Manufacture requires a new commercially distinct product; cutting used tyres into pieces does not trigger CVD liability.

Cutting used and old tyres into two or three pieces does not amount to manufacture under Section 2(f) of the Central Excise Act because the process does not create a new, distinct and commercially marketable product; the tyres retain their essential character. The Delhi High Court also noted that Modi Rubber Limited remains sound, having been impliedly approved by the Supreme Court. On the customs side, countervailing duty under Section 3(1) of the Customs Tariff Act cannot be levied where no excisable domestic equivalent exists, so CVD on cut pieces of used tyres and tubes is ultra vires.

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Issues: (i) Whether cutting used and old tyres into two or three pieces amounts to manufacture under Section 2(f) of the Central Excise Act, 1944. (ii) Whether the earlier decision in Modi Rubber Limited required reconsideration. (iii) Whether 12% countervailing duty under Section 3(1) of the Customs Tariff Act, 1975 could be levied on cut pieces of used tyres and tubes.

Issue (i): Whether cutting used and old tyres into two or three pieces amounts to manufacture under Section 2(f) of the Central Excise Act, 1944.

Analysis: The governing test is whether the process brings about a transformation into a new product having a different identity, character or use, and whether the resulting product is marketable. The Court applied the settled principle that mere change, cutting, sizing, or reduction in form does not amount to manufacture unless the original article ceases to be essentially the same and a new commercially distinct product emerges. Used tyres and tubes, even after being cut into pieces, retain their essential character and do not become a new product.

Conclusion: The process of cutting old tyres into two or more pieces is not manufacture.

Issue (ii): Whether the earlier decision in Modi Rubber Limited required reconsideration.

Analysis: The Court held that the earlier decision, which treated waste or scrap obtained in the course of manufacture as not the result of manufacture, had been impliedly approved by the Supreme Court. The later Supreme Court jurisprudence on manufacture and transformation was found to be consistent with that approach, and the reasoning in that precedent remained sound.

Conclusion: Modi Rubber Limited does not require reconsideration.

Issue (iii): Whether 12% countervailing duty under Section 3(1) of the Customs Tariff Act, 1975 could be levied on cut pieces of used tyres and tubes.

Analysis: Countervailing duty can be levied only where identical domestically manufactured goods are excisable. Since cutting used tyres into pieces is not manufacture, the domestic analogue necessary for CVD was absent. The administrative clarification treating such cut tyre scrap as dutiable was therefore inconsistent with the statutory scheme.

Conclusion: The levy of 12% CVD on cut pieces of used tyres and used tubes is unlawful and ultra vires.

Final Conclusion: The challenged clarification was set aside and the writ petition was allowed, as the process did not amount to manufacture and the consequential CVD demand could not stand.

Ratio Decidendi: A process amounts to manufacture only when it results in a new and distinct commercially marketable product with a different identity, character or use; mere cutting of used tyres into pieces, without such transformation, does not satisfy that test and cannot sustain countervailing duty.

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