Small-scale exemption upheld for loan licensees using their own materials, supervision and drug licences in the appellant's factory.

Small-scale exemption under Notification No. 175/86-C.E. remained available where goods were manufactured in the appellant's factory by four loan licensees acting as independent manufacturers. The Tribunal treated the units as separate manufacturers because they held individual drug licences, operated under their own supervision and control, and used their own raw materials. On those facts, paragraph 7 of the notification did not disqualify them, and the Department's objection based on brand-name ownership failed. The decision distinguished Harts Cocoa Products as factually different and followed the earlier approach in N.P. Industries.

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Issues: Whether the benefit of the small-scale exemption under Notification No. 175/86-C.E. was available to goods manufactured in the appellant's factory by four loan licensees using their own raw materials, own supervision and separate drug licences, notwithstanding the Department's objection based on paragraph 7 and brand-name ownership.

Analysis: The relevant enquiry was whether the four units using the appellant's factory were manufacturers in their own right or merely persons hit by paragraph 7 of the notification. The Tribunal found the facts to be materially similar to the earlier decision in N.P. Industries and noted that the four persons had separate drug licences, manufactured under their own supervision and control, and used their own raw materials. On that basis, they were treated as independent manufacturers and not as persons disentitled merely because the brand name was not that of the appellant. The relied-upon decision in Harts Cocoa Products was distinguished because it did not involve loan licensees on the present facts.

Conclusion: The exemption under Notification No. 175/86-C.E. was available, and the Department's denial of the benefit was not sustained.

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