Relevant case laws under Manufacture :
Since the definition of manufacture is an inclusive one and does not spell out or enumerate the activities covered therein, it is essential to arrive at an understanding of the term based on legal decisions on the point. Therefore, we go by the judicial decisions handed down to us.
1. The expression ‘manufacture‘ was considered at length by the Supreme Court in its decision in Union of India v. Delhi Cloth & General Mills Co. Ltd. 1977 (1) ELT J199. In para 14 of the judgment, the Court held that the word manufacture when used as a verb is generally understood to mean as bringing into existence a new substance and not merely to produce some change in the substance. The Court thereafter emphasized the definition by citing passage from an American judgement which was quoted in the Permanent Edition of Word and Phrases. The passage is as follows: –
| “Manufacture implies a change, but every change is not manufacture and yet change of an article is the result of treatment, labour and manipulation. But something is necessary and there must be transformation; a new and different article must emerge having a distinctive name and character or use”. |
This famous paragraph is now the basis for determining whether or not an activity or process amounts to manufacture.
[Union of India v. Delhi Cloth & General Mills Co. Ltd. 1977 (1) ELT J199]
2. Apex court has held that the word manufacture implied a change, but every change in the raw material does not tantamount to manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character and use.
[South Bihar Sugar Mills Ltd. v. Union of India (1978)(2)ELT J336]
3. Supreme Court held that to constitute manufacture it is not necessary that one should absolutely make out a new thing because it is well settled that one cannot absolutely make a thing by hand in the sense that nobody can create matter by hand(scientifically). It is transformation of a matter into something else that would amount to manufacture. That something else is a question of degree. Whether that something else is a different commercial commodity having its distinct character, use and name and is commercially known as such, is an important consideration in determining whether there is a manufacture.
[Empire Industries Ltd. v. Union of India 1985(20) ELT 1]
4. Whether or not something results in manufacture would depend on the facts of the case but any number of processes undertaken which do not result in a commercially different commodity cannot result in manufacture.
[U.O.I. v. Parle Products 1994 (74) E.L.T. 492 (S.C.)]
5. The Supreme Court held that prevalent and generally accepted test to ascertain whether there was manufacture was whether the change or the series of changes brought about by application of processes take the commodity to the point where, commodity can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new article that has emerged because of the result of the processes. There might be border line cases where either conclusion can be reached with equal justification. Insistence on any sharp or intrinsic distinction between processing and manufacture results in an over simplification of both and tends to blur their interdependence in cases.
[Ujagar Prints v. U.O.I 1988 (38) ELT 535]
6. The Tribunal has held that levy of excise duty is on manufacture and not on sale and hence the fact that invoices have been raised by the manufacturer in favour of a leasing company in respect of captively consumed excisable goods would not have any bearing on excise duty liability.
[B.P.L. Electronics Ltd. v. CCE 1994 (71) ELT 801]
7. The Bombay High Court has held that excise duty is a tax on manufacture and the liability to pay the duty does not depend on the end use of the product. The production or manufacture of goods is sufficient to attract duty, whether the goods are consumed, sold or not used thereafter is wholly irrelevant. The mere fac t that the product is not actually sold would not make any difference in determining the excisability of that product.
It is the effect of the operation carried out on a commodity that is material for the purpose of determining whether the operation constitutes ‘manufacture‘ under excise law. Any process or processes creating something else having distinctive name, character and use would amount to manufacture. The moment there is a transformation of an input into a new commodity which is commercially known as a distinct and separate commodity, having its own character, use and name, whether it is the result of a process or several processes, manufacture takes place and the liability to duty is attracted.
[Critic India Ltd. v. U.O.I 1993 (66) ELT 566]