate passes, filed classification lists, and had its RT-12 returns assessed. There was no material showing any financial inter-connection between the partnership concern and the proprietary concerns, nor any evidence from workers or buyers to establish that the partnership was merely an extension of the other units. Mere common brand use, common ownership by father and son, loan dealings, or sharing of orders was insufficient by itself to establish that the partnership was a sham. In the absence of substantive evidence, suspicion of tax avoidance could not justify clubbing the clearances.

Conclusion: The partnership concern was not proved to be a dummy unit, and clubbing of its clearances with those of the proprietary concerns was not sustainable. The appellants succeeded on this issue.

---