Job worker as manufacturer: independent contract manufacturing prevents clubbing supplier clearances for small-scale exemption.

A job worker manufacturing goods independently in its own factory on contract basis is the manufacturer for small-scale exemption purposes, unless the raw material supplier exercised control over the entire manufacturing activity or the alleged manufacturer was merely a hired hand. On the facts stated, no such control was shown. The supplier of raw materials therefore could not be treated as the manufacturer, and its clearances could not be clubbed with the job worker's clearances for denying exemption under the notifications. Only the job worker's own clearances were relevant for determining eligibility.

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Issues: Whether a job worker manufacturing goods independently on contract basis is to be treated as the manufacturer for the purpose of small-scale exemption, and whether the clearances of the raw material supplier could be clubbed for denying exemption under the relevant notifications.

Analysis: The unit carried out the manufacturing activity in its own factory on contract basis. The supplier of raw materials could not be treated as the manufacturer unless the entire manufacturing activity was controlled by that supplier or the actual manufacturer was merely hired by it. On the facts found, no such control was established. The settled legal position is that a job worker who manufactures independently in terms of the contract is the manufacturer, and the clearances of the raw material supplier cannot be taken into account for exemption purposes merely because the goods were produced for that supplier.

Conclusion: The assessee alone was liable to be treated as the manufacturer, and only its own clearances were relevant for determining exemption under the notifications; the clubbing of the supplier's clearances was not justified.

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