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D

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MIS PUNJAB FOOTWEAR LIMITED, JALANDHAR

v.

COLLECTOR OF CENTRAL EXCISE, CHANDIGARH

OCTOBER 26, I 994

[R.M. SAHAI AND N.P. SINGH, JJ.]

Excise-Notification No. 88 of 1977 CE dated 9.5.1977-Claim of

benefit of-Manufacturing of footwears-Agreement between two

factories-Workers

of one factory working within precincts of another

factory-For purpose of considering claim of benefit of Notification number

of workers working in both factories to be taken into consideration.

The process of manufacturing of footwears is partly done by the

appellant and partly by Mis

Stepwell Industries Ltd. on behalf of the

appellant

on the basis of an agreement entered into between the

appellant and the said Mis

Stepwell Industries Ltd. In view of the terms

of the agreement, the workmen of Mis Stepwell Industries Ltd. were

working on the machines installed within the premises

of the appellant,

for purpose

of the part of the manufacture of footwears. They were also

entitled to use the electricity from the meter

of the appellant and had to

pay the charges for the same. The agreement says that the possession

of

the premises shall remain with the appellant, but Mis

Stepwell

In~ustries Ltd. shall have 'licence of entering the premises to work on

the

mach_ines'. It was also stipulated that 'the maintenance of the

machinery and its operation would be the responsibility'

of Mis

Stepwell Industries Ltd.

In respect

of the claim of the appellant for benefit under

Notification

No. 88 of 1977 dated 9.5.1977, the Collector of Central

Excise held that the number

of workmen directly employed by the

appellant as well the number

of workmen employed by Mis

Stepwell

Industries are to be counted and as the number of workmen of both the

factories exceeded 49, the appellant was not entitled to the benefit

of

aforesaid Notification.

On appeal, the Customs, Excise and Gold

(Control) Appellate Tribunal affirmed the findings of the Collector and

dismissed the appeal.

This appeal has been filed against the Order of the Appellate

Tribunal. The appellant submitted

that in view of the proviso (i) to the

Notification, the appellant was entitled to the benefit

of the Notification

202

PB. FOOTWEAR LTD. v. COLLECTOR OF C. EXCISE [N.P. SINGH, J.] 203

because the footwears were being produced by or on behalf of the A

appellant which shall be deemed to be manufacturer in one or more

factories.

It was pointed out that

Mis Stepwell Industries shall not be

deemed to be a factory belonging to the appellant, and as such the

workmen of Mis Stepwell Industries should not be counted for

purposes

of granting or refusing benefit of the Notification.

B

Dismissing the appeal, this Court

HELD : In view of the terms of the agreement between the.

appellant and

Mis Stepwell Industries Ltd., the workmen of Mis

Stepwell Industries had to work within the premises of the factory of

the appellari"t. In this background, it cannot be said that the workmen C

of Mis Stepwell Industries were not working within the precincts of the

factory

of the appellant. As such while calculating the number of

workers; their workers of

Mis Stepwell Industries have to be taken into

account. There

is no dispute that if the workers of

Mis Stepwell

Industries

are taken as working within the precincts of the appellant,

then the number

of workers was in excess of 49, mentioned in proviso. D

(i) of the Notification No. 88 of 1977 CE dated 9.5.1977. The benefit of

the Notification in view of proviso (i) can be extended only to such

manufacturers in whose factory including the precincts thereof, not

more

than 49 workers are working on any day of the preceding 12

months. As within the precincts of the factory of appellant more than E

49 workers were working including the workers of

Mis Stepwell

Industries, the appellant shall not be entitled to the benefit

of the

notification.

(205-G-H, 206-A)

CIVIL APPELLATE JURISDICTION

1986.

Civil Appeal No. 3723 of

From the Judgment and Order dated 10.6.86 of the Customs, Excise

and Gold (Control) Appellate Tribunal, New Delhi

in A.No. E.L.

(SB) (T)

A. No. 945of1981.

F

V. Sridharan, T. Ramesh, and V. Balachandran for the Appellant. G

Joseph Valla Pally and A.K. Srivastava for the Respondent.

The Judgment

of the Court was delivered by.

N.P.

SINGH, J. Mis

Punjab Footwear Limited, the appellant, have

been manufacturing footwears. It appears that the process

of manufacturing H

204 SUPREME COURT REPORTS [1994] SUPP. 5 S.C.R.

A of footwears is partly done by the appellant and partly by Mis Stepwell

Industries Limited on behalf

of the appellant on the basis of an agreement

entered into between the appellant and the .said M/s Stepwell Industries

Limited.

