Clubbing of clearances for SSI exemption fails without proof of common funding or financial flowback between units.

Clearances of two units could not be clubbed for denial of small scale exemption where the record contained no allegation or finding of common funding or financial flowback. Mere common premises, management, labour, electricity connection, or other shared facilities were held insufficient to treat one unit as a dummy of the other for SSI purposes. The fact that one unit was separately registered was also irrelevant because registration was not required for SSI status during the relevant period. Accordingly, the aggregation of clearances failed, and the duty demand and penalties were not sustainable.

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Issues: Whether the clearances of two units could be clubbed for denying small scale exemption and sustaining duty demand and penalties when there was no allegation or finding of common funding or financial flowback.

Analysis: The demand was founded on the allegation that one unit was a dummy of the other and that the clearances should therefore be aggregated for the purpose of the SSI limit. The record did not show any allegation in the show cause notice of common funding or financial flowback between the units. The governing principle applied was that mere commonalities such as common premises, management, labour, or electricity connection are insufficient to justify clubbing in the absence of evidence of common funding and financial flowback. The Department's attempt to distinguish the case on the basis of registration of one unit was found irrelevant, as registration was not required for SSI status during the relevant period. The separate appellate finding that the dummy-unit allegation did not survive also weighed against the Department.

Conclusion: The clearances could not be clubbed, and the duty demand and penalties were not sustainable.

Ratio Decidendi: Clubbing of clearances of two units for SSI purposes requires evidence of common funding and financial flowback; common management or shared facilities alone is insufficient.

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