Clubbing of clearances requires proof of a dummy unit; separate registration and independent operations defeat the demand.

Clearances of separately registered units cannot be clubbed merely because of common personnel, inter se transactions, or physical proximity. Where each unit is independently constituted, maintains separate registrations, records, purchases, sales, and job-work accounts, the separate legal identity is respected unless the department proves that one unit is a sham or dummy concern with financial flow-back and mutuality of interest. On the facts, the allegation that the second unit was not genuinely in existence failed, so clubbing, duty demand, and penalties were unsustainable.

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Issues: Whether the clearances of two separately registered units could be clubbed on the allegation that one was a dummy unit created to avail exemption under Notification No. 1/93, and whether duty and penalties were sustainable.

Analysis: The units were shown to be separately constituted and independently operating, one as a company and the other as a partnership firm, with separate registrations, records, purchases, sales, and accounting of job work. Mere commonality of personnel, inter se transactions, or the existence of a passage between the units was insufficient to establish that one unit was a paper concern. Clubbing requires proof that the second unit was not genuinely in existence or that there was financial flow back and mutuality of interest justifying disregard of separate identity. On the evidence, the allegation of a dummy unit was not established.

Conclusion: The clearances could not be clubbed and the allegation of dummy unit failed; the demand and penalties were unsustainable.

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