Clubbing of clearances fails without financial flow back or effective control over the other unit's independent operations.

Clearances of two units could not be clubbed merely because one unit manufactured goods on labour charges for the appellant. Clubbing required evidence of a dummy unit, including financial flow back and effective control by the appellant over the other unit's functions and activities. The existence of both units and their independent working negatived the allegation that they were one and the same concern. On the facts stated, the demand and penalty could not be sustained by treating the other unit as a dummy unit.

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Issues: Whether the clearances of the appellant and the other unit could be clubbed on the basis that the other unit was a dummy unit lacking independence and financial flow back, so as to sustain the duty demand and penalty.

Analysis: The appellant had supplied raw materials to the other unit, which manufactured goods on labour charges. The mere receipt of labour charges did not, by itself, establish that the other unit was a dummy concern. For clubbing to be justified, the record had to show financial flow back and effective control by the appellant over the functions and activities of the other unit. The existence of both units and their independent working negatived the allegation that they were one and the same concern. On the facts alleged, the demand could not be sustained by treating the other unit as a dummy unit.

Conclusion: The clubbing of clearances was not justified and the duty demand and penalty could not be sustained against the appellant.

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