SSI exemption and loan licence manufacture: brand ownership and control determine the real manufacturer, not the factory location.

Goods manufactured in a factory for a loan licensee under the latter's supervision and control were treated as manufactured by the loan licensee for SSI exemption purposes. The Tribunal applied the principle that, where the loan licensee supplies raw material, supervises production and owns the brand name, it is the real manufacturer in law even if the goods are physically made in another assessee's premises. On that basis, use of the loan licensee's own brand name did not amount to use of somebody else's brand name, and denial of Small Scale Industry exemption under Notification No. 8/99 was unsustainable.

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Issues: Whether the goods manufactured in the assessee's factory for a loan licensee under the latter's supervision and control could be treated as manufactured by the assessee so as to deny Small Scale Industry exemption on the ground of use of another's brand name.

Analysis: The Tribunal held that the department's attempt to deny the benefit of SSI exemption under Notification No. 8/99 was unsustainable. It accepted the finding that the loan licensee, who supplied the raw material, supervised and controlled the manufacture, and owned the brand name, was the real manufacturer in law. The fact that the goods were physically manufactured in the assessee's factory did not alter this legal position. The Tribunal applied the principle that a loan licensee manufacturing through another factory under its own supervision and control is entitled to be treated as the manufacturer for SSI exemption purposes, and that use of the loan licensee's own brand name does not amount to use of somebody else's brand name.

Conclusion: The denial of SSI exemption was not justified, and the assessee was entitled to the benefit of the notification.

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