Manufacture under central excise requires emergence of a new commodity; assembling switching systems did not create a dutiable product.

Assembly, installation and commissioning of bought-out switching systems with auxiliary equipment did not amount to manufacture because the installed goods retained their identity as switching systems and no new commodity with a distinct commercial identity, character, or use emerged. The auxiliary power plant and inverter were only supporting equipment, and the activity therefore did not create a dutiable telephone exchange under Heading 8517. The central excise demand, interest, and penalty were unsustainable, and the impugned order was set aside with consequential relief.

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Issues: Whether assembly, installation and commissioning of switching systems with auxiliary equipment amounted to manufacture and attracted central excise duty on telephone exchanges classifiable under Heading 8517.

Analysis: The switching system was the main component of the telephone exchange, while the power plant and inverter were only auxiliary equipment. On installation, the goods remained switching systems and did not acquire a distinct commercial identity, character, or use. The activity did not result in emergence of a new commodity. Following the view taken in the appellant's own earlier matter, the demand could not be sustained.

Conclusion: The activity did not amount to manufacture and no duty was payable. The duty demand, interest, and penalty were unsustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Assembly of bought-out components into a functioning switching system, without emergence of a new commodity having a distinct commercial identity, does not amount to manufacture for central excise purposes.

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