SSI exemption and loan-licensee job work clearances were not clubbed for aggregate turnover computation.

For SSI exemption, clearances made under a loan-labour/job-work arrangement were not to be clubbed where neither the loan licensee nor the assessee had taken over the entire factory or a distinct shift, and manufacture was carried out under the principal's raw material, plans and supervision. The assessee was treated as a job worker for goods manufactured for loan licensees, while outside manufacturers remained the manufacturers for goods produced for the assessee as loan licensee. As duty had already been discharged on the respective clearances, both categories were excluded from the assessee's aggregate value of clearances, rendering the demand and penalty unsustainable.

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Issues: Whether, for the purpose of SSI exemption, the value of clearances of goods manufactured for loan licensees and the value of goods got manufactured by the assessee as a loan licensee through other manufacturers were includible in the aggregate value of clearances for home consumption.

Analysis: The relevant test was whether the loan licensee could be treated as the independent manufacturer. On the facts, neither the loan licensees nor the assessee, when acting as a loan licensee through other manufacturers, had hired the entire factory premises or a distinct shift. The goods were manufactured under job-work arrangements, with raw material and manufacturing plans supplied by the respective principals and manufacture carried out under their supervision. In such circumstances, the assessee was only a job worker in respect of goods manufactured for loan licensees, while the other manufacturers remained the manufacturers in respect of goods produced for the assessee as loan licensee. Since the goods for loan licensees had been cleared under the loan licensees' brand name on payment of normal duty, and duty had been discharged by the outside manufacturers for the goods produced for the assessee, those clearances could not be clubbed for SSI computation.

Conclusion: The value of both categories of clearances was not includible in the assessee's aggregate value of clearances for SSI exemption, and the demand and penalty were unsustainable.

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