If the same manufacturer (i.e. firm with same partners or same limited company or same proprietor) has more than one factories, turnover of all the factories will be clubbed together for calculating the limit of Rs. 150 lakhs or 4 crores. Thus, if a manufacturer has one unit at Mumbai with 1.2 crores turnover and another unit at Delhi with 2.1 crores turnover, he will not be entitled to Excise exemption in any of the factories.
Some times, as a tax planning, a manufacturer may start another unit, instead of increasing production in his own factory, so that both units can avail SSI concession. If the other unit belongs to same proprietor or same company or same partnership firm, the turnover of both these units will be added together for purpose of SSI concession. To avoid this, the other unit may be started under different partnership or under different companies. If such other unit is genuinely separate and independent, their turnover will not be clubbed. However, if the other unit is a ‘sham’ or a ‘facade i.e. deceptive front’ or a ‘bogus unit’, the turnover of these two units will be clubbed i.e. considered in total for calculating SSI exemption limit. This is called ‘clubbing of turnover’.
No clubbing of units belonging to Government, Khadi and Village Commission etc. - Central Government, State Government, State Industries Corporation, State Khadi and Village Industries Board, National Small Industries Corporation, State Small Industries Development Corporation or Khadi and Village Industries Commission may hold more than one factories. However, their turnover will not be clubbed and turnover of each factory will be considered separately for calculating the limit of 150/400 lakhs.
Clubbing if more than one manufacturer in same factory - In some cases, more than one manufacturer manufactures the goods in one factory. This usually happens in following cases -
One manufacturer manufactures for part of year and then other - One manufacturer manufactures goods for some part of the year and then sells/transfers the unit. The other manufacturer manufactures in remaining part of the year in the same factory.
More than one manufacturers in one shed - One large shed is hired by numerous small units for manufacturing purposes and each small manufacturer uses a small portion of it. In such case, clubbing provisions will apply. [However, in case of small textile units, such clubbing provision will not apply – see discussions later].
Facilities of one factory used on sharing basis - Facilities of one factory are shared by different manufacturers on time sharing or other basis. In such cases, turnover of all those manufacturers will be clubbed together for calculating the excise exemption limits. - Indica Laboratories v. UOI - 1990 (50) ELT 210 (Guj).
Clubbing if change of ownership during the year - If ownership of factory changes during the year, clearances of previous owner as well as new owner during the year will be clubbed for calculating the value of clearances for purpose of SSI exemption - Gaurav Equipments (P.) Ltd. v. CCE - 1993 (66) ELT 438 (CEGAT).
No Clubbing provisions if two factories belong to different owners - There are various forms of ownership of an industrial unit i.e. (a) proprietorship (b) partnership firm (c) limited or private limited Company (d) Hindu Undivided Family (HUF) (e) Family Trust. All these forms of ownership have separate and distinct existence. Clubbing provisions are applicable if two or more SSI units belong to same proprietor or to same partnership firm or to same private limited company. However, if one unit ‘A’ belongs to a proprietor ‘P’ and other unit ‘B’ belongs to a partnership firm where ‘P’ is one of the partners, turnover of ‘A’ and ‘B’ cannot be clubbed as the partnership has
CAclubindia
