ORDER

H.R. Syiem, Member (T)

1. This appeal came before the bench on 18.4.1986. It was found that there was some unclarity about the proper transfer of the revision petition from the Government of India to this Tribunal. The Registry reported that the matter had indeed been regularly transferred. The appeal was then heard on 14.5.1986.

2. The learned Counsel for the appellants argued that his main contention was that M/s. Shakti Udyog could not be regarded as the manufacturers of the steel utensils made by M/s. Mittal Steel Works, Vishwakarma Industries, Mittal Industries and Nishkam Udyog on their behalf, even though they sent stainless steel flats to them for the purpose. The manufacturer of the steel utensil is that person who makes the utensil from the raw material steel sheet or flat, and not the supplier of the steel sheet or even the owner of the utensil. It might be true, said the counsel, that they owned the steel sheets and utensils made from them; but they were not the manufacturers of the utensil. The other units who made the utensils for them were themselves independent units who manufacture goods not only for them but also for any one who placed orders with them. The Collector had no authority to say that the 4 other units must be held to be only contractors in relation to M/s. Shakti Udyog, and that the latter were the manufacturers within the meaning of Section 2(f) of the Central Excises Salt Act, 1944 of the stainless steel utensils manufactured on their account.

3. All other arguments will be more or less secondary once the above issue is decided, submitted the learned counsel.

4. The learned SDR argued very vehemently against the appellants saying that the arguments set out by the Collector in his order were sufficient to convince any one that the utensils were manufactured and cleared on behalf of M/s. Shakti Udyog by the other units and so must be accounted as manufactures and clearances of M/s. Shakti Udyog themselves for the purpose of notification No. 176/77-CE. He said he specially relied on the Shree Agency judgement of the Supreme Court 1977 ELT (J168)(S.C.) to maintain that M/s. Shakti Udyog engaged in the manufacture of the utensils, when they employed the 3 or 4 other units to make the goods for them. The ratio of the judgement, as discussed by the Collector would apply squarely to enable the manufactures by the other unit also to be taken into consideration to arrive at M/s. Shakti Udyog's production and clearances. He said the appeal had no merits.

5. We can see in the order No. 1/CE/81 dated 21.1.1981 passed by the Collector Central Excise, Chandigarh that there was no dispute that the utensils were manufactured by the 4 outside units. There was no dispute either that the manufacture was on behalf of M/s. Shakti Udyog and that the stainless steel sheets were sent by them and that the goods remained the property of M/s. Shakti Udyog at all times. The makers simply fabricated the utensils and charged the owners for the work.

6. In these conditions it is not permissible to adjudge the utensils as the manufactures of M/s. Shakti. Udyog or as cleared on their behalf. The utensils were manufactured by the four independent units and they were the manufacturers of the utensils, even though M/s. Shakti Udyog were their owners. Ownership does not make a man a manufacturer, anymore than giving a pieces of cloth to be made into a shirt turns one into a tailor. We must not mistake these two activities - they are separate even when they converge in the same person. Owning and manufacturing are distinct roles and this distinction must be kept in view.

7. The Central Excise say M/s. Shakti Udyog engaged in the manufacture of utensils by getting utensils made by other persons, and rely on the Shree Agency judgement of the Supreme Court 1977 ELT (J168)(S.C.). M/s. Shakti Udyog did indeed, by employing the 4 outside units, cause stainless steel utensils to be manufactured. But it -is well to note what the honourable court dealt with. Shree Agency gave yarns to 16 powerloom units to weave cotton fabrics for them, but claimed before central excise that they sold the yarn which they did not, and did not own the cloth, which in fact they did. Investigations showed that Shree Agency made false claims before the central excise. More important was the notification under which Shree Agency attempted to escape duty.

8. Notification 5-CE dated 1.3.1955 amended on 1.3.1956 exempted at the relevant time :

Cotton fabrics manufactured by on or behalf of the same person in once or more factories commonly known as power looms (without spinning plants), in which less than 5 powerlooms in all are installed.

