Common control and staged sales can justify clubbing clearances and using the final wholesale price for valuation.

Closely connected units under common ownership, management, premises and trading channels may have their clearances clubbed as those of one manufacturer for exemption purposes, even without formal profit-sharing or documented financial flow-back. Where sales are routed through connected concerns with no genuine independent movement or dealing, the assessable value may be taken as the last sale price to independent wholesalers. A diary-based demand for alleged clandestine manufacture and clearance cannot stand without proper reconciliation of diary entries with excise records, export figures and removals; that component was set aside and remanded for fresh quantification. Deliberate suppression and staged transactions also justified invocation of the extended limitation period.

---

---

Issues: (i) whether the clearances of the three concerns could be clubbed as clearances of one manufacturer for the purpose of the exemption notification; (ii) whether the assessable value was correctly taken on the basis of the last sale price to independent wholesalers; (iii) whether the demand based on the seized diaries alleging clandestine manufacture and clearance was sustainable; and (iv) whether the extended period of limitation could be invoked for the later demand.

Issue (i): Whether the clearances of the three concerns could be clubbed as clearances of one manufacturer for the purpose of the exemption notification.

Analysis: The units were closely connected in ownership, management, premises, production arrangements, and trading channels. SD and LD were set up in the premises of UC, their operations were controlled by persons closely associated with UC, and the trading concerns were also linked to the same network of persons and premises. The pattern showed common control over production and sales and a special financial relationship, even though there was no formal profit-sharing or documented financial flow-back.

Conclusion: The clearances were rightly clubbed and treated as clearances by one manufacturer, against the assessee.

Issue (ii): Whether the assessable value was correctly taken on the basis of the last sale price to independent wholesalers.

Analysis: The evidence showed a sequence of sales through connected trading concerns with no satisfactory proof of genuine physical movement or independent commercial dealing at each stage. The alleged processing by intermediaries was not substantiated, and the circumstances pointed to stage-managed transactions designed to depress assessable value. In such a situation, the true value was the amount realised in the final sale to independent wholesalers.

Conclusion: Adoption of the last sale price as the assessable value was upheld, against the assessee.

Issue (iii): Whether the demand based on the seized diaries alleging clandestine manufacture and clearance was sustainable.

Analysis: The diaries could be linked to the assessee's production and export figures, but the record did not establish the alleged clandestine clearances with the required comparison of diary entries against excise records, export figures, and removals. Without that verification, the inference of unaccounted clearance could not stand.

Conclusion: The demand founded on the diaries was set aside, in favour of the assessee, and the matter was remanded for fresh quantification after excluding that component.

Issue (iv): Whether the extended period of limitation could be invoked for the later demand.

Analysis: The scheme of splitting clearances and suppressing the correct assessable value was found to be deliberate and intended to evade duty. The department was not shown to have been fully aware of the true facts so as to negate suppression.

Conclusion: The extended period of limitation was validly invoked, against the assessee.

Final Conclusion: The clubbing and valuation findings were sustained, the diary-based demand was set aside and remanded for recomputation, the penalties were maintained, and the later demand was upheld on limitation as well as on merits.

Ratio Decidendi: Where units are managed and controlled as part of a common commercial arrangement with connected trading concerns and stage-managed sales, their clearances may be clubbed and the assessable value determined by the final genuine sale price; a separate clandestine-clearance demand must still be supported by proper reconciliation of records.

---