Dummy unit test failed: separate legal entities and lack of control barred clubbing, exemption denial, and penalty.

Clearances of the five units could not be clubbed with the first appellant because the record did not establish that they were dummy or front concerns. The agreements showed restrictions on sale and technical know-how, but there was no evidence of common premises or telephone, raw material supply, financial assistance, control over management or production, profit flow-back, or decision-making. Separate registration as legal entities and the mere presence of common directors, negotiated pricing, or supply of goods to the first appellant were insufficient to treat the first appellant as the manufacturer. The exemption under Notification No. 80/80-C.E. therefore could not be denied, and penalty under Rule 173Q was not sustainable.

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Issues: Whether the clearances of the five manufacturing units could be clubbed with the first appellant on the footing that they were dummy units or creations of the first appellant, and whether the first appellant could therefore be treated as the manufacturer so as to deny exemption under Notification No. 80/80-C.E. and sustain penalty under Rule 173Q of the Central Excise Rules, 1944.

Analysis: The agreements showed restrictions regarding sale of the goods and use of technical know-how, but there was no evidence of common premises or telephone in the show cause notice, no supply of raw materials, no financial assistance, and no material to establish control over management, production, profit flow-back, or decision-making. The units were separately registered legal entities. Mere common directors, negotiated pricing, or supply of goods to the first appellant was insufficient to establish that the other units were fictitious or that the first appellant istically controlled their manufacturing activity. The facts therefore did not satisfy the settled test for treating a unit as a dummy or front concern.

Conclusion: The first appellant was not the manufacturer of the goods, the clearances could not be clubbed, and the denial of exemption and penalty could not be sustained.

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