Manufacture test for steel processing: cutting and drilling structural materials did not attract excise duty or penalty.

Processing MS angles and structural materials by cutting, drilling and related work did not create a new and distinct product, so it did not amount to manufacture for central excise purposes. The court followed the earlier view in the petitioner's own matters and noted that the appellate authority had also accepted the same reasoning and dropped recovery. As the demand was founded on an incorrect characterisation of the activity, the excise duty and penalty could not be sustained and were set aside.

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Issues: Whether the activity of cutting, drilling and related processing of MS angles and structural materials amounted to manufacture so as to sustain the demand of central excise duty and penalty.

Analysis: The disputed activity had already been examined in the petitioner's own cases and the earlier view was that such processing did not result in a new product and therefore did not amount to manufacture. The impugned demand proceeded on a contrary footing despite the existing Tribunal decisions and the subsequent order of the appellate authority, which accepted the same line of reasoning and dropped recovery. In that background, the earlier view on the nature of the activity governed the dispute and the demand could not be sustained.

Conclusion: The activity did not amount to manufacture and the demand of excise duty and penalty was unsustainable.

Final Conclusion: The excise demand and penalty were set aside and the writ petition succeeded.

Ratio Decidendi: Processing of steel structural materials by cutting and drilling, without emergence of a new and distinct product, does not constitute manufacture for central excise purposes.

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