Manufacture test under Section XVI Note 4 fails where independently functional machines are only assembled for turnkey supply.

Note 4 of Section XVI applies only where individual components combine into a machine or combination of machines with a clearly defined function under Chapters 84 or 85. Independently purchased and independently functional machines that are merely assembled for convenience, demonstration, or commissioning do not lose their separate identity or become a new machine with a single defined function. On that basis, the turnkey supply was held not to amount to manufacture and was not excisable.

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Issues: Whether the assembly and supply of independently functioning machines as a turnkey project resulted in manufacture of excisable goods attracting duty under Note 4 of Section XVI of the Schedule to the Central Excise Tariff Act, 1985.

Analysis: Note 4 applies only where individual components combine to form a machine or combination of machines having a clearly defined function under Chapter 84 or 85. The machines supplied in this case were independently purchased, independently functional, and capable of being used separately; they were assembled only for convenience, demonstration, or commissioning, and did not lose their individual identity or create a new distinct machine with a single defined function. The circular relied upon by the Board also supports the principle that goods manufactured at site are dutiable only when a new identity, character, and use emerges from the components.

Conclusion: The activity did not amount to manufacture and the assembled turnkey supply was not excisable.

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