SSI exemption and clubbing of clearances: independent contractors in the same premises were treated as separate manufacturers.

Clearances of RCC/PSC poles manufactured by separate independent contractors in the same TNEB yard could not be clubbed to deny small scale exemption under Notification No. 8/1999-C.E. The operative test was whether the arrangement was a device to split clearances through dummy units; on the facts, each contractor manufactured independently and mere use of the same premises did not make them one factory or one manufacturer. As the respondent's aggregate clearances had to be examined on its own footing, the demand based on other contractors' clearances was unsustainable, and the associated penalties also failed. The contractor, not the Electricity Board, was treated as the actual manufacturer.

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Issues: Whether the clearances of RCC/PSC poles manufactured by different independent contractors in the same TNEB yard could be aggregated for the purpose of denying small scale exemption under Notification No. 8/1999-C.E. dated 28.02.1999, and whether the duty demand and penalties could be sustained.

Analysis: The contracts showed that each contractor carried on manufacture independently, and the mere use of the TNEB yard as the place of manufacture did not convert all contractors into one factory or one manufacturer. The condition in the notification aimed at preventing splitting of clearances through dummy units and could not be invoked to club the clearances of separate contractors. Since the aggregate clearances of the respondent had to be examined on its own footing, the demand based on clearances made by other contractors from the same yard was unsustainable. The Tribunal also relied on earlier decisions treating the contractor, and not the Electricity Board, as the actual manufacturer.

Conclusion: The clubbing of clearances was impermissible and the respondent remained entitled to the SSI exemption; the duty demand and penalties were not sustainable.

Final Conclusion: The appeal by the Department failed because the respondent was an independent manufacturer and the exemption could not be denied by aggregating the clearances of other contractors from the same premises.

Ratio Decidendi: For SSI exemption, clearances of separate independent manufacturers cannot be clubbed merely because they manufacture in the same premises; aggregation is permissible only where the arrangement is a device to split clearances through dummy units.

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