Combination packing of separately marketable drugs is not manufacture absent any new marketability

Packing separately marketable anti-tuberculosis drugs together in a combination pack did not amount to manufacture under Note 5 to Chapter 30 because the individual drugs were already marketable and the combined pack did not create a new product or add marketability. The packing was only for convenience of administration, not a process that converted an unmarketable product into a marketable one. On that basis, denial of exemption under Notifications 75/94 and 30/88 was unsustainable, and the demand was set aside with consequential relief to the assessee.

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Issues: Whether packing separately marketable anti-tuberculosis drugs together in a combination pack amounted to manufacture under Note 5 to Chapter 30 so as to deny exemption under Notifications 75/94 and 30/88.

Analysis: Note 5 to Chapter 30 treats certain processes as manufacture only where the treatment renders the product marketable to the consumer. The individual drugs were already separately marketable before being put into a combined pack, and the combination did not create a new product or confer any additional attribute of marketability. The packing was only for convenience of administration and did not amount to a process that brought a previously unmarketable product into the market. On that reasoning, the finding that a new dutiable product emerged could not be sustained.

Conclusion: The combination packing did not amount to manufacture and the denial of exemption was unsustainable, in favour of the assessee.

Final Conclusion: The demand was set aside and the appeal succeeded with consequential relief as permissible in law.

Ratio Decidendi: A process of packing separately marketable goods together does not amount to manufacture unless it confers marketability on a product that lacked it earlier.

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