Excise manufacturing and captive-consumption exemption apply where fabrication is done in-house under buyer's control using hired labour.

A person who supplies the materials, drawings, specifications and consumables, and controls fabrication carried out in its own premises through hired labour, is treated as the manufacturer of the racks and trolleys for excise purposes. The racks and trolleys were also eligible for captive-consumption exemption under Notification No. 67/95-CE because they were inputs used in the manufacture of notified final products, and the record did not show exclusive use in relation to excluded Chapter 55 goods. The demand and penalty were therefore not sustainable, and the exemption claim was accepted.

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Issues: (i) Whether the appellant was the manufacturer of the racks and trolleys fabricated in its factory premises by outside fabricators. (ii) Whether the appellant was entitled to exemption under Notification No. 67/95-CE dated 16/03/1995 in respect of such racks and trolleys.

Issue (i): Whether the appellant was the manufacturer of the racks and trolleys fabricated in its factory premises by outside fabricators.

Analysis: The fabrication was carried out in the appellant's premises, using raw materials and consumables supplied by the appellant, under its drawings, specifications, instructions, control and supervision. The fabricators supplied labour only and were not independent manufacturers. The facts were distinguishable from cases where work was done outside the supplier's premises without supervision. On the facts, the person who engaged hired labour and got the goods manufactured on its account was the manufacturer.

Conclusion: The appellant was correctly treated as the manufacturer of the racks and trolleys.

Issue (ii): Whether the appellant was entitled to exemption under Notification No. 67/95-CE dated 16/03/1995 in respect of such racks and trolleys.

Analysis: The notification exempts inputs captively consumed within the factory for manufacture of specified final products. The racks and trolleys were classifiable as inputs under Heading 9403, and the appellant manufactured final products under Chapters 51 and 58, which were covered by the notification. The record did not show that the racks and trolleys were used exclusively in relation to Chapter 55 goods, which were excluded. The exemption was therefore available to the extent the inputs were used for the notified final products.

Conclusion: The appellant was entitled to the benefit of Notification No. 67/95-CE.

Final Conclusion: The demand and penalty could not be sustained, and the appeal was allowed on the assessee's claim to exemption and on its challenge to the manufacturer finding.

Ratio Decidendi: A person who supplies materials, provides specifications, exercises control and supervision, and gets fabrication done in its own premises through hired labour is the manufacturer for excise purposes, and captive-consumption exemption applies where the goods are used in relation to notified final products.

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