MANU/SC/2289/1996

Equivalent Citation: 1997(68)ECR527(SC)

IN THE SUPREME COURT OF INDIA
Civil Appeal Nos. 3692-95 of 1984
Decided On: 19.09.1996
Appellants: Britannia Biscuit Company Ltd.
Vs.
Respondent: Collector of Central Excise, Madras
Hon'ble Judges/Coram:
S.P. Bharucha and K. Venkataswami, JJ.
Subject: Civil
Acts/Rules/Orders:
Central Excises and Salt Act, 1944 - Section 2; Central Excise Tariff Act, 1985
Disposition:
Appeals allowed
Case Note:
Held: Manufacturer - Job-workers--Fabricating metal containers from Tin Sheets-Supplier of Sheets, under agreement, having the right to reject metal containers and
no provision relating to scrap--Value of sheets to be adjusted--All the four job work
units being paid fixed rates, having their own excise licences, and employing their
own workers--Supplier of Tin sheets cannot be treated as the manufacturer of metal
containers--CEA: S. 2(f).
ORDER
1. It appears that during the course of inspection of M/s. Containers and Components, Madras,
it was noticed that it was manufacturing metal containers out of tin sheets supplied by the
appellants on job work basis. The containers were manufactured according to standards
prescribed by the appellants. It was then discovered by the Excise authorities that the
appellants were also getting containers fabricated by three other units. The value of the
containers manufactured for the appellants by these four units exceeded Rs. 2 lakhs, except
during the year 1971-72. The appellants were, therefore, issued a notice on 12.5.1974, to show
cause why they should not be held to be the manufacturers of the containers, why it should not
be held that they were not entitled to exemption under a notification dt. 1.5.1970 and why they
should not be held liable to pay excise duty. The Assistant Collector upheld the demand in the
notice. The appeal filed before the Appellate Collector was, in substance, dismissed. The
appellants preferred revision applications to the Government of India which, upon the
establishment of the Customs, Excise and Gold (Control) Appellate Tribunal, stood transferred
to the Tribunal. The Tribunal, in the judgment and order under appeal, referred to the definition
of manufacturer in Section 2(f) of the Central Excises and Salt Act, 1944. It noted that the

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containers were excisable goods, that the appellants supplied the metal sheets required for the
manufacture of the containers and that the containers were essential for the packing of the
appellants biscuits. It took the view that if a person got goods manufactured by others under
his direction and control then he would be the manufacturer thereof. Note was taken of the fact
that a fixed rate was paid to the units, that the appellants had a right to reject the containers
and that there was no provision in the work orders that related to the scrap. The four units held
separate licences, but on that account it could not be held that they were the manufacturers
and not the appellants. Though the appellants had not actually hired the workers of these units,
it was reasonable to conclude that the appellants were engaged in the production of excisable
goods, viz., the containers, on their own account.
2. We are in no doubt that the Tribunal misdirected itself. Section 2(f) defines 'manufacture'
which, insofar as it is relevant, reads thus:-Section 2. In this Act, unless there is anything repugnant in the subject or context,(i) 'manufacture' includes any process-(i) incidental or ancillary
manufactured product;

to

the

completion

of

(ii) which is specified in relation to any goods in the Section

or Chapter Notes of the Schedule to the Central Excise Tariff
Act, 1985 as amounting to manufacture,
and the word "manufacturer" shall be construed accordingly and shall
include not only a person who employs hired labour in the production or
manufacture of excisable goods, but also any person who engages in
their production or manufacture on his won account.
A manufacturer therein is a person who employs hired labour in the production or manufacture
of excisable goods and a person who engages in their production or manufacture on his own
account.
3. In the instant case, the appellants, who manufacture biscuits and other confectionery,
entered into agreements with the four units to manufacture containers within which their
biscuits could be packed. Under the terms thereof, the appellants supplied the metal and the
value thereof was adjusted against the amounts that were required to be paid for the
manufacture of the containers. The appellants reserved the right to reject the containers. From
this it cannot be concluded that the appellants were the manufacturers of the containers or that
the definition of 'manufacturer' would apply to them, particularly having regard to the fact,
which the Tribunal noted, that four units had their own licences and employed their own
workers. The appeals are allowed and the judgment and order of the Tribunal is set aside.
No order as to costs.
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