1987 (3) TMI 249 - AT - Central Excise

Summary

Issues:
- Interpretation of Notification No. 176/77 for small scale units manufacturing goods under Item 68 of the Central Excise Tariff.
- Determination of whether the appellants can be considered manufacturers under Section 2(f) of the Central Excises and Salt Act, 1944.
- Examination of whether the appellants, who manufactured goods for raw material suppliers, are entitled to exemption benefits under the notification.

Analysis:
The judgment by the Appellate Tribunal CEGAT, Madras delves into the interpretation of Notification No. 176/77 concerning small scale units manufacturing goods under Item 68 of the Central Excise Tariff. The appeals were filed based on a High Court order granting the right to appeal within a specified period. The central issue revolved around whether the appellants could be classified as manufacturers under Section 2(f) of the Central Excises and Salt Act, 1944, to claim benefits under the notification. The appellants argued that they were independent manufacturers, even though they produced goods according to the specifications of raw material suppliers, who were termed as customers. The appellants relied on judicial precedents to support their claim, emphasizing that manufacturing on behalf of customers did not disqualify them from being considered manufacturers under the Act.

The contention put forth by the learned Counsel for the appellants was that the appellants' status as manufacturers was established, and previous court decisions supported this stance. The Division Bench ruling of the Madras High Court and Special Bench rulings of CEGAT in other cases were cited to reinforce the argument that manufacturing for customers did not negate the appellants' manufacturing status. On the other hand, the Department's representative argued that since the goods were manufactured for raw material suppliers, the appellants could not be deemed manufacturers under the Act. The Department relied on a Special Bench ruling of CEGAT to support their position, asserting that the appellants were akin to hired labor and did not qualify as manufacturers. Reference was made to a Supreme Court ruling to bolster the argument that raw material suppliers were the actual owners of the goods manufactured by the appellants.

Upon careful consideration of both parties' submissions, the Tribunal rejected the Department's stance and upheld the appellants' claim as manufacturers under Section 2(f) of the Act. It was emphasized that the appellants were independent manufacturers and not surrogates or agents of the raw material suppliers. The Tribunal highlighted that the dealings between the parties were on a principal-to-principal basis, further solidifying the appellants' manufacturing status. Citing various judicial precedents, including a Special Bench ruling of CEGAT, the Tribunal concluded that the appellants were entitled to the benefits of the notification. Consequently, the impugned orders were set aside, and the appeals were allowed in favor of the appellants.