Exemption for goods made by independent units depends on proof they acted on the assessee's behalf, not mere material supply.

Exemption under Notification No. 85/72 could not be denied merely because independent units used materials supplied by the assessee. The decisive question was whether those units manufactured the oil driven pumps for and on behalf of the assessee. As the finding showed no control by the assessee over either the manufacturing process or the manufacturers, and no material establishing agency or manufacture on its behalf, mere supply of castings or other components was insufficient to attract duty. The pumps were therefore treated as not manufactured by the assessee or on its behalf, and the exemption remained available.

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Issues: Whether oil driven pumps manufactured by independent units using materials supplied by the appellant could be treated as manufactured on behalf of the appellant so as to deny exemption under Notification No. 85/72 dated 17-3-1972.

Analysis: The exemption was available so long as the value of the eligible pumps did not exceed the prescribed limit, including cases where goods were manufactured by others on behalf of the assessee. The dispute turned not on whether manufacture had taken place, but on whether the independent units were acting on behalf of the appellant. The finding recorded was that the appellant had no control over either the manufacturing process or the manufacturing parties. Mere supply of castings or other components, without material to show that the units were manufacturing for and on behalf of the appellant, was insufficient to attract duty or to deny exemption. The Tribunal had gone beyond the scope of the notification by treating supply of components as conclusive of manufacture on behalf of the appellant.

Conclusion: The pumps were not manufactured by the appellant or on its behalf, and the appellant was entitled to the exemption under Notification No. 85/72 dated 17-3-1972.

Ratio Decidendi: To deny exemption on the footing that goods were manufactured on behalf of an assessee, there must be material showing that the independent manufacturer acted for the assessee; mere supply of raw materials or components is not enough.

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