Assembly of duty-paid computer parts into a working system is not manufacture without a new product

Mere assembly of duty-paid computer components into a functional computer system does not constitute manufacture for central excise purposes unless a new commodity emerges with a distinct name, character or use. CPU, monitor, hard disk and keyboard remained separately classifiable components designed to operate together as an automatic data processing system, and their interconnection did not create a different product. The departmental clarification on computer networks and the later Tribunal view on installation of computer parts supported this settled test of manufacture. No excise duty was payable on the assembly activity on that basis.

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Issues: Whether assembling duty-paid computer components into a working computer system amounts to manufacture attracting central excise duty.

Analysis: The computer components such as CPU, monitor, hard disk and keyboard were separately classifiable under heading 84.71 and were designed to be interconnected as part of an automatic data processing system. Applying the settled test of manufacture, mere assembly of such units into a working system did not bring into existence a new product having a distinct name, character or use different from the components themselves. The departmental clarification on computer networks from duty-paid computers and peripherals and the later Tribunal view on installation of computer parts supported this conclusion.

Conclusion: The activity of assembling the computer components did not amount to manufacture and no excise duty was payable on that basis.

Ratio Decidendi: Mere assembly of duty-paid computer components into a functional computer system, without emergence of a new commodity with a distinct name, character or use, does not constitute manufacture.

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