Clubbing of clearances for small scale exemption applies when units operate as one integrated manufacturer with common control and finance.

Multiple units may have their clearances clubbed for small scale exemption where their own records and conduct show them to function as one commercially integrated manufacturer, with common management, finance, staff, publicity and interdependent operations. On those facts, separate corporate form does not prevent aggregation, and exemption can be denied to each unit individually. Non-disclosure of the common and interlinked character of the units, being material to exemption eligibility and duty liability, amounts to suppression of relevant facts and supports invocation of the extended period of limitation. The demand was sustained, while the redemption fine and penalty were reduced.

---

---

Issues: (i) Whether the clearances of the seven units were required to be clubbed for determining eligibility to small scale exemption. (ii) Whether the extended period of limitation was invocable on account of non-disclosure of material facts.

Issue (i): Whether the clearances of the seven units were required to be clubbed for determining eligibility to small scale exemption.

Analysis: The exemption notifications were intended for genuine small scale units and contemplated aggregation where the factual position showed that multiple units functioned as one manufacturer. The units shared common management, common professional and technical staff, common financial arrangements, coordinated operations, common publicity, and interlinked dealings. Their own documents and conduct showed that they projected themselves as a single group entity and not as truly independent units. On these facts, the separate corporate or legal form of each unit did not prevent clubbing for exemption purposes.

Conclusion: The clearances were correctly clubbed, and the denial of separate small scale exemption to each unit was upheld.

Issue (ii): Whether the extended period of limitation was invocable on account of non-disclosure of material facts.

Analysis: The facts relevant to eligibility for exemption were within the special knowledge of the units, but the true relationship among them and the common character of their operations was not disclosed to the Department. Since such disclosure was material to determining exemption eligibility and duty liability, the omission amounted to suppression of relevant facts for fiscal purposes.

Conclusion: The extended period of limitation was rightly invoked.

Final Conclusion: The demand of duty was sustained, while the redemption fine and penalty were reduced, leaving the appeals only partly successful.

Ratio Decidendi: Where multiple units are shown by their own conduct and records to function as a single commercially integrated entity with common management, common finance, and interdependent operations, their clearances may be clubbed for small scale exemption, and non-disclosure of such material facts can justify invocation of the extended limitation period.

---