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Case laws relating to clubbing of clearances

Case laws relating to clubbing of clearances :

1. If one person owns a factory and is a partner in another factory, the production of all factories cannot be clubbed.AC v. Jayanthilal Balubhai & Ors. 1978 (2) E.L.T. J317(SC)
2. Factors such as common location of factories, common expenses, common partners, common trade mark, sharing of machinery usage, mutual financial transaction without interest not enough to club clearances.Jagjivandas & Co. v. CCE 1985 (19) E.L.T. 441 (T) affirmed by Supreme Court in 1989 (44) E.L.T. A24.

Authors note: This is a landmark judgment often used by assessees.

3. Turnover of limited companies being independent not clubbable in the absence of financial flowback.Spring Fresh Drinks v. CCE 1991 (54) E.L.T. 333 (T) [This case was maintained in Collector v. Spring Fresh Drinks 1997 (92) ELT A70 (SC)]
4. Common employees, proximity of factories, closeness of relationship are not sufficient to club clearances in the absence of flow back of profits.Renu Tandon v. UOI 1993 (66) E.L.T. 375 (Raj)
5. When two units are functioning in the same Commissionerate and have been granted separate registrations and facility of job work under Rule 57F, turnover not clubbable.Nikhildeep Cables P. Ltd. v. CCE 1994 (70) E.L.T. 273 (T)
6. Units separately incorporated with separate plant not clubbable because of few common directors or grant of interest free loans.Alpha Toyo Ltd. v. CCE 1994 (71) E.L.T. 689 (T)
7. Manufacture of same products in factory as well as job workers factory not clubbable unless common control shown.CCE v. MM Khambatwala 1996 (84) E.L.T. 161 (SC)
8. SSI units – Registration of SSI units/ undertakings by Director of Industries – Clubbing of units/ undertakings for computing investment in plant and machinery – A proprietor can be common if he is the same person. Similarly, a partner can be common if two firms are constituted with similar number of partners – Same is the position of a company having common director – If the number of partners / directors differs, then it cannot be said that the unit is set up with common partner or director.Kemtrode Pvt. Ltd. v. Joint Director (SSI), Govt. of Karnataka 1999 (108) E.L.T. 616 (Kar.)
9. Two units, one owned in individual capacity and other as Karta of HUF. Both the units are having separate machineries, separate incometax PAN No., separate sales tax, separate professional tax registration and separate electricity meters. No evidence to show that the two units are not independent. Clubbing of clearance does not applyCCEx., Ahmedabad, v. Arbuda Industries, 2008 (230) E.L.T. 159(ri.- Ahmd.)
10. With regard to „clubbing of clearances‟, it was held that demand based on two units having common Directors and one person looking after affairs of both and second unit which is not having complete machinery to manufacture final product, the impugned Tribunal order containing finding that accounts of both units managed separately and capital, premises, machinery, labour and operations separate cannot be interfered with since it is essentially a finding of fact and therefore Apex Court refused to interfere with such finding of fact.CCE v. Superior Products 2008 (230) E.L.T. 3 (S.C.)
11. Where the Tribunal in its impugned order had held that both units as separate and independent, Apex Court held that such finding of facts cannot be interfered with as the Revenue further accepted Tribunal‟s decision in earlier similar proceedings of assessee, not justified to challenge same subsequently.CCE v. Shakti Tubes Ltd 2008 (231) E.L.T. 193 (S.C.)
12. Maintenance of accounts of various units by a single person and at one office is not a ground for justifying clubbing. If different firms operated with its own machinery in separate premises leased from appellant, clubbing their clearances cannot be justified. A single security guard was in charge of security of all units in no way contributed to a finding that clearances of these units could be clubbed. Mutuality of interest, financial integrity among various units and unit of control are sine qua non for clubbing of clearance of units involved. The Units engaged in production and transactions are assessed to sales tax and income tax, hence entitled to be considered as independent units in their own right.Techno Device v. CCE 2009 (243) E.L.T. 79 (Tri. – Chennai)
13. In absence of any finding of there being any common funding and financial flow-back, clubbing of clearances is not permissible, merely on the premise of familiarities between partners of units and other administrative commonalitiesCoimbatore Engineering Works v. CCE 2009 (239) E.L.T. 366 (Tri. – Chennai)
14. In this case, both units had their premises in same block. Property tax, water charges and other charges relating to entire premises occupied by both the units paid by appellant. Office staff was common for both and salary paid by appellants. Products sold through a common marketing agent. It was held that the benefit of SSI exemption not available.Harnik Nutrients Pvt. Ltd. v. CCE 2009 (238) E.L.T. 235 (Bom.)


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