Manufacture requires a commercially distinct product; converting black bars into bright bars did not attract duty or related penalties.

Conversion of steel black bars into bright bars was treated as not amounting to manufacture because a mere change in form or shape does not create a new commercially distinct commodity. On that basis, the duty demand failed, and the related denial of Modvat credit and levy of interest also fell away because they depended on the same unsustainable classification of the activity. The consequential penalties could not survive once the underlying demands were found untenable.

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Issues: Whether conversion of steel black bars into bright bars constituted manufacture, and whether the demands of duty, Modvat credit, interest, and consequential penalties were sustainable.

Analysis: The conversion of steel black bars into bright bars was held not to amount to manufacture, following the principle that a mere change in form or shape does not establish emergence of a new commodity in the absence of evidence that the articles are commercially distinct. Since the activity itself was not exigible to duty, the foundation for demanding duty, denying Modvat credit, and levying interest failed. The penalties, being consequential to the unsustainable demands, also could not survive.

Conclusion: The demands of duty, Modvat credit, and interest were not sustainable, and the penalties were set aside.

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