M/S PUNJAB FOOTWEAR LIMITED, JALANDHARversusCOLLECTOR OF CENTRAL EXCISE, CHANDIGARH

A            MIS PUNJAB FOOTWEAR LIMITED, JALANDHAR
                               v.
            COLLECTOR OF CENTRAL EXCISE, CHANDIGARH

                              OCTOBER 26, I 994

B                     [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 ofconsidering claim ofbenefit ofNotification number
c    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
D   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
E   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.

F       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
G   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
H   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              Civil Appeal No. 3723 of
1986.
                                                                             F
    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.

    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:

                    Provided that:-

                   (i) Such footwear is produced by or on behalf of a
G                  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
H                  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.
                                                                                 F
     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
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.