Assembly of imported telecom equipment was not manufacture, and the excise demand also failed on territorial jurisdiction.

Mere assembly and commissioning of imported MSC, BSC and BTS components into a radio telephony network did not amount to manufacture because the equipment was imported as fully manufactured items and no new marketable excisable product was shown to have been created; the central excise demand was therefore unsustainable. The demand also failed on jurisdictional grounds because critical components of the alleged system were located outside the adjudicating authority's territorial jurisdiction, so the authority could not assess the entire installation as manufacture within its domain. The impugned duty and penalty demand was set aside and the appeals were allowed.

---

---

Issues: (i) Whether the assembly and installation of the imported MSC, BSC and BTS components into a transmission apparatus for radio telephony amounted to manufacture of excisable goods. (ii) Whether the adjudicating authority could sustain the demand when the critical components of the alleged system were located outside its jurisdiction.

Issue (i): Whether the assembly and installation of the imported MSC, BSC and BTS components into a transmission apparatus for radio telephony amounted to manufacture of excisable goods.

Analysis: The installed network consisted of components which had been imported as fully manufactured items and merely assembled and commissioned at site. The activity undertaken was installation and commissioning of the system, for which service tax had already been paid. The Tribunal noted that the case was not one of manufacture of a new marketable product by conversion of parts into a distinct excisable article. The reliance placed on Note 6 to Section XVI did not assist the demand in the facts proved on record.

Conclusion: The activity did not amount to manufacture of excisable goods, and the demand of central excise duty was unsustainable.

Issue (ii): Whether the adjudicating authority could sustain the demand when the critical components of the alleged system were located outside its jurisdiction.

Analysis: The Tribunal accepted that the alleged excisable system comprised critical components such as MSCs and BSCs located outside the adjudicating authority's territorial jurisdiction. On that footing, the authority was not competent to treat the entire installation and assembly of the network as manufacture within its jurisdiction and to assess duty on that basis.

Conclusion: The demand could not be sustained on jurisdictional grounds.

Final Conclusion: The impugned duty and penalty demand was set aside and the appeals were allowed.

Ratio Decidendi: Mere assembly and commissioning of imported equipment into a system, without proof of manufacture of a new marketable excisable product within the adjudicating authority's jurisdiction, does not attract central excise duty.

---