Hi Vimal / Pete,
There is a flag SERUNI in table T399J that could allow non-unique serial/material combinations. But it looks like this is not used and is now redundant. See note 70362 which references this flag.
In transaction IQ01 a error is issued if you try to create same serial/material twice. I do find if I set a value in EXIST_MODE in function ITOB_CHECK_SERIALNO then it is possible to avoid the check and system will create a duplicate serial/material. This is related to the redundant functionality referenced in note above. Maybe there is a modification or enhancement on your system that does something similar.
I would say that creating such non-unique serial numbers should be avoided.
-Paul