Marble slab finishing processes do not amount to manufacture where no new excisable product emerges, and exemption remains available.

Further processing of duty-paid natural marble slabs by resin filling, fibre netting, polishing, edge cutting and similar finishing operations did not amount to manufacture, because no new, distinct and marketable product emerged and Chapter 25 continued to apply. Similar processing of agglomerated marble slabs, including slabs cut or sawn from blocks, also did not create duty liability for the relevant period, as the deeming provision in Chapter 68 operated only prospectively. The processed slabs remained eligible for the exemption under Notification No. 4/2006-CE on the facts found, and the related penalties could not survive once the duty demands were held unsustainable.

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Issues: (i) Whether fibre netting, resin filling, polishing, edge cutting and similar processes on duty-paid natural marble slabs amounted to manufacture and changed their tariff classification; (ii) whether similar processing of agglomerated marble slabs, including slabs obtained by cutting or sawing blocks, amounted to manufacture and attracted duty; (iii) whether the processed marble slabs were entitled to the concessional benefit under the exemption notification; (iv) whether penalties survived once the duty demands were found unsustainable.

Issue (i): Whether fibre netting, resin filling, polishing, edge cutting and similar processes on duty-paid natural marble slabs amounted to manufacture and changed their tariff classification.

Analysis: The processes undertaken on duty-paid natural marble slabs did not bring into existence a new, distinct and marketable product. Note 6 of Chapter 25 of the Central Excise Tariff Act, 1985 applies where stone blocks are converted into slabs or tiles, and does not extend to further processing of already duty-paid slabs. The earlier judicial position on marble slabs remained applicable, and the processes of resin filling, fibre backing, polishing and edging did not take the goods out of Chapter 25.

Conclusion: The processes did not amount to manufacture, and the natural marble slabs remained classifiable under Chapter 25.

Issue (ii): Whether similar processing of agglomerated marble slabs, including slabs obtained by cutting or sawing blocks, amounted to manufacture and attracted duty.

Analysis: The processing of agglomerated marble slabs, including resin filling and polishing, likewise did not result in a new excisable commodity during the relevant period. Note 3 of Chapter 68, which later treated specified processes as deemed manufacture, operated only prospectively from its insertion and could not govern the earlier period. The cutting or sawing and subsequent finishing of such slabs therefore did not create duty liability for the disputed period.

Conclusion: The processing of agglomerated marble slabs did not amount to manufacture for the relevant period, and the duty demand was unsustainable.

Issue (iii): Whether the processed marble slabs were entitled to the concessional benefit under the exemption notification.

Analysis: The exemption under Notification No. 4/2006-CE remained available to the processed marble slabs where they continued to fall within the relevant tariff description. The classification dispute could not defeat the exemption merely because the slabs had undergone resin filling, fibre netting or polishing, and the concession was available on the facts found.

Conclusion: The processed marble slabs were entitled to the concessional benefit under the exemption notification.

Issue (iv): Whether penalties survived once the duty demands were found unsustainable.

Analysis: Penalties under Section 11AC of the Central Excise Act, 1944 were dependent on the sustainability of the duty demands. Since the demands themselves failed on merits, the consequential penalties could not stand.

Conclusion: The penalties were not sustainable.

Final Conclusion: The duty demands and consequential penalties on processed natural marble slabs, agglomerated marble slabs and imported marble slabs were set aside, and the appeals were allowed with consequential relief.

Ratio Decidendi: Further processing of marble slabs by resin filling, fibre backing, polishing and similar finishing operations does not amount to manufacture unless the statute or tariff notes expressly deem such processing to be manufacture for the relevant period.

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