Manufacture and exemption eligibility under a two-tier scheme require distinct compliance; soft drinks production qualified, but exemption failed.

Production of soft drinks by purification of water and sugar, treatment of carbon dioxide, blending, filling, bottling and sealing was treated as manufacture because it resulted in a commercially different product, and the notification's exclusion was limited to minor processes such as packing, polishing and cleaning. Under the exemption scheme, the Director's eligibility certificate did not finally determine entitlement; the taxing authority could independently examine whether exemption was available. The claimant also failed to prove effective steps before the cut-off date by acquiring or firmly ordering the full plant and machinery required. The activity qualified as manufacture, but the exemption claim failed.

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Issues: (i) Whether the petitioner's activity of producing soft drinks amounted to manufacture under S.R.O. No. 1729 of 1993; (ii) whether the Director's eligibility certificate exhausted the decision-making function under the exemption scheme or whether the Deputy Commissioner could independently decide entitlement to exemption; and (iii) whether the petitioner had taken effective steps before 1 January 2000 by acquiring or placing firm orders for the necessary plant and machinery.

Issue (i): Whether the petitioner's activity of producing soft drinks amounted to manufacture under S.R.O. No. 1729 of 1993.

Analysis: The process involved purification of water and sugar, treatment of carbon dioxide, blending, filling, bottling and sealing, resulting in a commercially different product from the raw materials. The exclusion in the notification was confined to activities such as packing, polishing, cleaning and similar limited processes. Production of soft drinks was also treated as manufacture in the excise context, reinforcing the character of the activity.

Conclusion: The activity was manufacture within the meaning of the notification and this issue was decided in favour of the petitioner.

Issue (ii): Whether the Director's eligibility certificate exhausted the decision-making function under the exemption scheme or whether the Deputy Commissioner could independently decide entitlement to exemption.

Analysis: The notification created a two-stage scheme. The Director was required to certify eligibility by recording commencement of commercial production and the monetary limit of exemption. The actual entitlement to exemption remained for the taxing authority to determine while issuing the exemption order. The Director's certificate did not amount to a final certificate of exemption, and the Deputy Commissioner was not acting without jurisdiction in examining entitlement under the notification.

Conclusion: The Deputy Commissioner had jurisdiction to decide entitlement to exemption, and the issue was decided against the petitioner.

Issue (iii): Whether the petitioner had taken effective steps before 1 January 2000 by acquiring or placing firm orders for the necessary plant and machinery.

Analysis: For self-financing units, the notification required acquisition or firm orders for the necessary plant and machinery before the cut-off date, with advance payment by cheque or demand draft credited before that date serving as a deeming basis. On the materials produced, firm orders before the cut-off date were shown only for a limited part of the machinery, not for the complete set of plant and machinery required for the manufacturing unit. The later produced purchase details did not establish that the full statutory requirement had been met.

Conclusion: The petitioner failed to satisfy the condition of having taken effective steps in the manner required by the notification, and this issue was decided against the petitioner.

Final Conclusion: The exemption claim was not established under the notification scheme, although the petitioner's activity was held to be manufacture. The writ petition failed and the impugned order was sustained.

Ratio Decidendi: Under a two-tier exemption scheme, eligibility certification and actual entitlement to tax exemption are distinct, and a claimant must independently satisfy the substantive conditions for exemption, including timely acquisition or firm ordering of the requisite plant and machinery.

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