Manufacture under central excise law depends on actual control, not mere supply of raw material to an independent processor.

Mere supply of raw material to another unit for conversion on rolling charges did not, by itself, make the supplier the manufacturer for central excise purposes. The statutory definition of manufacturer under Section 2(f)(iv) was held inapplicable where the actual production was carried out by an independent concern on arm's-length terms, supported by account payee payments, and there was no material showing direction, control, or a dummy arrangement. On that footing, liability to central excise duty and penalty under Rule 173-Q did not arise against the supplier.

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Issues: Whether the appellant could be treated as the manufacturer of the cushion compound/tread rubber and made liable for central excise duty and penalty under Rule 173-Q of the Central Excise Rules.

Analysis: The appellant had merely supplied end-cuttings/raw material to another concern for conversion into cushion compound on payment of rolling charges and received the finished goods back. The evidence showed arm's-length dealings through account payee cheques. The statutory definition of manufacturer under Section 2(f)(iv) of the Central Excises and Salt Act, 1944 was not attracted merely because goods were produced to the buyer's specifications or from material supplied by the buyer; liability would arise only where the actual manufacturer acted under the buyer's direction and control, or was a dummy concern. On the facts, the manufacturing unit could not be treated as a dummy for the appellant, and mere supply of raw material did not make the appellant the manufacturer.

Conclusion: The appellant was not the manufacturer and was not liable to pay central excise duty or suffer penalty under Rule 173-Q; the demand and penalty were set aside.

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