Ancillary use in manufacture does not create excisable goods when the article retains its identity and no manufacture occurs.

Used release paper employed only as an auxiliary aid in manufacture of leather cloth did not lose its identity or become part of the finished product. Because the article remained identifiable as release paper and no manufacture resulted from its use or removal, it was not treated as excisable goods. On that basis, no central excise duty was chargeable and no classification declaration was required for the used release paper.

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Issues: Whether used release paper, after being employed in the manufacture of leather cloth, ceased to be merely release paper and became dutiable goods, so as to require classification declaration and payment of central excise duty.

Analysis: The used release paper retained its identity and did not become part of the leather cloth. It was used only for an auxiliary purpose in the manufacturing process and was not the raw material from which the finished product emerged. Since the article remained identifiable as release paper and the process did not amount to manufacture, no excise duty could be levied on its use or removal. In the absence of manufacture, there was no basis for insisting on classification of the item as excisable goods.

Conclusion: The duty demand and the requirement of classification in respect of used release paper were unsustainable and the issue was decided in favour of the assessee.

Ratio Decidendi: An article used only for an ancillary purpose in manufacture, which retains its identity and does not itself emerge as the manufactured product, does not attract excise duty as manufactured goods.

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