Exemption for repacking activity sustained where an independent rural unit was not shown to be a dummy concern.

An independent rural unit repacking bulk formic acid into retail containers was treated as carrying on a process of manufacture, and exemption under Notification No. 1/93 was held available. The mere existence of a repacking agreement, or the affixing of labels showing another concern, did not by itself defeat the exemption where the notification contained no restrictive term against such activity and there was no finding that the unit was a dummy of the other concern. On that basis, denial of exemption was unsustainable, and the demand and penalty could not survive.

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Issues: Whether the assessee was entitled to exemption under Notification No. 1/93 despite repacking formic acid received in bulk into retail containers and affixing labels indicating another concern.

Analysis: The unit was found to be independent, situated in a rural area, and engaged in repacking bulk formic acid into smaller containers, which was treated as a process of manufacture. There was no finding that the unit was a dummy unit of the other concern. The mere existence of an agreement for repacking, or the affixing of labels on the containers, did not by itself negate the exemption in the absence of any restrictive term in the notification.

Conclusion: The exemption could not be denied, and the demand and penalty were unsustainable.

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