In respect

of the claim for benefit under Notification No. 88 of 1977

B CE dated 9 .5 .1977, the Collector of Central Excise, Chandigarh by his

order dated

21.8.1980 held that the number of workmen directly employed

by the appellant

as well as the number of workmen employed by

Mis

Stepwell ln~ustries Limited are to be counted and as the number of

workmen in both the factories exceeded 49, the appellant was not entitled to

the benefit

of aforesaid Notification.

c

The Customs, Excise and Gold (Control) Appellate Tribunal

(hereinafter referred to as 'the Tribunal') affirmed the aforesaid finding

of

the Collector saying that for purposes of granting or refusing the benefit of

the Notification aforesaid the number of workers working in the factory of

the appellant as well as the factory of

Mis Stepwell Industries have to be

D taken into consideration and as the number of workmei:i exceeded 49, the

appellant was not entitled to the benefit

of the aforesaid Notification.

On

that finding, the appeal of the appellant was dismissed. The relevant part of

Notification No. 88of1977 read as follows:

"In exercise ofthe powers conferred by sub-rule (I) of Rule

E 8 of the Central Excise Rules 1944, and in suppression of

the notification of the Government of India in the

Department

of Revenue and Banking No. 103/76-Central

Excise, dated the 16th

of March, 1976, the Central

Government hereby exempts footwears falling under sub­

item

(I) of Item No. 36 of the first schedule to the Central

F Excises and

Salt Act, 1944 (1 of 1944), from the whole of

the duty of excise leviable thereon:

G

H

Provided that:-

(i) Such footwear is produced by or on behalf of a

manufacturer

in one or more factories, including the

precincts thereof, wherein not more than 49 workers are

working, on any day

of the preceding 12 months, or

(ii) the total equivalent

of power used in the manufacture of

such

f9otwears by or on behalf of a manufacturer in one or

more factories does not exceed 2 Horse Power."

PB. FOOTWEAR LTD. v. COLLECTOR OF C. EXCISE [N.P. SINGH, J.) 205

The learned counsel appearing for the appellant urged that in view of A

proviso (i), the appellant was entitled to the benefit of Notification in

question because the footwears were being produced by or on behalf of the

appellant which shall

be deemed to be manufacturer in one or more

factories.

It was pointed out that M/s

Stepwell Industries shall not be

deemed to be a factory belonging

to the appellant, as such the workmen of

M/s Stepwell Industries should not be counted for purposes of granting or B

refusing benefit of the Notification. It was also submitted that the

expression 'such footwears' occurring

in proviso (i) has to be read with

r_eference to the footwears manufactured directly by the appellant in their

own factory and the number

of workmen working in the factory of the

appellant shall be the determining factor.

c

Before this aspect could be examined in detail, the learned counsel

appearing for the respondent, drew our attention

to the agreement dated

1.8.1977 between the appellant and

Mis Stepwell Industries Limited. It was

pointed out that

in terms of the said agreement,

Mis Stepwell Industries

Limite~ was working on the machines installed within the premises of the D

appellant, for purpose of the part of the manufacture of footwears in respect

of which contract had been given to said Mis Stepwell Industries Limited.

Not only the said Mis Stepwell Industries were to use the machines of the

appellant, but they were also entitled to use the electricity from ~ter of the

appellant and had to pay the charges for the same. The agreement says that

the possession

of the premises shall remain with the appellant, but M/s E

Stepwell Industries shall have 'licence of entering the premises to work on

the machines'. It further says that Mis Stepwell Industries 'shall use the

electricity from the meter'

of the appellant and 'shall pay the electricity

used by them'. It was also stipulated that 'the maintenance

of the machinery

and its operation would be the responsibility'

ofM/s Stepwell Industries.

In view

of the aforesaid terms of the agreement, the workmen of M/s

Stepwell had to work within the premises

of the factory of the appellant. In

F

this background, can it be said that the workmen of

Mis Stepwell Industries

were not working within the precincts

of the factory of the appellant? As

such while calculating the number of workers, the workers of

Mis Stepwell G

Industries have to be taken into account. There is no dispute that if the

workers

of

Mis Stepwell Industries are taken as working within the

precincts

of the appellant, then the number of workers was in excess of 49,

mentioned

in proviso (i) of the Notification aforesaid. The benefit of the

Notification in view

of proviso (i) can be extended only to such

manufacturers

in whose factory including the precincts there of, not more H

206 SUPREME COURT REPORTS [1994] SUPP. 5 S.C.R.

A than 49 workers are working·on·any day ofthe preceding 12 months. As

within the precincts

of the factory more

than 49 workers were working

including the workers·ofM/s Stepwell'Indu'stries, the appellant shall not be

entitled to the benefit of the Notification.

According to us, the Collector

as well as the Tribunal have rightly

B come to the conclusion that the appellant is not entitled to 'the benefit of

Notification in question. Accordingly this appeal fails

and is dismissed.

However, there will be no order as to 'costs.

A.G. Appeal dismissed.