Lubricating oil additive labelling and testing did not amount to manufacture where goods were sold in the same barrels.

Labelling imported lubricating oil additive barrels with the importer's name, address and brand name, together with sampling, testing and enclosing test certificates, was held not to amount to manufacture under Note 5 to Chapter 38. The labelling was done to satisfy mandatory packaging requirements, not to make the goods marketable, and the goods were sold in the same barrels without repacking from bulk to retail packs. Sampling and testing were treated as quality assurance for customer specifications rather than a marketability-enhancing process. A later departmental circular was held inapplicable to the disputed period because it had no retrospective effect, so the duty demand and related proposals were not sustainable.

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Issues: Whether the respondents' operations on imported lubricating oil additives, namely adding their own name, address and brand name to the barrels, sampling and testing the goods, and enclosing test certificates, amounted to manufacture under Note 5 to Chapter 38 of the Central Excise Tariff Act, 1985.

Analysis: Note 5 to Chapter 38 deems manufacture in cases of labelling or relabelling of containers, repacking from bulk packs to retail packs, or adoption of any other treatment to render the product marketable to the consumer. The labelling done by the respondents was only to comply with the statutory requirements under Rule 33 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, and not to make the goods marketable. The goods were sold as such in the same barrels and there was no repacking from bulk to retail packs. The sampling, testing and issue of test certificates were also found to be undertaken to meet customer specifications and to assure conformity, not as a treatment intended to render the goods marketable. The later departmental circular could not govern the period in dispute because it had no retrospective effect.

Conclusion: The respondents' activity did not amount to manufacture under Note 5 to Chapter 38, and the duty demand and connected proposals were not sustainable.

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