Site-fabricated plant not excisable; independent subcontractors remained manufacturers, defeating duty demand and penalty.

Site-fabricated and erected items embedded in the earth do not satisfy the test of marketable goods and therefore are not excisable. On that basis, the activities carried out through subcontractors within the buyer's premises did not give rise to central excise duty. The contract structure also showed that the subcontractors operated independently with their own workforce and specialization; mere supply of raw materials and quality inspection by the customer did not make them hired labour or convert the customer into the manufacturer. The subcontractors were treated as the manufacturers, so the duty demand and penalty could not be sustained.

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Issues: (i) Whether the activities undertaken through sub-contractors within the buyer's premises amounted to manufacture of excisable goods; (ii) Whether the sub-contractors or the appellant was the manufacturer liable for duty.

Issue (i): Whether the activities undertaken through sub-contractors within the buyer's premises amounted to manufacture of excisable goods.

Analysis: Fabrication and erection at site may bring into existence components, but for central excise levy the goods must be marketable. Where the work is carried out at site and the plant and machinery, on erection, become embedded in the earth, the resulting items do not satisfy the test of goods for excise purposes.

Conclusion: The activities did not result in excisable goods, and no duty liability arose.

Issue (ii): Whether the sub-contractors or the appellant was the manufacturer liable for duty.

Analysis: The contract was executed through independent sub-contractors who had their own workforce and specialization. Mere supply of raw materials and quality inspection by the appellant did not convert the sub-contractors into hired labour or make the appellant the manufacturer. Where the transaction is on a principle-to-principle basis and the job workers operate independently, the job workers are the manufacturers.

Conclusion: The sub-contractors were the manufacturers and the appellant was not liable as manufacturer.

Final Conclusion: Since the goods were not excisable and the appellant was not the manufacturer, the demand and penalty could not be sustained and the appeal succeeded.

Ratio Decidendi: Site-fabricated and erected items that are embedded in the earth and not marketable are not excisable goods, and independent job workers acting on a principle-to-principle basis remain the manufacturers despite supply of raw materials by the customer.

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