Manufacture under Central Excise requires creation of marketability; de-packing damaged goods for bulk sale is not manufacture.

De-packing, de-wrapping, decanting, cutting and bulk sale of damaged or obsolete finished goods did not amount to manufacture under Central Excise law because the process did not create or enhance marketability; it only destroyed marketability. Manufacture under section 2(f)(iii) requires packing, repacking, labelling or similar treatment that renders goods marketable to consumers. As the goods were already marketable products received back in damaged condition, the duty demand, interest, penalty and registration requirement could not be sustained.

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Issues: Whether the activity of de-packing, de-wrapping, decanting, cutting, and selling damaged or obsolete finished goods in bulk amounts to manufacture under the Central Excise law, and consequently whether the demand of duty, interest, penalty, and registration requirement could be sustained.

Analysis: The goods were already marketable products and were only received back in damaged or obsolete condition. The activity undertaken did not render the goods marketable to consumers; instead, it made them non-saleable and non-marketable. Manufacture, for purposes of section 2(f)(iii), requires packing, repacking, labelling, or similar treatment to render goods marketable to the consumer. Since the disputed process was only one of de-packing or destruction of marketability, it did not answer that test. The reasoning was supported by the principle that marketability is essential and that the process must create or enhance marketability, not destroy it.

Conclusion: The activity did not amount to manufacture, and the duty demand, interest, penalty, and registration requirement could not be sustained. The appeal succeeded.

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