but then it is prompting catalina home is not recognized,the environment variables nee dto be set to run this
Just to test the setup, please try setting up the catalina_home variable under System Variables in the environment variables of your windows operating system. The value of this Variable would be the directory where you installed tomcat. In my case, I've installed tomcat under G:\server\Tomcat6020. So my CATALINA_HOME=G:\server\Tomcat6020
how can the system takes the port number and runs on localhost without using manual installation
It is possible to run a program on an operating system without actual installation. Tomcat does just that. The port numbers are picked up from the configuration files and if you were to modify these files, you can pretty much tweak how your instance of Tomcat would work including the port number on which it would be listening.
My suggestion to you is that you go ahead with the zip file for Tomcat rather than the exe installation. There was an issue with the exe installation some time back and don't know if this got corrected. You can read the details here
With the zip method of installation, I think you are on the right track. Just need to make sure your CATALINA_HOME is pointing to the right folder.
Hope this helps...