Independent manufacturer test denied exemption where shared facilities and branding links lacked proof of dummy status or control.

Common ownership links, shared premises, packing controls, raw-material supply and branding instructions were held insufficient, by themselves, to show that the appellants manufactured goods on behalf of another concern for purposes of Notification No. 85/85. The decisive test was whether the appellants acted on their own account on a principal-to-principal basis, and the record showed separate existence, separate operations and no clear evidence of dummy status or financial flow back. The department had also been informed of the relevant arrangement, so suppression was not established, and the demand was found time-barred. The impugned demand and denial of exemption were set aside.

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Issues: (i) whether the appellants were independent manufacturers acting on their own account, or were manufacturing the goods on behalf of another concern so as to deny the exemption under Notification No. 85/85; (ii) whether the demand was sustainable in view of suppression and limitation.

Issue (i): whether the appellants were independent manufacturers acting on their own account, or were manufacturing the goods on behalf of another concern so as to deny the exemption under Notification No. 85/85.

Analysis: The relationship between the parties, common directors or family connections, common office or godown, supply of raw materials, control over packing and branding, and the price structure were held insufficient, by themselves, to establish that the appellants manufactured the goods on behalf of the other concern. The decisive test remained whether the appellants manufactured the goods on their own account on a principal-to-principal basis. The record showed separate existence, separate operations, and no clear evidence of the appellants being a mere dummy or of any financial flow back. It was also noted that if the other concern were treated as the real manufacturer, it ought to have been made a party to the adjudication.

Conclusion: The appellants were independent manufacturers and the exemption could not be denied on the footing that they manufactured on behalf of the other concern.

Issue (ii): whether the demand was sustainable in view of suppression and limitation.

Analysis: The department had been informed of the agreement and relevant particulars at the time of classification proceedings, and the appellants had filed declarations and price lists from time to time. On those facts, suppression of material facts was not established. The demand was also found to be time-barred on the facts of the case.

Conclusion: The demand was not sustainable on the ground of suppression or limitation.

Final Conclusion: The impugned demand and denial of exemption were set aside, and the appeal was allowed.

Ratio Decidendi: Mere common ownership links, brand control, packing instructions, supply of materials, or shared facilities do not make an independent manufacturer a person manufacturing goods on behalf of another, absent clear evidence of dummy status, financial flow back, or control showing manufacture other than on a principal-to-principal basis.

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