Recording sound on blank audio cassettes amounts to manufacture when the finished cassette is a distinct product in name, character and use.

Recording sound on a blank audio cassette is treated as manufacture under Chapter Note 7 of Chapter 85 because the prerecorded cassette becomes a distinct product in name, character and use from the blank cassette. The note reflects the principle that conversion of a blank cassette into a prerecorded one creates a commercially different article. On the valuation aspect, the matter was remanded to the Commissioner (Appeals) for fresh decision after hearing the parties. The discussion therefore confirms manufacture on the sound-recording activity and leaves valuation to be reconsidered separately.

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Issues: Whether recording of sound on audio cassettes amounts to manufacture under Chapter Note 7 of Chapter 85, and whether the order setting aside the demand could be sustained.

Analysis: The demand related to the period after the introduction of Chapter Note 7 in Chapter 85. The note treated recording of sound as manufacture. The Court also relied on the principle that a prerecorded audio cassette is distinct from a blank cassette, differing in name, use, and identity, so recording on a blank cassette results in a manufactured product.

Conclusion: The finding that recording of sound does not amount to manufacture was set aside. The matter was remanded to the Commissioner (Appeals) to decide the valuation issue after giving an opportunity of hearing.

Final Conclusion: The revenue succeeded on the manufacture issue, while the valuation question was sent back for fresh decision.

Ratio Decidendi: Recording sound on a blank audio cassette so as to produce a prerecorded cassette amounts to manufacture where the resulting product is distinct in name, character, and use.

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