1991 (1) TMI 287 - AT - Central Excise

Summary

Issues:
1. Whether the respondents are entitled to the benefit of Notification No. 175/86, dated 1-3-1986.
2. Whether the respondents can be considered as hired labor for M/s. Bombay Dyeing & Manufacturing Company Ltd.

Detailed Analysis:
Issue 1: The main issue in the case was whether the respondents are entitled to the benefit of Notification No. 175/86, dated 1-3-1986. The respondents received fabrics from M/s. Bombay Dyeing & Manufacturing Company Ltd., performed stitching, hemming, affixing the brand name, and packing the goods based on job charges. The original authority considered the respondents as hired labor due to the involvement of M/s. Bombay Dyeing in the process. However, the respondents argued that they were independent job workers and not hired labor. The tribunal analyzed various judgments and held that the respondents should be treated as manufacturers, not M/s. Bombay Dyeing, as they transformed raw materials into finished goods independently. The tribunal found no evidence to suggest that the respondents were under the control of M/s. Bombay Dyeing, concluding that the respondents were entitled to the benefit of the notification.

Issue 2: The second issue was whether the respondents could be considered as hired labor for M/s. Bombay Dyeing & Manufacturing Company Ltd. The revenue authority contended that recent case law supported this argument. However, the tribunal disagreed, stating that the circumstances did not justify labeling the respondents as hired labor. The tribunal highlighted that the mere fact that defective goods were not rejected by M/s. Bombay Dyeing did not indicate control over the respondents. Additionally, the absence of evidence regarding the terms of the contract between the parties further weakened the revenue's argument. The tribunal concluded that the respondents were manufacturers in their own right and not hired labor for M/s. Bombay Dyeing, thereby rejecting the appeals in favor of the respondents.

In summary, the appellate tribunal held that the respondents were entitled to the benefit of Notification No. 175/86, dated 1-3-1986, as they were considered manufacturers in their own right and not hired labor for M/s. Bombay Dyeing & Manufacturing Company Ltd. The tribunal emphasized the lack of evidence showing control by M/s. Bombay Dyeing over the respondents and the independent nature of the work performed by the respondents in transforming raw materials into finished goods. The tribunal distinguished the case from previous judgments cited by the revenue authority and upheld the respondents' position as independent job workers, thereby dismissing the appeals.