Lubricating oil processing was not manufacture before the deeming chapter note, so excise duty and related penalties failed.

Packing, repacking, filtering, cleaning, heating, blending and reclamation of lubricating oil did not amount to manufacture for the relevant period because the deeming fiction in Chapter Note 9 to Chapter 27 had not yet come into force. The analysis applied section 2(f) of the Central Excise Act, 1944 and binding precedent holding that such treatment of lubricating oils was not manufacture before the chapter note existed. As a result, no central excise duty was payable and the related demands for interest, penalties, fine and confiscation could not stand.

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Issues: Whether the assessees' activities of packing, repacking, filtering, cleaning, heating, blending and reclamation of lubricating oil amounted to manufacture during the relevant period and, if not, whether the resulting duty, interest, penalties and confiscation could stand.

Analysis: The activities undertaken on lubricating oils were examined in the light of section 2(f) of the Central Excise Act, 1944 and the later insertion of Chapter Note 9 to Chapter 27 of the Central Excise Tariff Act, 1985, which created a deeming fiction that certain treatment of lubricating oils would amount to manufacture. The decisive feature was that the relevant period preceded that deeming provision. The reasoning was reinforced by the departmental circular dated 11.04.2016, which acknowledged that repacking and similar treatment of lubricating oils are covered by the chapter note, and by binding precedent holding that repacking of lubricating oils and reclamation of oil from used oil did not amount to manufacture before the chapter note came into force.

Conclusion: The activities did not amount to manufacture during the relevant period. No central excise duty was payable, and the connected demands for interest, penalties, fine and confiscation also failed.

Final Conclusion: The assessees succeeded on the substantive question, the revenue challenge failed, and the impugned orders were set aside.

Ratio Decidendi: Before the introduction of the deeming chapter note, repacking or similar processing of lubricating oils did not constitute manufacture unless the process itself satisfied the statutory test under section 2(f) of the Central Excise Act, 1944.

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