Factory-based exemption turns on statutory definition: outside job-work clearances were excluded from aggregate value under Notification No. 80/80-C.E.

Notification No. 80/80-C.E. was construed to apply to clearances from one or more factories, with "factory" taking its meaning from section 2(e) of the Central Excises and Salt Act, 1944 because the notification contained no separate definition. Goods such as agarbatti made outside the assessee's factory by independent cottage-type manufacturers on job-work basis were not treated as the assessee's own clearances for computing the aggregate value. As a result, such outside clearances were excluded from the exemption threshold, and the assessee remained entitled to the exemption for the relevant first clearances under Tariff Item 14F.

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Issues: Whether clearances of agarbatti and similar goods manufactured outside the appellants' factory on job-work basis had to be included in the aggregate value of clearances for denying exemption under Notification No. 80/80-C.E., and whether the appellants were entitled to exemption for the first clearance of goods falling under Tariff Item 14F.

Analysis: Notification No. 80/80-C.E. applied to clearances from one or more factories and excluded manufacturers whose aggregate value of clearances exceeded the prescribed limit. The expression "factory" in the notification was held to be governed by Section 2(e) of the Central Excises and Salt Act, 1944, since the notification was issued under Rule 8(1) of the Central Excise Rules, 1944 and contained no special definition. On the facts, the outside units were independent cottage-type manufacturers, the goods were manufactured away from the appellants' factory, and the appellants were not treated as the manufacturer of those goods for the purpose of counting their clearances. The value of such outside clearances was therefore not includible in the appellants' aggregate clearance value.

Conclusion: The appellants were entitled to exemption under Notification No. 80/80-C.E. for the relevant clearances, and the order withdrawing the exemption was unsustainable.

Ratio Decidendi: For exemption notifications tied to factory clearances, goods manufactured by independent outside manufacturers on job-work basis are not to be added to the assessee's clearances unless the assessee can properly be treated as the manufacturer of those goods under the governing statutory definition.

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