Temporary site assembly of bought-out components does not amount to manufacture when no new commercially distinct article emerges.

Supplying separately procured components of a computerized wheel aligner under one invoice and temporarily assembling them at the customer's site was held not to amount to manufacture under section 2(f) because the parts retained their separate identity and no new commercially distinct article came into existence. On that basis, excise liability failed on merits. The record also showed commercial invoicing and disclosure in sales tax returns, so there was no suppression or intent to evade duty and the extended limitation period could not be invoked. As the basic demand was unsustainable, interest and penalties also could not survive, and the impugned order was set aside.

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Issues: (i) Whether supplying separately procured components of a computerized wheel aligner under one invoice and installing them temporarily at the customer's premises amounted to manufacture under section 2(f) of the Central Excise Act, 1944; (ii) whether the demand, interest and penalties were sustainable, including on limitation.

Issue (i): Whether supplying separately procured components of a computerized wheel aligner under one invoice and installing them temporarily at the customer's premises amounted to manufacture under section 2(f) of the Central Excise Act, 1944.

Analysis: The goods were purchased as independent items and were cleared either from the godown or directly from vendors. At the customer's premises they were only brought together for use, with temporary connections, and were removed again after the job was completed. The components retained their separate identity and function, and no process was undertaken at the appellant's end that brought into existence a new commercially distinct product. Applying the test of transformation into a new article having a distinct name, character or use, the activity was only a bundling and site-based use of bought-out items and not manufacture.

Conclusion: The activity did not amount to manufacture and the demand based on excise liability failed on merits.

Issue (ii): Whether the demand, interest and penalties were sustainable, including on limitation.

Analysis: Since the goods were cleared under commercial invoices and were reflected in sales tax returns, the record did not support suppression or any intent to evade duty. The extended period could not be invoked. Once the basic demand was unsustainable, the connected levy of interest and penalties also could not survive.

Conclusion: The demand was time-barred and the interest and penalties were not sustainable.

Final Conclusion: The impugned order was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: Supplying and temporarily assembling separately procured components at the customer's site, without any process at the assessee's end that results in a new commercially distinct article, does not constitute manufacture for central excise purposes; in the absence of suppression, the extended limitation period cannot be invoked.

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