Packing and manufacture in excise law: packing for convenience did not amount to a process completing manufacture.

Packing of china and porcelainware and glassware was held not to be an incidental or ancillary process completing manufacture for excise purposes under the Central Excises and Salt Act, 1944. Section 3 applies to goods produced or manufactured, and section 2(f) extends manufacture only to processes that are incidental or ancillary to completion of the manufactured product. Applying the settled test that manufacture requires a new marketable substance, the Court noted that the goods could be sold in wholesale without packing and that packing done for commercial convenience did not make it a necessary manufacturing process. On that basis, the excise levy founded on packing was invalid and the demand orders were quashed.

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Issues: Whether packing of china and porcelainwares and glassware was an incidental or ancillary process to the completion of manufacture so as to attract excise duty under the Central Excises and Salt Act, 1944.

Analysis: Excise duty under section 3 is leviable on goods that are produced or manufactured, and section 2(f) defines manufacture to include only such processes as are incidental or ancillary to completion of a manufactured product. Applying the settled meaning of manufacture as the bringing into existence of a new substance known to the market, packing was held not to be an essential part of the manufacturing process for these goods. The goods could be delivered in wholesale without packing, and commercial practice of packing for convenience did not convert packing into a process necessary for completion of manufacture.

Conclusion: Packing was not part of manufacture, and the levy of excise duty on the goods on that basis was invalid.

Final Conclusion: The petitions succeeded, the impugned demand orders were quashed, and the Rule was made absolute.

Ratio Decidendi: Packing is not an incidental or ancillary process completing manufacture unless it is legally and commercially necessary to bring the goods into a marketable manufactured form.

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