Clubbing of unit clearances and power-assisted component manufacture defeated exemption under the relevant notification.

Clearances from two units of the same partnership concern were treated as clearances by one manufacturer for exemption purposes, so the turnover from both units had to be clubbed. The separate-entity argument failed because the notification applied to clearances by and on behalf of a manufacturer, not to each location as an independent entity. The article also states that goods assembled in one unit could not claim Notification No. 179/77 where component parts were made in another unit of the same manufacturer with the aid of power. For a power-based exemption, any power-assisted process carried on by the same manufacturer in relation to the end product defeated eligibility.

---

---

Issues: (i) Whether clearances from two units of the same partnership concern were to be treated as clearances by the same manufacturer for the purpose of exemption limits; (ii) Whether goods assembled in one unit could claim exemption under Notification No. 179/77 when component parts were manufactured in another unit with the aid of power.

Issue (i): Whether clearances from two units of the same partnership concern were to be treated as clearances by the same manufacturer for the purpose of exemption limits.

Analysis: The relevant notification contemplated clearances by and on behalf of a manufacturer. Since both units belonged to the same partnership concern, the clearances from both units were attributable to the same manufacturer and could not be treated as those of separate entities merely because production was carried on at different locations.

Conclusion: The clearances from both units had to be clubbed for determining eligibility under the exemption scheme, and the assessee's separate-entity contention failed.

Issue (ii): Whether goods assembled in one unit could claim exemption under Notification No. 179/77 when component parts were manufactured in another unit with the aid of power.

Analysis: The exemption under Notification No. 179/77 was available only where, in or in relation to the manufacture of the goods, no process was ordinarily carried on with the aid of power. Applying the Supreme Court's interpretation, use of power in a process relatable to the end product by the same manufacturer, even in another unit, defeated the exemption. Here, the manufacturer used power in one unit to make component parts that were then assembled in the other unit without power.

Conclusion: The goods manufactured in the Wadala unit were not eligible for exemption under Notification No. 179/77.

Final Conclusion: The appellate order granting exemption was set aside and the departmental demand was sustained because the units were treated as belonging to one manufacturer and the use of power in the component-making process brought the goods outside the exemption.

Ratio Decidendi: For a power-based exemption, the decisive test is whether the same manufacturer carried out any process with the aid of power in relation to the manufacture of the end product, even if such process occurred in another unit belonging to him; if so, the exemption is unavailable.

---