Counting packing workers under excise levy rules can disqualify special treatment where total employment exceeds the prescribed limit.

For a special excise levy conditioned on employment not exceeding a prescribed number of workers, workers engaged in normal packing incidental to completion and marketability of the goods are counted as part of the manufacturing process. On the facts noted, records, workers' statements, admissions, common premises, and common supervision showed that the units together employed more than five workers, attracting disqualification from the special procedure. The finding of contravention sustained the penalty, while the differential duty required fresh verification and recomputation on the basis of the production and clearance figures produced by the assessees.

---

---

Issues: (i) whether the appellants had employed more than five workers during the relevant years so as to disentitle them from the special compounded levy procedure; (ii) whether packing formed part of the manufacturing process for the purpose of counting workers under the excise scheme; and (iii) whether the differential duty and penalty required interference.

Issue (i): whether the appellants had employed more than five workers during the relevant years so as to disentitle them from the special compounded levy procedure.

Analysis: The records seized at the time of inspection, the note books, the workers' statements, and the admissions of the persons managing the two units showed that workers from N.K. Industries were deployed in Raj Brothers Agencies and that on the relevant dates the number engaged exceeded five. The two units functioned from the same premises under common supervision, and the surrounding circumstances supported the conclusion that the arrangement was designed to retain the benefit of the special procedure while crossing the worker limit.

Conclusion: The appellants had employed more than five workers during the relevant years, and the disqualification under the special procedure was attracted.

Issue (ii): whether packing formed part of the manufacturing process for the purpose of counting workers under the excise scheme.

Analysis: For the excise scheme, the expression manufacture was taken in an inclusive sense and extended to processes incidental or ancillary to completion of the product. Normal packing of the battery plates before clearance was treated as connected with completion and marketability of the goods. A worker engaged in such packing could not be excluded while counting the work force for the purpose of the special levy condition.

Conclusion: Packing was treated as part of the manufacturing process for this purpose, and the packing workers were rightly counted.

Issue (iii): whether the differential duty and penalty required interference.

Analysis: The finding of contravention justified denial of the special levy and imposition of penalty. At the same time, the duty computation required fresh verification because the appellants had furnished figures relating to production and clearance which had not been fully considered.

Conclusion: The penalty was upheld, but the differential duty was directed to be reworked on verification of the material produced by the appellants.

Final Conclusion: The appeal failed on the main controversy regarding excess employment of workers and the consequent liability under the excise scheme, but the quantum of duty was sent back for recomputation on the furnished records.

Ratio Decidendi: For the purpose of a special excise levy conditioned on employment not exceeding a prescribed number, workers engaged in normal packing incidental to clearance and marketability are to be counted, and the overall factual arrangement may be assessed on the totality of circumstances including common supervision, records, and admissions.

---