The process of cutting and setting diamonds in gold and converting them into diamond jewellery involves a manufacturing process, and therefore a firm that performs this process is entitled to the benefit of Notification No. 119 of 1975, which exempts job work from excise duty.

Messrs Bapalal and Co. (Manufacturing) is the petitioner herein. The petitioner firm has been registered as a partnership firm under the Indian Partnership Act in 1933, the registration number being No. 63 of 1933. In the same year another partnership firm was also registered under the name and style of M/s. Bapalal and Co. (Diamonds) with registration number 64 of 1933. The respective registration certificates were issued by the Registrar of firms as M/s. Bapalal and Co. (Manufacturing Department) and M/s. Bapalal and Co. (Diamonds Department). According to the petitioner excepting for the fact that certain partners are common, the partnership firms are two independent and distinct entities. Though both the firms are situate in the same premises, they function separately. M/s. Bapalal and Co. (Diamonds) supply raw materials such as diamonds and gold to the petitioner and the latter manufactures the jewellery by setting the diamonds in gold. It returns the diamonds and gold received from M/s. Bapalal and Co. (Diamonds) in the form of diamond jewellery such as necklaces, ear studs and nose screw. The petitioner in return receives labour charges from M/s. Bapalal and Co. (Diamonds). Similarly, the petitioner does job work for private customers who supply the petitioner with diamonds and gold and charges them for the manufacture of the jewellery. Apart from the job work that is done by the petitioner for M/s. Bapalal and Co. (Diamonds) and private customers, it receives gold ornaments and silverwares manufactured in workshops situated in Bombay, Calcutta, Coimbatore, Delhi, Kanwar, Mangalore, Marmagoa, Kumbakonam etc. and affixes its seal on these ornaments and then sells them in the open market. Admittedly as on 28-2-1975, the petitioner had a factory which was power operated one, employing more than 20 workmen. In view of the fact that the petitioner's manufactory fell within the meaning of 'factory' the articles of jewellery manufactured by the petitioner became assessable to excise duty.

2.The Central Excise Tariff Item No. 68, reads as follows :-

"68. All other goods not elsewhere specified manufactured in a factory but excluding-

(a) alcohol, all sorts, including alcoholic liquors for human consumption;

(b) opium, Indian hemp and other narcotic drugs and narcotics, and

(c) dutiable goods as defined in S. 2(c) of the Medical and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955).

Explanation. - In this item, the expression 'factory' has the meaning assigned to it in Section 2(m) of the Factories Act, 1948 (63 of 1948).'

Notification No. 119 of 1975, dated 30-4-1975 issued by the Government If India reads as follows :-" *

The goods falling under Item No. 68 of Tariff in respect of goods manufactured in a factory as a 'job work' from so much of the duty of excise leviable thereon as in excess of the duty calculated on the basis of the amount charged for the job work.

Explanation. - For the purpose of this notification, the expression 'job work' shall mean such items of work where an article intended to undergo manufacturing process is supplied to the job worker and that article is returned by the job worker to the supplier after the articles have undergone the intended manufacturing process as charging only for the job work done by him.'

3.The petitioner took advantage of the Notification No. 119 of 1975 and claimed before the respondent that it was liable to pay duty only on the basis of the amount charged for the job work done by it for M/s. Bapalal and Co. (Diamonds) and other private customers. As regards the gold jewellery and silverware which were bought from other manufacturers and sold by the petitioner with its seal affixed, the petitioner contended that such items of jewellery and silverwares were not dutiable as it did not manufacture the said articles.

4.The third respondent the Assistant Collector of Central Excise, Madras did not accept the stand of the petitioner. On 22-6-1976 he passed an order statin