1991 (6) TMI 149 - AT - Central Excise

Summary

Issues:
- Interpretation of Notification No. 85/85 regarding exemption for clearances of excisable goods.
- Determination of whether goods manufactured by a loan licensee from raw materials supplied by the appellant should be included in the total clearances for exemption calculation.
- Examination of legal position on clearances on behalf of a manufacturer under Notification No. 85/85.

Analysis:
The case involved an appeal against the order passed by the Collector of Central Excise (Appeals) Madras regarding the eligibility of the appellants for exemption under Notification No. 85/85. The dispute arose from the inclusion of goods manufactured by a loan licensee from raw materials supplied by the appellants in the total clearances for the exemption calculation. The Assistant Collector and the Collector (Appeals) had upheld the demand for recovery based on this inclusion.

The appellants argued that there could be no clearances on behalf of a manufacturer for the purpose of the exemption under Notification No. 85/85. They relied on legal precedents, including the case of Shakti Udyog v. Collector of C. Ex., Chandigarh, to support their position that only clearances from a factory should be considered. They contended that the goods manufactured by the loan licensee should not be added to their own clearances for the exemption calculation.

On the other hand, the department argued that the goods manufactured by the loan licensee using raw materials supplied by the appellants should be included in the total clearances. They referred to the provisions of Notification No. 85/85 to support their stance that clearances by or on behalf of a manufacturer should be considered for the exemption limit.

The Tribunal analyzed the legal position and relevant case law on the issue. Referring to the decision in the case of Shakti Udyog, Jallandhar v. Collector of C. Ex., Chandigarh, the Tribunal emphasized that there is no concept of clearances on behalf of a manufacturer. Additionally, in the case of True Chem Pharma (Pvt.) Ltd. v. Collr. of C. Ex., it was held that a loan licensee cannot be deemed a manufacturer unless they carry out manufacturing activities under their own supervision and control.

Based on the lack of evidence that the appellants were carrying out manufacturing activities under their control at the loan licensee's premises, the Tribunal held that the value of goods manufactured by the loan licensee should not be added to the appellants' clearances. Consequently, as the value of goods cleared from the appellant's factory did not exceed the exemption limit, the Tribunal allowed the appeal and set aside the order of the Collector (Appeals).

In conclusion, the Tribunal ruled in favor of the appellants, holding that they were entitled to the exemption under Notification No. 85/85 as the goods manufactured by the loan licensee should not have been included in the total clearances calculation.