Manufacture through hired labour and tariff classification as parts of ice-cream machines supported small-scale exemption.

Fabrication carried out through hired labour under the assessee's control can still amount to manufacture by the assessee, especially where the goods are produced and cleared commercially from the assessee's operations. The goods were treated as parts of ice-cream and ice-candy machines rather than as goods falling under Heading 8418; classification was aligned with Heading 8419 on the Tribunal view relied upon. Because the clearances remained within the prescribed exemption limit, small-scale industry exemption was available, and the resultant demands, penalties and fine were set aside.

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Issues: (i) Whether the appellants were the manufacturers of the insulated tanks in question. (ii) Whether the goods were classifiable under Heading 8418 or Heading 8419 of the Central Excise Tariff and, on that basis, entitled to small-scale exemption.

Issue (i): Whether the appellants were the manufacturers of the insulated tanks in question.

Analysis: The work was undertaken partly through labour contractors and partly at the appellants' premises. The contractors received labour charges and were not shown to be independent principals acting on a principal-to-principal basis. The goods were ultimately produced and cleared by the appellants to customers on a commercial scale.

Conclusion: The appellants were correctly held to be the manufacturers.

Issue (ii): Whether the goods were classifiable under Heading 8418 or Heading 8419 of the Central Excise Tariff and, on that basis, entitled to small-scale exemption.

Analysis: The goods were found to be parts of ice-cream and ice-candy machines. The tariff entry adopted by the Commissioner under Heading 8418 was held to be incorrect, and the classification was aligned with Heading 8419 in light of the Tribunal view relied upon. Since the clearances were within the exemption limit, the benefit of the small-scale exemption was available under the relevant notification.

Conclusion: The goods were classifiable under Heading 8419 and the appellants were entitled to SSI exemption.

Final Conclusion: The demands, penalties, and fine were set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: Where fabrication and production are carried out through hired labour under the control of the assessee, manufacture can be attributed to the assessee; and if the goods are correctly classifiable under the exempted tariff heading, small-scale exemption follows where the clearances remain within the prescribed limit.

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