Tailor-made garments remain excisable, handicraft exemption needs proof, and artificially split units may face clubbed clearances.

Garments stitched to individual measurements from fabrics supplied by the assessee were treated as excisable manufactured goods because tailor-made clothing can still be marketable, and the handicraft exemption was denied for lack of contemporaneous proof that the actual cleared goods had the required hand ornamentation. Clearances of three family-controlled units were clubbed for SSI exemption where raw materials, labels and design inputs were centrally supplied and production was artificially split, and the extended limitation period was held available because the later notice rested on a distinct factual and legal basis.

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Issues: (i) Whether garments stitched as per individual customers' measurements and specifications out of fabrics purchased from the assessee were excisable goods and whether they were entitled to exemption as handicrafts; (ii) Whether the clearances of East West Attire and Ethnocity were liable to be clubbed with the clearances of Diwan Sons for SSI exemption and whether the demand raised in the later notice was time-barred.

Issue (i): Whether garments stitched as per individual customers' measurements and specifications out of fabrics purchased from the assessee were excisable goods and whether they were entitled to exemption as handicrafts.

Analysis: Conversion of fabric into garments constituted manufacture, and garments falling under the relevant tariff heading were capable of being marketable even if saleable only to a single customer. Tailor-made garments were not excluded from excisability merely because they were made to individual specifications. The claim for handicraft exemption was rejected because the nature and extent of hand ornamentation had not been established in respect of the actual garments cleared during the relevant period, and later certificates could not substitute contemporaneous proof.

Conclusion: The garments were held to be excisable and not entitled to exemption as handicrafts, against the assessee.

Issue (ii): Whether the clearances of East West Attire and Ethnocity were liable to be clubbed with the clearances of Diwan Sons for SSI exemption and whether the demand raised in the later notice was time-barred.

Analysis: The evidence showed that the units were controlled through members of the same family, that raw materials, labels and design inputs were centrally supplied, and that the production had been artificially split into three units. The later notice was not treated as barred by limitation because the clubbing allegation introduced a new factual and legal foundation not covered by the earlier notices, and the extended period was therefore held available.

Conclusion: Clubbing was upheld and the demand was held not to be time-barred, in favour of Revenue.

Final Conclusion: The Tribunal sustained the findings on excisability, refusal of handicraft exemption, clubbing of clearances, and limitation, but sent the matter back for a fresh determination on the exact duty liability and consequential penalties in light of the unresolved job-work liability issue.

Ratio Decidendi: Tailor-made garments remain excisable if manufacture results in marketable goods, handicraft exemption requires proof of the actual cleared goods, and clubbing of clearances is justified where separate units are found to be artificially split and centrally for SSI benefit.

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