Job-work manufacturing and ocean-going vessel exemption turn on actual fabrication and vessel design, not contractual labels.

In a job-work arrangement for construction of tugs and barges, the entity that actually undertakes fabrication with its own labour, equipment and consumables is the manufacturer, even where another party supplies materials or is contractually assigned tax liability. Applying that principle, the job contractor was treated as the manufacturer, not the appellant. The text also states that vessel status depends on design and construction, supported by the naval architect's affidavit, contractual specifications and shipping certificate; on that basis, the tugs and barges were treated as ocean-going vessels and entitled to the relevant exemption. The impugned order was set aside and full relief followed.

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Issues: (i) Whether, on the terms of the agreement and the surrounding facts, M/s. Raigad was the manufacturer of the tugs and barges or the appellant was the manufacturer. (ii) If the appellant was the manufacturer, whether the tugs and barges were ocean-going vessels entitled to exemption under the relevant notifications.

Issue (i): Whether, on the terms of the agreement and the surrounding facts, M/s. Raigad was the manufacturer of the tugs and barges or the appellant was the manufacturer.

Analysis: The agreement described M/s. Raigad as a job contractor required to provide labour for construction of the goods, while the appellant supplied the materials. The record also showed that the machinery, consumables, electricity and fabrication activity were arranged and carried out by M/s. Raigad for the actual construction work. Mere supply of raw materials, supervision, or contractual allocation of tax liability did not convert the appellant into the manufacturer. The Tribunal distinguished the authority relied on by the Revenue and applied the principle that actual fabrication by the job worker makes the job worker the manufacturer.

Conclusion: M/s. Raigad, and not the appellant, was the manufacturer.

Issue (ii): If the appellant was the manufacturer, whether the tugs and barges were ocean-going vessels entitled to exemption under the relevant notifications.

Analysis: The affidavit of the naval architect, the contractual specifications, and the shipping certificate supported the conclusion that the tugs and barges were designed and constructed for sea-going use. The Tribunal accepted that the character of the vessels was to be determined from their nature and construction, not merely from a narrow test of actual use, and treated them as ocean-going vessels for exemption purposes.

Conclusion: The tugs and barges were ocean-going vessels and were entitled to the exemption under the relevant notifications.

Final Conclusion: The impugned order was set aside and the appeal succeeded in full, with consequential relief.

Ratio Decidendi: In a job-work arrangement, the entity that actually undertakes fabrication with its own labour and equipment is the manufacturer, and vessels shown by their design and construction to be sea-going qualify as ocean-going vessels for the relevant exemption.

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