Clubbed clearances defeat small scale exemption where separate units exist only on paper and share common resources.

Two purportedly separate units were treated as one factory because they operated from the same premises with a common gate, shared machinery, painting facilities, electricity, workers, raw material purchases, accounts and stock control, and the purchase bills were found to be fake and manipulated. On those facts, the separate existence of the units was only on paper, so their clearances had to be clubbed as those of one manufacturer. As the aggregate clearances in the preceding year exceeded the prescribed small scale exemption limit, the benefit of Notification No. 64/83-C.E. was unavailable, and the demand of duty, penalty and redemption fine was sustained.

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Issues: Whether the two purportedly separate units constituted one factory/unit for the purpose of clubbing clearances and denial of small scale exemption under Notification No. 64/83-C.E.

Analysis: The units were found to operate from the same with one roof and common gate, without separate demarcation. They shared machinery, painting facility, electricity meter, workers, raw material purchases, accounts and stock control, and the purchase bills were found to be fake and manipulated. On these facts, the separate existence of the units was held to be only on paper and the clearances were required to be treated as those of one manufacturer. Since the aggregate clearances in the preceding year exceeded the prescribed limit of Rs. 2.5 lakhs, the benefit of the exemption notification was not available.

Conclusion: The appellants were not entitled to separate treatment or to the claimed small scale exemption, and the demand of duty, penalty and redemption fine was sustained against the assessee.

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