The cotton fabrics had been without any doubt manufactured on - behalf of Shree Agency and the Supreme Court held this to be the case from the facts surrounding the transactions. Because of this, Shree agency was considered to be the manufacturer in terms of Section 2(f) (iv) of the Central Excises and Salt Act and hence the exemption was not available to them. Had the notification No. 176/77-CE been similarly worded M/s. Shakti Udyog would also be disentitled.

9. But notification No 176/77-CE is not similarly worded; it gave exemption to goods falling in item 68 :

cleared for home consumption on or after the first day of April in any financial year by or on behalf of a manufacturer from one or more factories....

It is not manufacture "by or on behalf" that is the exempting determinant, but clearance "by or on behalf of". Manufacture is one thing, clearance another. Goods can be manufactured of behalf of another; they can never be cleared on behalf of another. A man who produces goods must clear them; they can never be cleared on his behalf or on behalf of some other man. Clearance is itself an end, it is self-sufficient and does not need to be done on behalf of anybody. It is enough to clear - it is not important on whose behalf goods are cleared. The producer/manufacturer clears goods and there is an end of the matter as far as clearance goes.

10. The Collector quotes AIR 1965 Gujarat 215 ruling that a person who engages in manufacture by employing an independent contractor is also a manufacturer. This judgement is in harmony with the Shree Agency judgement of the Supreme court : both decided the question of who the manufacturer was. Our enquiry here is not about who the manufacturer of the goods was, - but who was their clearer.

11. The goods made on behalf of M/s. Shakti Udyog by the 4 outside units were not cleared on behalf of M/s. Shakti Udyog - they were simply cleared by the 4 unit. There is no such thing as clearance on. behalf -there is only clearance. We cannot find any law to support the pronouncement that the utensils were cleared on behalf of M/s. Shakti Udyog. They were cleared by the manufacturing units and sent to their owners - M/s. Shakti Udyog. Therefore, the clearances cannot be taken under M/s. Shakti Udyog account - they must be taken under the makers' account. Notification No., 176/77-CE can take the total clearances of such outside unit - it cannot lift clearances from some unit to add to the total of another. We would like to emphasize again that there is nothing as "clearance on behalf" in the central excise law and in fact the phrase is meaningless.

12. To be sure, a man may camouflage his operations and conceal that he owns more than one factory. When it discovered that the other 2 or 3 factories are his, we will be tempted to say that their goods were cleared on his behalf. It is nothing of the kind. The goods were cleared by the owner, though he may have remained unknown before, and though to all appearances, somebody also cleared and removed the goods, it was the true owner who in reality cleared them. The goods were not cleared on his behalf: they were cleared by him or, to cut is short, they were cleared and the clearances go to the owner's account.

13. M/s. Shakti Udyog is not the hidden owner of the 3 or 4 other units who made utensils for them. Therefore, the clearances of these units shall not be taken into M/s. Shakti Udyog. This is our directive and order.

14. The show cause notice was amended on 29.10.80 to show for 1976-77 total clearances of Rs. 5,358,217.50, of which Rs. 2,314,898.54 were patras. This leaves a value of Rs.3,044,000.00 for utensils. For 1977-78, the total was amended to Rs. 6,055,395.58 of which patras accounted for Rs. 3,333,626.80. This yields a value of Rs. 2,722,375.00 for utensils. Since the Collector demands duty only on the utensils, we take it that the patras on sheets are not the subject for any claim by the department. The appellants themselves say the sheets are exempt and this has not been repudiated by the Collector. In any case, they would be dutiable, not under item 68, but under item 26AA, and even if exempted, they would still be excisable goods as Ruled by the hon'ble New Delhi High Court in 1983 ECR 1559 Vizalandra. However, notification No. 176/77-CE exempts goods falling in item 68 and also only the utensils would be entitled to this.

15. The order of the Collector Central Excise Chandigarh No. 1/CE/81 dated 21.1.1981 is set aside. The exemption claimed by M/s. Shakti Udyog shall be redetermined in a manner compatible with the orders given above.