Labour contract manufacture test: contractor supplying labour only was not treated as manufacturer for excise purposes.

Welding and painting work performed on a genuine labour contract basis, with raw materials, utilities and supervision supplied by the principal concern, did not make the contractor the manufacturer for central excise purposes. The records showed site-based work under the principal concern's control, and there was no factual basis to treat the appellant as an independent manufacturer. The excise demand could not therefore be sustained against the labour contractor, and the order was set aside.

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Issues: Whether the appellant, who executed welding and painting work on a piece-rate labour contract basis using raw materials, power, water, and supervision supplied by the principal concern, could be treated as the manufacturer for central excise purposes.

Analysis: The work was found to be executed under a labour contract, with all materials and utilities supplied by the principal concern and the operations supervised by its engineers. The correspondence and records described the activity as welding and painting work at site, and there was no factual basis to treat the appellant as an independent manufacturer. On those facts, the person supplying the materials, controlling the work, and employing the labour was the manufacturer, not the labour contractor.

Conclusion: The appellant was not the manufacturer and the excise demand could not be sustained against it.

Final Conclusion: The impugned order was set aside and the appeals were allowed.

Ratio Decidendi: Where work is performed as a genuine labour contract using materials and supervision supplied by another person, the contractor does not become the manufacturer merely because the work results in a finished product.

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