Manufacturer status requires independent proof of actual manufacture, not customer representations; consequential excise duty and personal penalty fail.

Central excise manufacturer status must be established under the statutory definition of manufacture, not merely from representations made to customers to obtain supply orders. The notes state that absence of functional manufacturing infrastructure, machinery and testing facilities, coupled with trading purchases and limited principal-to-principal job work, did not prove that the assessee manufactured the goods. They further state that suspicion cannot replace independent evidence of manufacture. Where the underlying duty demand fails, the notes explain that goods cannot be treated as liable to confiscation and a bona fide authorised representative without knowledge or reason to believe otherwise is not liable to penalty under Rule 26.

---

---

Issues: (i) Whether the assessee was liable to central excise duty as the manufacturer of goods supplied to power supply corporations; (ii) Whether personal penalty was imposable on the authorised representative.

Issue (i): Whether the assessee was liable to central excise duty as the manufacturer of goods supplied to power supply corporations.

Analysis: Manufacture had to be determined under Section 2(f) of the Central Excise Act, 1944, and not merely from representations made to customers for obtaining orders. The evidence showed that the assessee lacked functional manufacturing infrastructure, machinery and testing facilities, while the goods were purchased and sold as trading goods or obtained in limited quantities through job workers acting on a principal-to-principal basis. The Revenue produced no independent evidence of actual manufacture by the assessee. The earlier decision concerning the same assessee and substantially identical facts was applicable. Suspicion arising from declarations to power supply corporations could not substitute proof of manufacture.

Conclusion: The assessee was not the manufacturer of the disputed goods; the duty demand, interest and penalty against the assessee are unsustainable and are set aside, in favour of the assessee.

Issue (ii): Whether personal penalty was imposable on the authorised representative.

Analysis: Since the underlying duty demand was unsustainable, there was no basis to regard the goods as liable to confiscation. The authorised representative acted bona fide and lacked knowledge or reason to believe that the goods were liable to confiscation.

Conclusion: Penalty under Rule 26 of the Central Excise Rules is not imposable on the authorised representative and is set aside, in favour of the assessee.

Final Conclusion: The impugned order cannot sustain the fiscal liabilities founded on the allegation that the assessee manufactured the goods.

Ratio Decidendi: A representation of manufacturer status to secure commercial orders, without independent proof of actual manufacture under the statutory definition, cannot fasten central excise liability on a trader.

---