Manufacture by processing duty-paid inputs supports CENVAT credit where grinding, sizing and packing make goods marketable.

Grinding, sizing and packing of duty-paid Ferro Silicon cake amounted to manufacture because the processes made the goods marketable in customer-required sizes within the inclusive definition under section 2(f) of the Central Excise Act, 1944. Since the finished goods were cleared on payment of duty and the duty-paid nature of the inputs was undisputed, CENVAT credit could not be denied on a purely technical objection that the processing was not manufacture. The denial of credit was therefore unsustainable and the assessee's claim was upheld.

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Issues: Whether grinding, sizing and packing of duty-paid Ferro Silicon cake amounted to manufacture, and whether CENVAT credit could be denied on the input solely on the ground that such processes were not manufacture.

Analysis: The input was received in the factory in duty-paid condition and the subsequent processes of grinding, sizing and packing were undisputed. These processes made the goods marketable in the sizes required by customers and therefore fell within the inclusive definition of manufacture under section 2(f) of the Central Excise Act, 1944. The finished goods were cleared on payment of duty and the department did not dispute such duty payment. In these circumstances, credit could not be denied on a mere technical objection when the duty-paid nature of the goods and the substantive eligibility conditions were satisfied.

Conclusion: The processes undertaken amounted to manufacture and the denial of CENVAT credit was unsustainable.

Final Conclusion: The order denying credit was set aside and the appellant's claim for CENVAT credit was upheld.

Ratio Decidendi: Where processing makes duty-paid inputs marketable and the resultant goods are cleared on payment of duty, CENVAT credit cannot be denied on a purely technical objection that the process is not manufacture.

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