Manufacture under central excise requires a new and distinct commodity; mere assembly of bought-out components was not enough.

Supplying separate bought-out components of a computerized wheel aligner under one invoice and assembling them temporarily at the customer's site did not amount to manufacture under Section 2(f) of the Central Excise Act, 1944, because no new and distinct commodity emerged and the parts remained individually identifiable. The demand also failed on limitation, as the clearances were reflected in commercial records and sales tax returns, with no material showing suppression or intent to evade duty, so the extended period was unavailable. On that basis, the connected penalties and interest could not survive and were set aside.

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Issues: (i) Whether supplying bought-out components of a computerized wheel aligner under one invoice and assembling them temporarily at the customer's site amounts to manufacture under Section 2(f) of the Central Excise Act, 1944. (ii) Whether the demand was barred by limitation and the connected penalties and interest were sustainable.

Issue (i): Whether supplying bought-out components of a computerized wheel aligner under one invoice and assembling them temporarily at the customer's site amounts to manufacture under Section 2(f) of the Central Excise Act, 1944.

Analysis: The goods were purchased as separate items and sent either from the godown or directly from suppliers, without any process being undertaken at the appellant's factory or godown. The parts were merely brought together at the customer's workshop for use, remained individually identifiable, and were removed again after the job was done. Applying the settled test of manufacture, a new commodity with a distinct name, character or use must emerge; mere putting together of bought-out items, without transformation or processing, does not satisfy that test. The fact that the equipment was sold under a composite description and that the appellant assisted in installation or after-sale service did not alter the character of the transaction.

Conclusion: The activity did not amount to manufacture and the duty demand could not be sustained.

Issue (ii): Whether the demand was barred by limitation and the connected penalties and interest were sustainable.

Analysis: The clearances were made under commercial invoices and were reflected in sales tax returns. In the absence of material showing deliberate suppression or intent to evade duty, the extended period was not available. Since the demand itself failed on merits and was also time-barred, the penalties and interest founded on the same demand could not survive.

Conclusion: The demand was barred by limitation and the penalties and interest were liable to be set aside.

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

Ratio Decidendi: Buying and supplying separate, marketable components without any process that brings into existence a new and distinct commodity does not amount to manufacture under central excise law; in the absence of suppression or intent to evade, the extended period of limitation cannot be invoked.

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