Manufacture under Exim Policy controls customs exemption, and compaction was treated as a qualifying process for stay relief.

For exemption under Notification No. 47/2002-Cus in the Exim Policy 2002-2007 context, the meaning of "manufacture" is governed by the policy definition rather than section 2(f) of the Central Excise Act, 1944. That policy definition is broad and covers a process that brings into existence a product with a distinctive name, character or use. On the stated record, compaction of granules was treated as a manufacturing process in technical literature, the manufacturing licence and departmental treatment, and the denial of exemption was considered prima facie unsustainable. The material also did not support allegations of suppression or aiding and abetting, so unconditional stay relief and waiver of pre-deposit were granted.

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Issues: Whether the appellants had made out a prima facie case for unconditional waiver of pre-deposit and stay of recovery in proceedings arising from denial of exemption under Notification No. 47/2002-Cus on the ground that the process of compaction did not amount to manufacture.

Analysis: The exemption notification was examined in the context of the Exim Policy 2002-2007 under which advance licence could be granted for deemed exports and the expression of manufacture in that policy was controlling for the notification. The policy definition of manufacture was wide and included processes bringing into existence a product with a distinctive name, character or use, and the advance licences specifically described the export product as compacted granules. The record also showed that compaction was recognised in technical literature and under the manufacturing licence, and that the concerned departments had treated compaction as a manufacturing process. On that basis, the denial of exemption was found to be prima facie unsustainable, and the record did not support the allegation of suppression or aiding and abetting.

Conclusion: The appellants established a strong prima facie case for waiver of pre-deposit and stay of recovery, and unconditional stay relief was granted.

Ratio Decidendi: For exemption under Notification No. 47/2002-Cus issued in the context of the Exim Policy 2002-2007, the meaning of manufacture is governed by the policy definition and not by section 2(f) of the Central Excise Act, 1944.

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