Manufacture and duty liability turn on who actually performs the processing, not on prior embroidery alone.

Manufacture for excise purposes depends on transformation of goods into a new and distinct commodity, and duty liability attaches to the person who actually carries out or directs that transformation. Where embroidered grey fabrics were handed to a third party for later processing, the appellants could not be treated as the manufacturers of that subsequent activity because they had no role in it and had already paid duty on their own embroidery work. Notification No. 27/92 was held to concern registration under Rule 174 only and could not be used to impose duty liability on non-processors.

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Issues: Whether the appellants, who had embroidered grey fabrics and then handed them over to another processor, could be treated as the manufacturers liable to pay duty on the subsequent processing.

Analysis: Manufacture requires transformation of goods into a new and distinct commodity, and the liability attaches to the person who actually carries out or directs that transformation. The appellants had already discharged duty on the embroidery undertaken by them and had no role in the later processing done by the third party. The reference to Notification No. 27/92 was held to be confined to registration under Rule 174 and not to govern duty liability. The notification could not be used to fasten duty on persons who were not the processors.

Conclusion: The appellants were not liable for duty on the processing undertaken by another person and could not be treated as the manufacturers for that activity.

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