SSI exemption cannot be denied to a genuinely new unit with separate registrations merely because it uses the same premises.

SSI exemption under Notification No. 1/93 depends on whether a later unit is a genuine independent manufacturer or only a continuation of the earlier concern. Where the earlier business had closed, surrendered registration and sold the unit, and the new proprietary unit obtained fresh excise, sales tax and income-tax registrations and commenced production in its own right, the earlier clearances could not be clubbed against it. On those facts, the exemption could not be denied merely because both units operated from the same premises. The demand and penalty were therefore unsustainable, and the exemption benefit was restored.

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Issues: Whether the appellant, a new proprietary unit operating from the same premises as the earlier concern, was entitled to the benefit of Notification No. 1/93, or whether the exemption was barred because the earlier concern had already crossed the prescribed clearance limit.

Analysis: The entitlement to small-scale industry exemption turned on whether the new unit was merely a continuation of the old manufacturer or a distinct manufacturer with separate registrations and a different constitution. The relevant distinction was that clubbing of clearances is justified where the same factory or business is in substance continued by the same manufacturing entity, but not where the later unit has an independent existence, separate registrations, and carries on business in its own right. The facts showed that the earlier concern had closed its business, surrendered its registration, and sold the unit, while the appellant obtained fresh excise, sales tax, and income-tax registrations and commenced production as a proprietary concern. The earlier clearances could not therefore be attributed to the appellant for the purpose of denying the exemption.

Conclusion: The appellant was entitled to the benefit of Notification No. 1/93, and the demand and penalty were unsustainable.

Final Conclusion: The appeal succeeded, the adjudication order was set aside, and the exemption benefit was restored to the appellant.

Ratio Decidendi: A newly constituted manufacturer with independent registrations and separate business identity cannot be denied SSI exemption merely because it operates from the same premises as an earlier concern whose clearances had exceeded the exemption threshold, unless the later unit is shown to be a mere continuation or dummy of the earlier manufacturer.

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