Independent lessee entity defeats duty demand on leased factory manufacture where separate functioning was proved.

Duty on goods manufactured in the leased portion of the factory was not payable by the respondents because the lessee concern was found to be an independent entity. The record showed that it dealt with its own customers, and there was no material proving financing, control, or disposal of goods by the respondents. The departmental case was based on suspicion, while the evidence supported separate functioning during the relevant period. Subsequent departmental treatment of the leased premises as part of the respondents' factory did not establish lack of independence. The duty demand was therefore not sustained and the appeal failed.

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Issues: Whether duty on the goods manufactured in the leased portion of the factory was payable by the respondents on the footing that the lessee concern was merely a paper entity and the manufacture was by the respondents.

Analysis: The record showed that the leased concern had been treated as a separate entity, had dealings with its own customers, and there was no material to prove that it was financed or controlled by the respondents or that the goods were disposed of by the respondents. The departmental stand rested on suspicion, while the evidence accepted by the appellate authority supported independent functioning of the lessee concern. The subsequent departmental treatment of the leased premises as part of the respondents' factory did not by itself establish that the lessee was not functioning independently during the relevant period.

Conclusion: The finding that the lessee concern was an independent entity was upheld and the duty demand against the respondents was not sustained. The appeals were dismissed.

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