Per P.K. Kapoor: This is an appeal by the Revenue against the order dated 7-5-86 passed by the Collector (Appeals), Madras. The appellants were engaged in the manufacture of 'Cassettes' falling under Item 59 of the Central Excise Tariff. They were also receiving gramophone records from M/s. Music India Ltd. which were manufactured by the latter from master-discs supplied by the appellants. The gramophone records received by the appellants from M/s. Music India Ltd., Bombay were sold at a higher price under their own brand name. The appellants were served with a show cause notice alleging that the value of the records obtained by them from M/s. Music India Ltd., Bombay for sale after affixation of their brand name was required to be added to the value of goods produced and cleared by them from M/s. Saraswathi Stores for the purpose of computing the value of goods cleared for the purpose of notification No. 83/83 dated 1-3-83. The show cause notice further alleged that the aggregate value of the goods manufactured by them and those manufactured by M/s. Music India Ltd. on their account had exceeded the exemption limit under the said notification. They were, therefore. asked to show cause as to why duty amounting to Rs. 1,05,470-90 should not be recovered from them. The appellants contended that they had no control over the manufacturing operations of M/s. Music India Ltd., Bombay. They stated that the transactions between them and M/s. Music India Ltd. were purely on principal to principal basis. On these grounds they denied that the value of goods received by them from M/s. Music India Ltd., Bombay were required to be clubbed to the value of their clearances from M/s. Saraswathi Stores for the purposes of the exemption under Notification No. 83/83 dated 1-3-83. However, in his order dated 22-10-85 the Assistant Collector held that in respect of the gramophone records manufactured by M/s. Music India Ltd. master discs supplied by the appellants in terms of Section 2 (f) the appellants had to be deemed as the manufacturers since the term 'manufacturer' includes not only a person who employs hired labour for the production of goods but also a person who engages in production of goods on his account. On the basis of this reasoning the Assistant Collector confirmed the demand. Being aggrieved by the order passed by the Assistant Collector the appellants filed an appeal before the Collector (Appeals) who held that the value of the gramophone records received by the appellants from M/s. Music India Ltd., Bombay could not be added to the clearances of cassettes by M/s. Saraswathi Stores since M/s. Music India Bombay who had taken out a licence and paid the duty had to be deemed as the manufacturers of the gramophone records in question.

2. On behalf of the appellants Shri R.K. Kapoor, Ld. SDR submitted that the Collector (Appeals) had erred in holding that the respondents could not be deemed as manufacturers of gramophone records in question which were manufactured out of the master-discs supplied by the appellants and which were finally sold by them to consumers at a higher price than what was charged by M/s. Music India Ltd., Bombay. He contended that the respondents has to be deemed as manufacturers of the gramophone records in question since in terms of Section 2 (f) 'manufacturer' includes not only a person who employees hired labour in the manufacture of excisable goods but also a person who engages in their production or manufacture on his own account. He argued that in terms of Section 2 (0 the respondents were manufacturers of the gramophone records which were manufactured by them by employing the factory of an other person, namely M/s. Music India Ltd., Bombay.

3. A notice intimating the date of hearing was issued by registered post on 2-9-94 to the respondents but no one appeared on their behalf.

4. We have examined the records of the case and considered the submissions made on behalf of the appellants. It is seen that the