The exemption from excise duty under Notification No. 176/77-C.E. applied to manufacturers manufacturing goods on behalf of other consumers, as long as they met the other conditions specified in the notification.

Headnote:
CENTRAL EXCISE ACT, 1944 - SECTION 2(F) - RULE 8(1) - NOTIFICATION NO. 176/77-C.E. - EXEMPTION FROM EXCISE DUTY - INTERPRETATION - APPLICABILITY TO MANUFACTURERS MANUFACTURING GOODS ON BEHALF OF OTHER CONSUMERS.
Fact of the Case:

The petitioners, small-scale industries engaged in structural fabrications, challenged the denial of exemption from excise duty under Notification No. 176/77-C.E. The notification exempted goods manufactured by manufacturers with capital investment not exceeding Rs. 10 lakhs and annual clearance not exceeding Rs. 30 lakhs. The respondents argued that the exemption did not apply to the petitioners because they manufactured goods on behalf of Bharat Heavy Electricals Limited (BHEL) and not on their own account.
Finding of the Court:

The court held that the notification applied to the petitioners and they were entitled to the exemption from excise duty. The court found that the petitioners were manufacturers as defined under Section 2(f) of the Central Excise Act, 1944, and that the goods manufactured by them fell under Item 68 of the First Schedule to the Act. The court also found that the petitioners' capital investment did not exceed Rs. 10 lakhs and their annual clearance did not exceed Rs. 30 lakhs.
Issues: Whether the exemption from excise duty under Notification No. 176/77-C.E. applied to manufacturers manufacturing goods on behalf of other consumers.
Ratio Decidendi: The court interpreted the notification and found that the expression "by or on behalf of a manufacturer" occurring in the notification did not restrict the exemption to manufacturers who purchased raw materials, manufactured finished goods, and sold them to third parties. The court held that the exemption applied to manufacturers who manufactured goods on behalf of other consumers, as long as they met the other conditions specified in the notification.
Final Decision: The court allowed the petitions and issued a direction to the respondents not to demand excise duty on the goods manufactured by the petitioners in terms of the notification.

Judgment :-

ISMAIL, C.J

This batch of writ petitions involves the interpretation of a notification of the Government of India dated 18th June, 1977, issued in the Department of Revenue and Banking, New Delhi, bearing G.S.R. No. 176/77-C.E. The said notification reads as follows :

"In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), and cleared for home consumption on or after the. first day of April in any financial year, by or on behalf of a manufacturer from one or more factories from the whole of the duty of excise leviable thereon, if an officer not below the rank of an Assistant Collector of Central Excise is satisfied that the sum total of the value of the capital investment made from time to time on plant and machinery installed in the industrial unit in which the goods, under clearance, are manufactured, is not more than rupees ten lakhs :

Provided that this exemption shall not be applicable to a manufacturer if the total value of all excisable goods cleared by him or on his behalf in the preceding financial year had exceeded rupees thirty lakhs :

Provided further that the exemption contained in this notification shall apply to the first clearances for home consumption by, or on behalf of, the manufacturer referred to in this notification, from one or more factories, up to a value not exceeding rupees thirty lakhs during a financial year subsequent to 1977-78, and up to a value not exceeding rupees twenty-four lakhs during the period commencing on the 18th day of June, 1977, and ending on 31st day of March, 1978.

Explanation. -For the purpose of determining the value of any capital investment, only the face value of such investment at the time when such investment was made shall be taken into account.'

2.The petitioners have prayed in these writ petitions for the issue of writs of mandamus forbearing the Assistant Collector of Central Excise, Tiruchy-1, and the Union of India represented by the Secretary to Government, Ministry of Finance, Department of Revenue and Banking, New Delhi, from interfering with the manufacture of goods in and the issue of finished goods from the petitioners' factories in various places in Thiruverambur and Thuvakudi near Tiruchy.

3.The facts are not in controversy. The petitioners herein are small-scale industries located in one or the other of the developed plots of the Developed Plots Estate in Tiruchy. The petitioners herein are engaged in structural fabrications and supply of certain articles to large consumers like Bharat Heavy Electrical Limited, Tiruchy. The further admitted case of the parties is that the raw materials are supplied to the petitioners by the said large consumers and the petitioners manufacture the products according to the specifications given by the said large consumers on receipt of certain conversion charges. The question for consideration is whether the exemption given as per the notification of the Government of India extracted above applies to the petitioners herein or not. It is not in dispute that the value of the plants and machinery installed in the industrial units of the petitioners does not in each case exceed rupees ten lakhs as provided for in the notification. Equally it is not in dispute that the value of the goods cleared for home consumption from the industrial units of the petitioners herein did not exceed rupees 30 lakhs during the preceding financial year. Again it is not disputed that the petitioners herein are manufacturers as defined in Section 2(f) of the Central Excises and Salt Act. This position has been conceded by the respondents in the counter-affidavit filed by them. In paragraph 9 of the common counter-affidavit filed in the batch of writ petitions, it is stated that applying the definition contained in Section 2(f) of the Central Excises and Salt Act,

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