Clubbing of clearances requires financial interdependence; employee interchangeability alone was insufficient to deny exemption.

Clearances of two separately incorporated units could not be clubbed to deny exemption where the only indicated link was interchangeability of employees, because there was no finding of financial flowback or comparable financial interdependence between the units. On the material recorded, that absence was decisive: the department had not established the basis required for clubbing clearances, so denial of exemption was not justified and the assessee's position was upheld. The departmental challenge to the Collector's order therefore failed.

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Issues: Whether the clearances of two separately incorporated units could be clubbed so as to deny the exemption under Notification No. 77/85.

Analysis: The dispute turned on whether the units were functioning as a single entity for exemption purposes. Although the employees were said to be interchangeable between the two units, the record did not contain a finding of financial flowback from one unit to another. In matters of clubbing of clearances, such financial interdependence is an important criterion, and its absence meant that the department's case was not established.

Conclusion: The clearances could not be clubbed on the material on record, and the denial of exemption was not justified; the finding is in favour of the assessee.

Final Conclusion: The departmental challenge to the Collector's order failed, and the appeal was dismissed.

Ratio Decidendi: For clubbing clearances, mere interchangeability of employees is insufficient unless supported by evidence of financial flowback or similar interdependence between the units.

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