Actual manufacturer and excise valuation: clubbing upheld, but duty payable had to be excluded from assessable value.

Connected clearances may be clubbed for small-scale exemption when goods are completed in the appellant's premises from raw materials supplied by related units, because the actual manufacturer is the person who carries out the completed manufacturing process. The clubbing of clearances was upheld on that basis. For excise valuation, the assessable value must exclude the duty payable on the goods under Section 4(4)(d)(ii), even if the duty is not separately shown in the invoice, and in the absence of a contrary restriction in the notification, the exemption limit must be computed after that deduction. The valuation issue was decided for the assessee.

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Issues: (i) Whether the clearances of the other units were rightly clubbed with the appellant's clearances and the appellant could be treated as the manufacturer for purposes of duty liability and exemption under Notification No. 83/83; (ii) Whether, for computing the exemption limit, the assessable value had to be determined after deducting the duty payable under Section 4(4)(d)(ii).

Issue (i): Whether the clearances of the other units were rightly clubbed with the appellant's clearances and the appellant could be treated as the manufacturer for purposes of duty liability and exemption under Notification No. 83/83.

Analysis: The goods were produced from raw materials supplied by the other units and the manufacturing process was carried through to completion in the appellant's premises. The other units were separate legal entities, but the appellant was the unit from which the finished goods were cleared after punching and glueing. In such circumstances, the person who actually manufactures the goods is the manufacturer, and the mere supplier of raw material is not the manufacturer. The clearances of the connected units were therefore capable of being clubbed for the purpose of determining eligibility under the small-scale exemption.

Conclusion: The appellant was correctly treated as the manufacturer and the clubbing of clearances was upheld.

Issue (ii): Whether, for computing the exemption limit, the assessable value had to be determined after deducting the duty payable under Section 4(4)(d)(ii).

Analysis: The value for excise purposes excludes the amount of duty of excise payable on the goods. The statutory expression covers duty payable and is not confined to duty actually shown as paid in the invoice. Accordingly, while determining the assessable value for the exemption limit, the duty element payable on removal had to be deducted, even if not separately reflected in the invoice. In the absence of any restriction in the notification, the assessable value had to be computed on that basis.

Conclusion: The assessable value was required to be reduced by the duty payable under Section 4(4)(d)(ii), and the appellant succeeded on this issue.

Final Conclusion: The demand was sustained on the issue of manufacture and clubbing, but the valuation issue was decided in favour of the appellant, with the result that the matter was disposed of partly in favour of the assessee.

Ratio Decidendi: For excise valuation, duty payable on the goods must be excluded from assessable value, and the actual manufacturer is the person who brings the goods to the completed stage of manufacture.

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