Manufacture test for processed steel inputs: limited cutting, drilling and galvanising did not create a new commodity, so duty demand failed.

Mere cutting to size, drilling/punching and galvanising of duty-paid MS bars and HA steel ribbed strips did not amount to manufacture because the processes did not create a new and distinct commodity. The Tribunal noted that similar limited processing of iron and steel materials had been held insufficient to constitute manufacture, and the deeming provision treating galvanisation of Chapter 72 goods as manufacture applied only from 01.03.2011. As the dispute related to March 2004 to June 2004, the goods could not be treated as classifiable under Chapter 73 on that basis, and the duty demand and penalty could not survive.

---

---

Issues: Whether cutting, drilling/punching and galvanising of duty-paid MS bars and HA steel ribbed strips amounted to manufacture and justified classification of the resulting goods under Chapter 73 of the Central Excise Tariff Act.

Analysis: The processes undertaken on the duty-paid inputs were only cutting to size, drilling/punching and galvanising. On the facts, these operations did not bring into existence a new and distinct commodity so as to amount to manufacture during the relevant period. The relevant judicial precedent on similar facts held that such limited processing of iron and steel materials does not, by itself, amount to manufacture. The Tribunal also noted that the deeming provision treating galvanisation of Chapter 72 goods as manufacture came into force only from 01.03.2011, whereas the dispute related to March 2004 to June 2004.

Conclusion: The activity did not amount to manufacture during the material period, and the impugned goods were not liable to be treated as classifiable under Chapter 73 on that basis. The demand and penalty could not survive.

Final Conclusion: The order confirming differential duty was unsustainable and was set aside, with consequential relief to the assessee.

Ratio Decidendi: Mere cutting, drilling/punching and galvanising of duty-paid iron and steel inputs does not amount to manufacture unless the process brings into existence a new and distinct commodity; galvanisation can be treated as deemed manufacture only when the governing chapter note is in force.

---