Sugar classification and manufacture test: Prasad and Mishri remained sugar, not sugar confectionery, and processing was not manufacture.

Prasad and Mishri made from sugar and containing more than 90% sucrose were treated as forms of sugar under Chapter 17, because Chapter Note 2 treats such products as sugar for the relevant sub-headings. Their essential character and use remained that of sugar, namely sweetening food and beverages, so they were not commercially distinct goods. Applying the settled test of manufacture, the process did not bring into existence a product with a distinct name, character and use, and therefore did not amount to manufacture. Classification under Heading 1704.90 as sugar confectionery was rejected, and the matter was decided against the Revenue.

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Issues: Whether Prasad and Mishri, made from sugar and having more than 90% sucrose, were classifiable as sugar confectionery under Heading 1704.90 or as sugar under Chapter 17, and whether the process of making them amounted to manufacture.

Analysis: Chapter Note 2 to Chapter 17 treats forms of sugar having more than 90% sucrose as sugar for the relevant sub-headings. The products in question were undisputedly made from sugar and retained the same essential character and use as sugar, namely sweetening foods and beverages. Applying the settled test of manufacture, a process amounts to manufacture only if it brings into existence a commercially different product with a distinct name, character and use. Since Prasad and Mishri were merely different forms of sugar and did not become commercially distinct goods, their making did not amount to manufacture. The attempt to classify them under Heading 1704.90 was therefore rejected.

Conclusion: The products could not be classified as sugar confectionery under Heading 1704.90, and their preparation from sugar did not amount to manufacture. The appeal was decided against the Revenue and in favour of the assessee.

Ratio Decidendi: Where a product made from sugar retains the essential character and use of sugar and does not emerge as a commercially distinct commodity, its processing does not amount to manufacture and it cannot be classified as sugar confectionery merely because a different name is given to it.

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