Clubbing of clearances requires proof, not suspicion, where separate entities lack evidence of dummy operations or financial flow-back.

Clearances of one unit could not be clubbed with another merely because of shared personnel, an electricity arrangement, or some common paperwork. The two concerns were separately recognised legal entities, and that supported distinct identity. Suspicion arising from missing machinery for larger valves or signed test certificates was insufficient without positive evidence of clandestine manufacture or removal. In the absence of proof that buyers dealt only with one concern, that the other was a dummy unit, or that there was mutual financial control and flow back of funds, the corporate veil could not be lifted. The demand and penalty were therefore unsustainable.

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Issues: Whether the clearances shown in the name of Process Control could be clubbed with the clearances of Geeta Valves for fastening duty liability on Geeta Valves.

Analysis: The two concerns were separate legal entities, one a private limited company and the other a partnership firm, and their separate recognition by other departments supported distinct identity. The absence of some machinery for bigger size valves, commonality of some personnel, a shared electricity arrangement, and some signed test certificates only raised suspicion. However, suspicion could not replace proof of clandestine manufacture or removal. No positive investigation established that the buyers dealt only with Geeta Valves, that Process Control was a dummy unit, or that there was mutuality of financial control and flow back of funds sufficient to lift the corporate veil.

Conclusion: The clearances of Process Control could not be clubbed with those of Geeta Valves, and the demand and penalty were unsustainable.

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