1999 (11) TMI 62 - SC - Customs

Supreme Court: Manufacturing of Audio Cassettes Qualifies for Customs Duty Exemption

GRAMOPHONE CO. OF INDIA LTD. Versus COLLECTOR OF CUSTOMS, CALCUTTA

GRAMOPHONE CO. OF INDIA LTD. Versus COLLECTOR OF CUSTOMS, CALCUTTA - 1999 (114) E.L.T. 770 (SC), 2000 (1) SCC 549, 1999 (9) JT 275, 1999 (7) SCALE 205 Issues:Classification of manufacturing activity for customs duty exemption under Project Import Regulations, 1986.Analysis:1. The appellant, engaged in manufacturing electronic goods, specifically pre-recorded audio cassettes, sought customs duty exemption for importing machinery. The appellant's industry was considered akin to a service industry by the Tribunal, leading to the rejection of the registration application for the import contract.2. The central issue revolved around determining whether the appellant's activity constituted a manufacturing process or merely offered services. The definition of 'industrial plants' under Project Imports Regulations, 1986 was crucial in establishing eligibility for customs duty exemption.3. The appellant's manufacturing process for pre-recorded audio cassettes involved various steps, including high-speed transfer of music signals onto cassettes. The appellant argued that their activities fell within the definition of 'manufacture' despite the lack of a specific definition in the Customs Act or Central Excise Act.4. The Supreme Court referenced past judgments to define 'manufacture,' emphasizing the transformation of goods into a new commodity with distinct character, use, and name. The Court highlighted that the production of pre-recorded audio cassettes constituted a manufacturing activity due to the creation of a new and different article for commercial sale.5. The Court disagreed with the Tribunal's comparison of the appellant's activity to a service industry like photo-processing, asserting that the mass production of pre-recorded audio cassettes qualified as manufacturing. The Court set aside previous orders rejecting the registration application and instructed the Assistant Collector to reconsider the application recognizing the appellant's activity as manufacturing.6. The judgment clarified the distinction between manufacturing activities and service industries, emphasizing the commercial recognition of the produced goods as distinct commodities. The decision established the appellant's eligibility for customs duty exemption under Project Import Regulations, 1986 based on the manufacturing nature of their operations.