Power used in making component parts does not defeat exemption where the finished generating set is assembled without power.

Assembly of diesel generating sets without the aid of power remained eligible for exemption, even though some component parts such as the base frame, control panel and fuel tank had earlier been manufactured with power. The decisive principle was that power used at an earlier stage in making independent, excisable component parts does not amount to use of power in the manufacture of the finished product when the final goods are assembled without power. On that basis, the exemption under Notification No. 179/77-C.E. was available, and the duty demand and penalty could not survive.

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Issues: Whether the manufacture of diesel generating sets by assembly of bought-out components without the aid of power remained eligible for exemption under Notification No. 179/77-C.E., when power had been used in the manufacture of some individual components such as base frame, control panel and fuel tank.

Analysis: The assembly of the generating sets was found to have been carried out without the aid of power, and that factual position was not rebutted. The decisive question was whether prior use of power in producing independently excisable components would taint the final product for the purpose of the exemption. The Board's circulars clarified that exemption remained available where the finished goods were assembled without aid of power from component parts already complete and excisable in themselves, because the use of power at an earlier stage in the manufacture of such components did not amount to use of power in the manufacture of the finished product. The same approach had been applied in earlier Tribunal decisions relied upon as support.

Conclusion: The use of power in the manufacture of the component parts did not disqualify the generating sets from the exemption. The appellants were entitled to the benefit of Notification No. 179/77-C.E.

Final Conclusion: The duty demand and penalty could not survive on the ground that the final generating sets were assembled without the aid of power, even though some separate components were produced with power.

Ratio Decidendi: Where a finished excisable product is assembled without the aid of power from independent component parts that are themselves complete excisable goods, earlier use of power in making those components does not amount to manufacture of the finished product with the aid of power for exemption purposes.

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