Independent contractors as manufacturers under excise law: Board not liable where units operated on a principal-to-principal basis.

Electricity Board liability for excise turned on whether independent contractors manufacturing pre-stressed concrete poles could be treated as the Board's own manufacturing units. The contract terms showed that the contractors set up and operated their own factories, engaged their own staff, used their own plant and machinery, and procured materials other than cement, while the Board only supplied cement and supervised quality. In the absence of evidence that the units were dummy concerns or that the arrangements were not on a principal-to-principal basis, the contractors were the actual manufacturers. The demand of duty and penalty against the Board was therefore not sustainable.

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Issues: Whether the Electricity Board could be treated as the manufacturer of pre-stressed concrete poles manufactured by independent contractors and consequently be made liable for central excise duty and penalty.

Analysis: The contract showed that the contractors set up their own factory, procured and arranged the materials other than cement, employed their own staff, and used their own plant and machinery. The Board supplied only cement at a fixed rate and supervised the work merely to ensure quality. There was no allegation or evidence that the contractor units were dummy concerns or that the transactions were not on a principal-to-principal basis. On these facts, the contractors were independent manufacturers and the Board could not be treated as the manufacturer under the excise law.

Conclusion: The demand of duty and penalty on the Board was not sustainable. The Board was not the manufacturer of the poles, and the Revenue appeal failed while the Board's appeal succeeded.

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