Excise manufacturer determination: leased plant operated on principal-to-principal terms defeats duty demand based on resale price.

Where a plant and equipment are leased for consideration and operated on a principal-to-principal basis, the party actually manufacturing the goods remains the manufacturer for excise purposes. Mere supply of equipment, personnel, or maintenance support does not make the other party the manufacturer under Section 2(f) of the Central Excise Act, 1944. In the absence of evidence of financial flowback or non-arm's length dealings, duty cannot be demanded on the other party's resale price. The department's assumption that that party was the manufacturer was held to have no legal basis, and the appeal was rejected.

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Issues: Whether Praxair could be treated as the manufacturer of the carbon dioxide cleared from the facility, and whether duty could be demanded on the sale price charged by Praxair in the absence of evidence of non-arm's length dealings or additional consideration.

Analysis: The agreement showed that the plant and equipment were leased to Vikram for consideration and that Vikram also paid operation and maintenance charges. The raw material was manufactured by Vikram, the facility was under its registration, and the transactions between the parties were on a principal-to-principal basis. Mere supply of equipment, personnel, or maintenance support by Praxair did not, by itself, make Praxair the manufacturer under Section 2(f) of the Central Excise Act, 1944. In the absence of evidence showing financial flowback or that the transactions were not at arm's length, the department's assumption that Praxair was the manufacturer had no legal basis.

Conclusion: Praxair could not be treated as the manufacturer, and the duty demand based on Praxair's resale price was unsustainable. The appeal was therefore rejected.

Ratio Decidendi: In excise matters, where the facility is leased and operated for consideration on a principal-to-principal basis, and there is no evidence of financial flowback or non-arm's length consideration, the party actually manufacturing the goods cannot be displaced as the manufacturer merely because another party supplied equipment, personnel, or maintenance support.

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