Exemption for non-power manufacture denied where outsourced powered processing formed part of the manufacturing chain.

Notification No. 179/77-C.E. was available only where, in or in relation to manufacture, no process was ordinarily carried on with the aid of power. Raw materials purchased by the assessee were sent out for slitting, cutting and similar treatment to make them fit for use in fireworks, and that conversion was admittedly done with power. The fact that the powered process was carried out by third parties outside the assessee's factory did not alter the position, because it was done at the assessee's instance, to its specifications, and as part of the manufacturing chain. Earlier decisions on finished inputs or cases involving no change in the raw material were treated as inapplicable, and the exemption and refund claim failed.

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Issues: Whether the appellants were entitled to exemption under Notification No. 179/77-C.E. dated 18-6-1977 and refund of duty on the footing that no process was ordinarily carried on with the aid of power in their factories.

Analysis: The exemption applied only where, in or in relation to the manufacture of the goods, no process was ordinarily carried on with the aid of power. The raw materials purchased by the appellants were sent out for slitting, cutting and similar treatment to make them fit for use in the manufacture of fireworks, and that conversion was admittedly done with the aid of power. The fact that the powered process was carried out by third parties outside the appellants' own factories did not matter, because the conversion was done at the appellants' instance and to their specifications and formed part of the manufacturing chain connected with their goods. The cited decisions on purchases of finished inputs or on cases where no change had yet been brought about in the raw material were held not to govern the present facts.

Conclusion: The refund claim was not maintainable and the appellants were not entitled to the exemption.

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