Independent manufacture and not hired labour: processing fabric into made-up articles qualified the unit for exemption.

Cutting fabric to size and carrying out stitching, hemming, brand affixation and packing constituted manufacturing activity by the respondents, not mere hired labour for the raw material supplier. The record did not show that they were a dummy or puppet unit under the supplier's control or supervision, and the supplier's sending of cut fabric, without more, was insufficient to treat the supplier as the manufacturer. As the subsequent processes produced made-up articles and the evidence did not support the hired-labour theory, the respondents were held to be manufacturers in their own right and entitled to Notification No. 175/86 dated 1-3-1986.

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Issues: Whether the respondents were merely hired labour for the raw material supplier or were independent manufacturers entitled to the benefit of Notification No. 175/86 dated 1-3-1986.

Analysis: The respondents received fabric cut to size and carried out stitching, hemming, affixing of brand name and packing. The record did not show that the respondents were a dummy unit or puppet under the control or supervision of the raw material supplier. The mere fact that the supplier sent cut fabric and that defective goods were not shown to have been rejected was insufficient to establish that the supplier, and not the respondents, was the manufacturer. The subsequent processes undertaken by the respondents resulted in made-up articles, and the materials on record did not justify treating the respondents as hired labour.

Conclusion: The respondents were not hired labour. They were manufacturers in their own right and were entitled to the benefit of Notification No. 175/86 dated 1-3-1986.

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