Assembling SKD telephones may not amount to manufacture, supporting waiver of pre-deposit in the duty dispute.

Imported consignments of telephones received in SKD form were treated as complete telephones in unassembled condition, and the stay application turned on whether later assembling, testing, packing and labelling constituted manufacture for excise purposes. Note 6 of Section XVI was held inapplicable because the goods were not incomplete or unfinished articles. Relying on earlier precedent that mere assembling of knocked-down goods does not necessarily amount to manufacture, a prima facie case was found for the assessee. Pre-deposit of duty and penalty was therefore dispensed with.

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Issues: Whether pre-deposit of duty and penalty should be dispensed with in a case involving imported telephones assembled from SKD parts.

Analysis: The imported consignments contained all parts necessary to constitute complete telephones, though they were received in unassembled condition. The goods had been assessed to customs duty as telephones and the dispute at the stay stage was whether subsequent assembling, testing, packing and affixing labels amounted to manufacture attracting excise duty. For the purpose of waiver of pre-deposit, the reliance placed on Note 6 of Section XVI was found inappropriate because the goods were already complete telephones in unassembled form, not incomplete or unfinished articles. The Tribunal found prima facie support in earlier decisions holding that mere assembling of knocked-down goods does not necessarily amount to manufacture.

Conclusion: A prima facie case was made out in favour of the assessee, and the requirement of pre-deposit of duty and penalty was dispensed with.

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