M/S. BASANT INDUSTRIES, AGRA versus COLLECTOR OF CENTRAL EXCISE

Citation: [1994] SUPP. 6 S.C.R. 446 · Decided: 09-12-1994 · Supreme Court of India · Bench: R.M. SAHAI · Disposal: Appeal(s) allowed

Judgment (excerpt)

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MIS. BASANT INDUSTRIES, AGRA 
v. 
COLLECTOR OF CENTRAL EXCISE 
DECEMBER 9, 1994 
[R. M. SAHAI ANDS. B. MAJMUDAR, JJ.] 
Central Excises and Salt Act, 1944- Central Excise Tariff- Item No. 
JOA-Notification No. 85172 dated 17.3.1972- Oil driven pumps-.Supply 
of components by assessee-Pumps manufactured by third parties-Whether 
the manufacture was on behalf of assessee-Held: No-Assessee entitled to 
claim exemption under the Notification. 
The appellant entered into agreements with different units who 
were duly licensed under the Central Excises and Salt Act, 1944 for 
manufacturing pumps and power driven pumps. In October, 1977 the 
appellant was served with a show-cause notice by the Central Excise 
Department that it got the power driven pumps manufactued with 
brand name 'Atul Shakti' from the different manufacturing units who 
in fact were manufacturing these pumps on behalf of the apellant. The 
appellant replied that it had given raw materials to independent units 
who were not under the control or direction of the appellant; the 
independent units had manufactured according to specification given 
by the appellant, and therefore, the work carried on by the 
independent units could not be deemed to be on behalf of the appellant 
and it could not be denied the benefits of exemption under Notification 
No. 85172. 
On appeal, the Tribunal found that the appellant sent components 
in the shape 'of casting which by a little machining and grinding became 
pumps, and therefore, even though the manufacturing units were 
independent, yet it did not make any difference in law as the pumps 
having been manufactured on behalf of the appellant it was not entitled 
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to exemption. The Tribunal further found that some of the independent 
units charged a sum of Rs. 10 per pump, which was so ridiculously low 
that no independent unit would manufacture a pump at such a low 
change. The present appeal is filed against the Tribunal's order. 
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Allowing the appeal, this Court 
446 
BASANT INDS. v. C.C.E., U.P. [R. M. SAHA!, J.] 
447 
HELD: 1. The oil driven pumps sold by the appellant having not A 
been manufactured by it, it was entitled to claim exemption under 
Notification No.85/72 dated 17th March 1972. [449 GJ 
2. The Tribunal found it as fact that the appellant had no control 
either over the manufacturing process or manufacturing parties. Once 
the Tribunal recorded this finding it misdirected itself in entering into B 
the question whether the pump manufactured by third parties was 
mere assembling of raw material or component supplied by the 
appellant or it was manufacture. Even assuming that what was 
supplied was component, that by itself was not sufficient to fasten 
liability on the appellant. The component unless processed did not 
result in production of pump. And that having been done by C 
independent units for payment, the finding that it was manufactured on 
behalf of the appellants without any material cannot be upheld. In fact, 
no such finding has been recorded by the Tribunal nor any material 
could be pointed out which could establish that it was the appellant 
who manufactured the pumps or the independent units from whom it 
got the pumps manufactured were doing so on behalf of the appellant. D 
The Tribunal in 
extending the 
meaning of the expression 
'manufacturing' on behalf of the appellant, by introducing the concept 
of supply of components went beyond the ambit of the Notification. 
[449 D to FJ 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 910of1987. 
From" the· Judgment and Order dated 27.2.86 of the Customs Central 
Customs Excise and Gold (Control) Appellate Tribunal, New Delhi in A. 
No.ED (SB) 579/80-BI) O.No.116/86-BI.) 
V. Laxmi Kumaran and Kamal Budhiraja for Khaitan and Co. for the 
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Appellant. 
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A. K. Ganguli, V.J. Francis and V. K. Verma for Ms. Sushrna Suri for 
the Respondent. 
The Judgment of the Court was delivered by 
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R.M. SAHAI. J. Whether oil driven pumps sold by the appellant were 
exempt under Notification No. 85/72 dated 17.3.1972 or they were 
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assessable to duty under item 30A of the Central Excise Tariff is the short 
question that arises for consideration in this appeal directed against order 
passed by the Custom, Excise and Gold (Control) Appellate Tribunal, New 
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448 
SUPREME COURT REPORTS 
[1994) SUPP. 6 S.C.R 
The appellant, a partnership firm registered under the Indian 
Partnership Act, was engaged in 

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