Factory manufacture not proved by site installation where components were separately procured, stored and cleared as such.

Where factual verification showed that the Bulk Milk Cooler's components were procured from local and overseas sources, stored separately, and cleared to customers for installation and commissioning at site, excise demand could not be sustained on the theory that the goods were manufactured in the assessee's factory and removed in knocked down condition. A later visit to the customer's premises did not by itself establish in-factory manufacture, and the Board's circular supported the view that the demand was untenable. The challenge by Revenue to the dropping of duty demand therefore failed, and the impugned order was upheld.

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Issues: (i) Whether the Bulk Milk Cooler was manufactured in the respondent's factory and removed in knocked down condition so as to sustain the excise demand and denial of exemption.

Analysis: The demand was based on the allegation that the respondent manufactured the Bulk Milk Cooler at its premises and cleared it under a different tariff heading. The factual verification made through the jurisdictional Assistant Commissioner showed that the relevant components were procured locally and from overseas, stored separately, and cleared as such to customers for installation and commissioning at site. The subsequent visit to a customer's premises did not establish manufacture in the respondent's factory. The adjudicating authority also relied on the Board's circular while holding that the demand was not sustainable.

Conclusion: The issue was decided against the Revenue and in favour of the respondent; the finding that the Bulk Milk Cooler was manufactured in the factory and cleared in knocked down condition was not accepted.

Final Conclusion: The Revenue's challenge to the dropping of duty demand failed, and the impugned order was upheld.

Ratio Decidendi: A subsequent installation of goods at a customer's site, by itself, does not prove manufacture in the assessee's factory where contemporaneous factual verification shows that components were merely procured and cleared as such.

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