PETITIONER: M/S. BASANT INDUSTRIES, AGRA Vs. RESPONDENT: COLLECTOR OF CENTRAL EXCISE DATE OF JUDGMENT09/12/1994 BENCH: SAHAI, R.M. (J) BENCH: SAHAI, R.M. (J) MAJMUDAR S.B. (J) CITATION: 1995 SCC (1) 534 JT 1995 (1) 152 1994 SCALE (5)181 ACT: HEADNOTE: JUDGMENT:
R.M. SAHAI, J.:
1. Whether oil driven pumps sold by the appellant were
exempt under Notification No. 85/72 dated 17.3.1972 or they
were assessable to duty under item 30A of the Central Excise
Tariff is the short question that arises for consideration
in this appeal directed against order passed by the ,
Custom, Excise and Gold (Control) Appellate Tribunal, New
Delhi.
2. The appellant, a partnership firm ‘ registered under
the Indian Partnership Act, ….. Was engaged in the
manufacture of combustion and diesel engines bearing brand
name ‘Atul Shakti’ for which it was duly f licensed under
the Central Excises & Salt Act, 1944 (‘Act’ for short). It
also carried
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on trading in pumps. It entered into agreements with
different units who were duly licensed under the Act for
manufacturing pumps and power driven pumps. In October, 1977
the appellant was served with a show-cause notice by the
Central Excise Department that they got the power driven
pumps manufactured with brand name ‘Atul Shakti’ from the
different manufacturing units who in fact were manufacturing
these pumps on behalf of the appellant. In reply it was
stated that the appellant had given raw materials to
independent units who were not under control or direction of
the appellant. According to the appellant, on the raw
material supplied by it the independent units had
manufactured according to specification given by the
appellant. Therefore, the work carried on by the independent
units could not be deemed to be on behalf of the appellant
and the appellant could not be denied the benefit of
exemption under Notification No. 85/72. The Tribunal did
not agree even though it held that the appellant had no
control over manufacturing process and the manufacturing
parties but what persuaded the Tribunal to take the view
against the appellant was that it found that the appellant
sent components in the shape of casting which by a little
machining and grinding became pumps. Therefore, even though
the manufacturing units were independent, yet it did not
make any difference in law as the pumps having been
manufactured on behalf of the appellant it was not entitled
to exemption. The Tribunal further held that if the claim of
the appellant that it had only supplied the raw material was
found to be correct, probably there would have been no
difficulty in accepting its claim but from the material it
transpired that the appellant had supplied components of
pumps and this was done in order to get over the legal
difficulty and claim exemption under the excise
notification. The Tribunal further found that some of the
independent units charged a sum of Rs. 10/- per pump. It was
demonstrative of the fact that the amount was so
ridiculously low that no independent unit manufactures a
pump for such a low cost.
3. The exemption under Notification no.85/72 dated 17th
March 1972 was available for power driven pumps if the value
did not exceed Rs. one lakh. This restriction was extended
even if the pumps were got manufactured by others. In other
words if value of the pumps sold by the appellant did not
exceed Rupees One Lakh whether manufactured by the appellant
or on its behalf by others then only it was entitled to
exemption. The appellant had cleared goods which exceeded
Rupees One Lakh in the years in dispute. Therefore, it was
not entitled to exemption unless the value of pumps
manufactured by different parties under the agreement was
excluded from its clearance. The appellant did not dispute
that it supplied castings, pump tape, shafts, impeller etc.
to the manufacturer. The question, therefore, that arose was
whether the pumps brought out of all this resulted in
manufacture. This word was explained by the Constitution
Bench in M/ s Ujagar Prints & Ors. v. Union of India & Ors.
1989(3) SCC 488. It was held that the test to determine
leviability under the Act is whether a new commercial
commodity has emerged. Since the goods which were
manufactured by different units on raw material supplied by
the appellant was a new commercial commodity it cannot be
said that it did not amount to manufacture. And that was not
the dispute in the show cause notice which called upon the
appellant to explain as to why the duty
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may not be levied on it as it was manufactured on its behalf
The ambit of controversy thus was not so much whether pumps
were manufactured by different parties but whether it was
manufacture on appellant’s behalf. The Tribunal in this
regard found it as fact that the appellant had no control
either over the manufacturing process or manufacturing
parties. Once the Tribunal recorded this finding it
misdirected itself in entering into the question whether the
pumps manufactured by third parties was mere assembling on
raw material or component supplied by the appellant or it
was manufacture. Even assuming that what was supplied was
component, but that by itself was not sufficient to fasten
liability on the appellant. The component unless processed
did not result in production of pump. And that having been
done by independent units for payment the finding that it
was manufactured on behalf of the appellants without any
material cannot be upheld. In fact, no such finding has been
recorded by the Tribunal nor any material could be pointed
out which could establish that it was the appellant who
manufactured the pumps or the independent units from whom it
got the pumps manufactured were doing so on behalf of the
appellant. The Tribunal in extending the meaning oft he
expression ‘manufacturing’ on behalf of the appellant by
introducing the concept of supply of components went beyond
the ambit of the Notification.
4. In the result, this appeal succeeds and is allowed.
The order passed by the Tribunal is set aside. The question
of law raised by the appellant is decided by saying that the
oil driven pumps sold by the appellant having not been
manufactured by it, it was pa entitled to claim exemption
under Notification No. 85/72 dated 17th March, 1972.
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