Actual manufacturer principle excludes job-work goods from clubbing with factory clearances for excise exemption purposes.

Agaarbatti, amlapodi and dhup made by household ladies on job work were held to be manufactured by those outside cottage manufacturers, not by the assessee. The Court noted that the assessee supplied raw materials, the goods were made without power, there was no supervision by the assessee, payment was on a piece-rate basis, and the finished goods were sold from the manufacturers' premises without entering the assessee's factory. Since excise liability turns on the actual manufacturer, the value of those goods could not be clubbed with factory clearances for denying the exemption.

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Issues: Whether agarbatti, amlapodi and dhup manufactured in the premises of household ladies on job work basis could be treated as goods manufactured by the assessee so as to club their value with factory clearances for denying exemption under the relevant excise notification.

Analysis: The undisputed facts showed that the assessee supplied raw materials, the goods were produced without power in the outside premises, there was no supervision by the assessee, payment was made on a piece-rate basis, and the finished goods were sold from the cottage manufacturers' premises without entering the assessee's factory. In excise law, the taxable event is manufacture, and sale proceeds or supply of raw materials do not alter the identity of the actual manufacturer. On those facts, the household ladies were the real manufacturers and their clearances could not be clubbed with the assessee's factory clearances.

Conclusion: The outside manufacturers, and not the assessee, were the manufacturers of the goods in question; the value of those goods could not be included for denying the exemption, and the appeal was against the assessee.

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