Independent premises test determines exemption where a separate manufacturing unit is not treated as one factory with the main unit.

Notification No. 46/81 applies where goods are manufactured in premises other than a factory as defined in section 2(m) of the Factories Act, 1948. The decisive inquiry is the character of the particular premises on its own facts, not mere common ownership or physical connection with another unit. A separate shed or unit does not lose its independent status unless the manufacturing activity is so interdependent that both places together constitute one factory. On the stated facts, the Sector 2 premises employed fewer than ten workers and remained an independent premises, so the exemption was available and denial on the basis of clubbing the two units was unsustainable.

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Issues: Whether goods manufactured in a separate premises employing less than ten workers were entitled to exemption under Notification No. 46/81 when the department treated that premises as part of the manufacturer's main factory.

Analysis: Notification No. 46/81 grants exemption to goods manufactured in premises other than a factory as defined in section 2(m) of the Factories Act, 1948. The decisive test is the character of the premises where manufacture takes place and whether that premises answers the statutory definition of a factory on its own facts. The fact that the premises belongs to the same manufacturer or is physically connected with another registered unit does not by itself justify denial of the exemption, unless the manufacturing activity is so interdependent that both places together constitute one factory. On the facts found, the separate shed at Sector 2 employed less than ten workers and did not lose its independent character merely because it was within the same business fold as the main unit.

Conclusion: The exemption under Notification No. 46/81 was available to the goods manufactured in the Sector 2 premises, and denial of the benefit on the ground that the two units were one and the same was not sustainable.

Ratio Decidendi: For exemption under Notification No. 46/81, the relevant inquiry is whether the particular premises where manufacture occurs is a factory within section 2(m) of the Factories Act, 1948, assessed on its own footing and not by clubbing it with another unit of the same manufacturer in the absence of true interdependent manufacturing activity.

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