Manufacture under excise law depends on who creates the new commodity, not mere common ownership or shared control.

For excise purposes, manufacture is attributed to the entity that brings about a new commercially distinct commodity with a different name, character and use. The text states that the assembly of textile machines occurred at Flamingo Machines Pvt. Ltd., and that common ownership, shared facilities or collaboration between related entities did not by themselves establish that the four appellant firms were the true manufacturers; such factors may go to valuation, not manufacturer identity. It further notes that a mere supplier of raw material or principal in a job-work arrangement is not the manufacturer under Section 2(f). On that basis, the duty demand against the appellant firms and the related penalties under Rule 173Q were stated to be unsustainable.

---

---

Issues: (i) Whether the goods were manufactured by Flamingo Machines Pvt. Ltd. or by the four appellant firms so as to sustain the duty demand; (ii) Whether penalty could be imposed on the appellant firms and on Flamingo Machines Pvt. Ltd. under Rule 173Q.

Issue (i): Whether the goods were manufactured by Flamingo Machines Pvt. Ltd. or by the four appellant firms so as to sustain the duty demand.

Analysis: Manufacture was examined on the basis of emergence of a new commercially distinct commodity having a different name, character and use. The order recorded that the assembly activity resulting in the emergence of textile machines took place at Flamingo Machines Pvt. Ltd., and if that was the real position, Flamingo would ordinarily be the manufacturer. However, the record did not clearly establish that the four appellant firms were the true manufacturers behind a facade or shell arrangement. Mere common ownership, common facilities, or collaboration between related entities was not enough to determine manufacture, since such factors may at most bear on valuation and not on the identity of the manufacturer. The concept of manufacturer under Section 2(f) did not extend to a mere supplier of raw material or principal in a job-work arrangement.

Conclusion: The duty demand against the four appellant firms was not sustainable, as they were not shown to be the manufacturers.

Issue (ii): Whether penalty could be imposed on the appellant firms and on Flamingo Machines Pvt. Ltd. under Rule 173Q.

Analysis: Penalty could not be sustained where the duty demand itself failed against the appellant firms and where Flamingo was not alleged to be the manufacturer in the notice and no duty had been demanded from it. The absence of a clear finding that the appellant firms were the real manufacturers, or that Flamingo was liable in the manner alleged, removed the foundation for penal action.

Conclusion: The penalties on the appellant firms and on Flamingo Machines Pvt. Ltd. were not sustainable.

Final Conclusion: The Tribunal held that the duty demand and penalties against the appellant firms could not stand, while one connected appeal was dismissed as not being aggrieved by the order.

Ratio Decidendi: Manufacture for excise purposes is attributed to the entity that brings about the emergence of a new commercially distinct commodity, and related-party status or common control does not by itself establish that another entity is the manufacturer.

---