Manufacture under Central Excise turns on conversion of unfinished goods; battery filling in finished two-wheelers is insufficient.

Mere filling of electrolyte in dry batteries and charging of batteries in duty-paid two-wheelers does not amount to manufacture under section 2(f) of the Central Excise Act or Section Note 6 of Section XVII of the Tariff. The two-wheelers were already received in complete and finished condition, and the limited post-receipt activity did not convert an incomplete or unfinished article into a complete or finished vehicle. On that basis, the excise demand was held unsustainable and the assessee succeeded on the central issue of manufacture.

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Issues: Whether filling electrolyte in dry batteries and charging them on receipt of duty-paid two-wheelers amounts to manufacture of complete or finished two-wheelers under section 2(f) of the Central Excise Act, 1944 and Section Note 6 of Section XVII of the First Schedule to the Central Excise Tariff Act, 1985.

Analysis: The two-wheelers were received by the appellants in a complete and finished condition, having already suffered duty at the hands of the manufacturer. The only activity undertaken was filling electrolyte in the batteries and charging them before delivery to customers. This did not convert an incomplete or unfinished article into a complete or finished two-wheeler. The process, therefore, did not satisfy the statutory test of manufacture under section 2(f) or the deeming scope of Section Note 6 of Section XVII.

Conclusion: The activity did not amount to manufacture and the demand was unsustainable.

Final Conclusion: The impugned orders were set aside and the appeals were allowed on merits, with the assessee succeeding on the central issue of manufacture.

Ratio Decidendi: Mere filling of electrolyte and charging of batteries in a duty-paid finished vehicle does not amount to manufacture unless the process results in conversion of an incomplete or unfinished article into a complete or finished article.

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