Excise manufacture requires actual assembly of goods within jurisdiction; site-installed diesel generating sets may fall outside duty.

Manufacture for excise purposes was treated as absent where diesel generating sets were assembled at customers' sites through contractors, the assessee had no factory, and the record did not show that the assessee itself manufactured or assembled the sets at its own premises. The majority held that mere supply of components and delivery of a completed set description did not constitute manufacture, especially where site assembly could result in immovable property rather than excisable goods. The demand was also held unsustainable because the Department failed to show that the alleged sites of assembly fell within the adjudicating authority's territorial jurisdiction. One member dissented, favouring remand for de novo examination of the evidence.

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Issues: (i) whether supply and installation of diesel generating sets at customers' sites amounted to manufacture of excisable goods; (ii) whether the demand could be sustained when the sites of installation were not shown to be within the territorial jurisdiction of the adjudicating authority.

Issue (i): whether supply and installation of diesel generating sets at customers' sites amounted to manufacture of excisable goods.

Analysis: The majority held that the appellants had no factory and were engaged in trading of components, with installation and assembly being carried out at customers' sites through separate contractors. It was found that manufacture must take place at the assessee's premises for excise liability to arise, and that if assembly at site results in an immovable property, the item does not answer the description of goods. The record did not establish that the appellants themselves assembled or manufactured the diesel generating sets at their premises. Mere supply of parts or description of the end product as a diesel generating set was insufficient to constitute manufacture.

Conclusion: The activity did not amount to manufacture by the appellants, and the goods were not liable to excise duty on that basis.

Issue (ii): whether the demand could be sustained when the sites of installation were not shown to be within the territorial jurisdiction of the adjudicating authority.

Analysis: The majority held that excise duty could be demanded only with reference to manufacture and removal from a place within jurisdiction. Since the appellants had no factory and the Department failed to show that the customers' sites where assembly allegedly occurred were within the adjudicating authority's territorial jurisdiction, the demand was jurisdictionally unsustainable. The objection had been raised and could not be brushed aside as irrelevant.

Conclusion: The demand was not sustainable for want of jurisdictional foundation.

Final Conclusion: The impugned duty demand and penalty could not be sustained, and the appeal succeeded with consequential relief according to law.

Ratio Decidendi: Excise duty cannot be levied unless manufacture of excisable goods is established at a place bringing the activity within the taxing authority's jurisdiction, and assembly at a customer's site resulting in an immovable property is not manufacture of goods.

Dissenting Opinion: One member held that the appellants appeared to be supplying and installing complete diesel generating sets and that the matter required remand for de novo consideration after examining the evidence, including the nature and extent of supplies and the question whether the sets were movable goods.

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