Clubbing of clearances requires proof of dummy status or financial interlinking; shared family ownership alone is insufficient.

Clubbing of clearances for denial of small scale exemption requires proof that one manufacturing unit is a dummy or financially interlinked with the other, with control over production, sales, or pooled sale proceeds. Separate registration, independent raw material purchases, and absence of evidence of inter-transfer of sale proceeds weighed against clubbing. Common premises, family ownership, shared machinery, and movement of parts between units were treated only as suspicious circumstances, not proof of a facade arrangement. In the absence of reliable evidence that finished goods were cleared through one unit for the benefit of the other, the basis for denying exemption was not established.

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Issues: Whether the value of clearances from two family-run manufacturing units could be clubbed for denying small scale exemption under the relevant notifications.

Analysis: The dispute turned on whether the two units were ly independent or whether one was merely a facade for the other. The record showed separate registration, independent purchase of raw materials, no proved inter-transfer of sale proceeds, and no reliable evidence that one unit controlled the sales or production of the other. Common premises, family relationship, shared use of some machines, and movement of parts between the units were treated as factors raising suspicion, but not as sufficient proof of financial flow back or of a dummy arrangement. In the absence of evidence that finished goods of one unit were cleared through the other or that the sale proceeds were pooled, the basis for clubbing clearances was not established.

Conclusion: The value of clearances could not be clubbed, and the denial of exemption was not justified.

Final Conclusion: The departmental challenge failed, and the order dropping the notice was allowed to stand.

Ratio Decidendi: Clubbing of clearances for denying small scale exemption requires proof of financial interlinking, dummy status, or control over production and sale of one unit by the other; mere common family ownership, shared facilities, or common use of some machinery is insufficient.

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