1994 (12) TMI 76 - SC - Central Excise

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 ? Held that - 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 of the expression manufacturing on behalf of the appellant by introducing the concept of supply of components went beyond the ambit of the Notification. 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 entitled to claim exemption under Notification No. 85/72, dated 17th March, 1972.

Summary

Issues:
Whether oil-driven pumps sold by the appellant were exempt under Notification No. 85/72 or assessable to duty under Item 30A of the Central Excise Tariff.

Detailed Analysis:
The appellant, a partnership firm, was involved in manufacturing combustion and diesel engines and trading in pumps. The dispute arose when the Central Excise Department issued a show cause notice stating that the power-driven pumps bearing the brand name 'Atul Shakti' were manufactured on behalf of the appellant by different units. The appellant argued that it provided raw materials to independent units, and the manufacturing process was carried out according to its specifications. The Tribunal, however, found that the components supplied by the appellant were essentially the pumps themselves, leading to the denial of exemption under Notification No. 85/72.

The exemption under Notification No. 85/72 was applicable if the value of the pumps did not exceed Rs. one lakh, even if manufactured by others on behalf of the appellant. The appellant had cleared goods exceeding this value during the disputed years. The key question was whether the pumps resulted from the components supplied by the appellant amounted to manufacture. The Tribunal erred in extending the definition of 'manufacturing on behalf of' by considering the supply of components as manufacturing, without establishing that the appellant had control over the manufacturing process or parties.

The Supreme Court held that since the pumps were not manufactured by the appellant itself, it was entitled to claim exemption under Notification No. 85/72. The Court emphasized that the mere supply of components by the appellant did not automatically make it liable for duty unless those components were processed into the final product by the independent units. The Tribunal's decision was set aside, ruling in favor of the appellant.

In conclusion, the Court's judgment clarified that the appellant could claim exemption for the oil-driven pumps under Notification No. 85/72 as they were not manufactured by the appellant itself. The decision highlighted the distinction between supplying components and actual manufacturing, emphasizing the need for a new commercial commodity to emerge for a process to be considered as manufacture under the excise laws.