Independent manufacture under central excise: brand ownership and supplied materials do not, by themselves, make the customer the manufacturer.

In central excise, mere supply of components, ownership of the brand name, provision of specifications, and purchase of the entire output do not by themselves make the customer the manufacturer. The decisive test is whether the fabricator manufactures goods on its own account as an independent entity or merely acts as a hired hand. On the stated facts, the actual fabrication was undertaken by DIPL as an independent manufacturer, so the appellant was not treated as the manufacturer. The notice and duty demand were also found unsustainable because they were based on that incorrect premise and could not extend beyond the permissible limitation.

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Issues: (i) Whether the appellant could be treated as the manufacturer of the blood analysers for central excise purposes. (ii) Whether the show cause notice and the demand were sustainable in law and within limitation.

Issue (i): Whether the appellant could be treated as the manufacturer of the blood analysers for central excise purposes.

Analysis: The appellant supplied some components, owned the brand name, provided specifications and purchased the entire output from the actual fabricator. Those features, however, did not by themselves establish manufacture by the appellant. The decisive question was whether the fabricator was merely a hired hand or whether it manufactured the goods on its own account. The arrangement showed that the actual manufacture was undertaken by DIPL, which had its own manufacturing activity and could not be treated as the appellant's labour. The fact that the appellant's materials were supplied at a lower value, that the goods carried the appellant's brand name, and that the entire production was sold to the appellant did not convert the appellant into the manufacturer. The agreement and surrounding circumstances did not support a conclusion that the relationship was anything other than one involving an independent manufacturer.

Conclusion: The appellant was not the manufacturer of the goods; DIPL remained the manufacturer.

Issue (ii): Whether the show cause notice and the demand were sustainable in law and within limitation.

Analysis: The later notice replaced the earlier notice and, therefore, the case had to be examined with reference to the substituted notice. In any event, the notice could not sustain a demand for a period extending beyond the permissible limitation. Since the appellant was not the manufacturer, the demand raised against it was also misplaced. The collateral direction that duty collected from DIPL should be refunded did not save the impugned order. The order assessing duty against the appellant on the footing that it was the manufacturer was therefore legally unsustainable.

Conclusion: The demand and consequential order were unsustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed, with the appellant held not liable as manufacturer for the demanded duty.

Ratio Decidendi: For central excise, supplying materials, specifications, brand name ownership, or purchasing the entire output does not by itself make the customer the manufacturer where the goods are actually manufactured by an independent entity on its own account.

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