Manufacture test failed for tyre kits: aggregation, strapping and hologram affixation did not justify fresh excise duty demand.

Mere aggregation of duty-paid tyres, tubes and flaps with strapping, inspection and hologram affixation did not amount to manufacture under section 2(f) of the Central Excise Act, 1944, because the record did not show that the goods were previously unmarketable or that the process universally made them marketable. Hologram affixation was treated as branding-related treatment, not a manufacturing process. The duty demand also failed for want of a proper statutory basis in classification and valuation, since the order departed from the existing assessment framework without support. The consequential demand was therefore unsustainable and the appeals succeeded.

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Issues: Whether the activity of placing tyres, tubes and flaps together, with strapping, hologram affixation and warranty, amounted to manufacture under section 2(f) of the Central Excise Act, 1944 and justified a fresh duty demand and valuation for the resulting kit.

Analysis: The duty on the individual tyres, tubes and flaps had already been discharged before the goods reached the distribution centres. The impugned demand proceeded on the premise that aggregation, inspection, strapping and hologram affixation created a new marketable product, but the record did not establish that the goods were unmarketable earlier or that every item required such treatment. The proceedings also did not segregate any damaged goods from the rest, so inspection could not be treated as a universal process of making the goods marketable. Hologram affixation was found to relate to brand acceptability rather than manufacture. The demand further suffered from inconsistency in classification and valuation, as the order moved away from the existing assessment basis without a proper statutory foundation.

Conclusion: The alleged activity did not amount to manufacture under section 2(f) of the Central Excise Act, 1944, and the consequential duty demand could not be sustained.

Final Conclusion: The appeals succeeded and the impugned order was set aside.

Ratio Decidendi: Mere aggregation, inspection, strapping or branding-related treatment of duty-paid goods does not constitute manufacture unless it is shown that the process renders the goods marketable within the meaning of the statute and is supported by a legally sustainable demand and valuation basis.

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