SSI exemption on leased premises turns on independent manufacture and notification conditions, not related directors alone.

SSI exemption under Notification No. 9/98-C.E. is determined by the notification's own conditions, including the prescribed clearance limit, and not by a mere relationship between directors of the manufacturer and directors of the lessor. Where the assessee manufactures and clears goods in its own independent capacity from a leased factory, relatedness of directors alone is not a basis to deny the benefit. The analysis also notes that the case did not involve clubbing of clearances from different factories of the same manufacturer or production by different manufacturers in the same factory, and on that footing the duty demand and penalties were held unsustainable.

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Issues: Whether the assessee was entitled to small scale industry exemption under Notification No. 9/98-C.E. despite the relationship between some of its directors and some directors of the leasing company.

Analysis: The assessee manufactured and cleared the goods in its own independent capacity from a factory taken on lease. The demand was founded only on the circumstance that some directors of the assessee were related to some directors of the leasing company. The exemption under the notification depended on satisfaction of its own conditions, including the prescribed limit of clearances. The relationship between directors, by itself, was not a ground to deny the benefit when the assessee was the actual manufacturer and the case did not rest on clubbing of clearances from different factories of the same manufacturer or production by different manufacturers in the same factory.

Conclusion: The assessee was entitled to the small scale industry exemption and the duty demand and penalties were unsustainable.

Final Conclusion: The orders below were set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: SSI exemption cannot be denied merely because some directors of the manufacturer are related to directors of the lessor company; entitlement must be tested only on the conditions of the exemption notification and the assessee's status as the independent manufacturer.

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