Manufacture through assembly of imported components supported licence clearance, duty exemption, and invalidated penalties.

Imported goods supplied as separate parts and sub-assemblies were fitted together and tested to make the equipment operational, so the assembly process was treated as manufacture under Section 2(f) of the Central Excise Act, 1944 and within the wider import-policy definition of manufacture. The attempt to describe the activity as mere installation or maintenance was rejected, and the goods were treated as components assembled into a machine rather than a fully assembled machine. On that basis, the conditions of the relevant import policy and exemption notification were satisfied, entitling the importer to clearance under the advance licence and duty exemption, with penalties held unsustainable.

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Issues: Whether the imported goods were components of an artificial lung ventilator with integrated anaesthetic unit or a complete machine, and whether the importer was entitled to clearance under the advance licence and the exemption notification.

Analysis: The evidence showed that the goods were brought in as separate parts and sub-assemblies which were fitted together and tested to make the equipment operational. The Commissioner's attempt to characterise the activity as mere installation or maintenance was rejected, because assembling components into a complete machine answers the test of manufacture under Section 2(f) of the Central Excise Act, 1944 and also falls within the wide import-policy definition of manufacture. The reliance placed on the policy restriction was misplaced, and the conditions of the relevant import policy and exemption notification were satisfied.

Conclusion: The imported goods were components assembled into a machine, not a fully assembled machine. The importer was entitled to clearance under the licence and to the duty exemption, and the penalties were unsustainable.

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