Site-based fabrication under customer control is not manufacture, while supported handicrafts claims remain exempt from excise.

Site-based fabrication or erection carried out under the customer's specifications, drawings, supervision and control, with materials and design supplied by the customer and consideration limited to labour charges, is not treated as manufacture for central excise purposes, so no duty is attracted on that activity. Goods supported by photographs and a certificate from the Development Commissioner (Handicrafts) as falling within the handicrafts category are eligible for exemption under Notification No. 76/86-CE, and the claim cannot be rejected without rebuttal evidence. The Departmental challenge therefore failed and the demand was dropped.

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Issues: (i) Whether the activities undertaken at the hotel site for which only labour charges were received amounted to manufacture exigible to central excise duty. (ii) Whether the goods claimed as handicrafts were entitled to exemption under Notification No. 76/86-CE dated 10.02.1986.

Issue (i): Whether the activities undertaken at the hotel site for which only labour charges were received amounted to manufacture exigible to central excise duty.

Analysis: The work was carried out at the customers' site under their specifications, drawings, supervision and control, with the raw material and design supplied by the hotel management. The items were erected piece by piece and the respondent received only labour charges for such site work. On these facts, the activity was not treated as manufacture so as to attract excise duty.

Conclusion: The demand on this count was not sustainable and was held to be not exigible to excise duty.

Issue (ii): Whether the goods claimed as handicrafts were entitled to exemption under Notification No. 76/86-CE dated 10.02.1986.

Analysis: The Commissioner (Appeals) had relied upon photographs of the items and a certificate from the Development Commissioner (Handicrafts) certifying that the items fell within the category of handicrafts. No material was produced to rebut those findings.

Conclusion: The exemption claim was accepted and the demand on these items was upheld as not leviable.

Final Conclusion: The Departmental challenge failed in full, and the order dropping the demand was sustained.

Ratio Decidendi: Site-based fabrication or erection undertaken under the customer's control for labour charges, without independent manufacture, does not amount to excisable manufacture, and a duly supported handicrafts exemption cannot be denied in the absence of rebuttal evidence.

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