Manufacture and excisability of timber scantlings turn on commercial identity, while refund claims need review on protest payment.

Mere conversion of chir and plywood timber into scantlings, including chemical treatment for fungus and termite resistance and drilling of holes for fitment, did not amount to manufacture because no new commercially distinct article emerged; the processed scantlings were therefore not excisable goods. Saw dust and wood waste generated during the process were also not excisable, as they were only incidental waste and not distinct marketable products. The refund claims were remitted for reconsideration on the limited factual question whether duty had been paid under protest, since that issue had not been examined by the lower authority.

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Issues: (i) Whether chir and plywood scantlings, after chemical treatment and drilling of holes for fitment, became excisable goods amounting to manufacture; (ii) Whether saw dust and wood waste arising during the conversion process were excisable goods; (iii) Whether the refund claims required reconsideration on the question of payment of duty under protest.

Issue (i): Whether chir and plywood scantlings, after chemical treatment and drilling of holes for fitment, became excisable goods amounting to manufacture

Analysis: The decisive test was whether the processing brought into existence a new and commercially distinct article. Mere sawing of timber into scantlings did not create a new product. Chemical treatment to make the scantlings fungus- and termite-resistant did not alter their essential identity, and drilling of holes for fitment was only an ancillary operation and not a manufacturing transformation. On the settled principle of manufacture under section 2(f), the processed scantlings did not acquire a new commercial character.

Conclusion: The scantlings were not excisable goods and the issue was decided in favour of the assessee.

Issue (ii): Whether saw dust and wood waste arising during the conversion process were excisable goods

Analysis: The products in question were merely waste arising in the course of manufacture of scantlings. Waste or by-products that do not emerge as distinct commercial articles do not become excisable merely because they are generated during processing. Following the principle that such waste products are not independently manufactured goods, saw dust and wood waste could not be treated as excisable.

Conclusion: Saw dust and wood waste were not excisable goods and the issue was decided in favour of the assessee.

Issue (iii): Whether the refund claims required reconsideration on the question of payment of duty under protest

Analysis: The refund claims had been rejected on limitation, but the question whether duty had been paid under protest had not been examined by the lower authorities. As that factual issue required verification from the existing record, the refund claims could not finally be decided on limitation alone and had to be reconsidered by the Assistant Collector.

Conclusion: The matter relating to the refund claims was remitted for reconsideration on the question of payment under protest.

Final Conclusion: The classification dispute was resolved in favour of the assessee, while the refund matters were sent back for fresh consideration on the limited issue of protest payment.

Ratio Decidendi: Mere processing of timber into scantlings, including chemical treatment or minor fitment drilling, does not constitute manufacture unless a new and commercially distinct product emerges; waste products arising in the course of such processing are not excisable goods absent such distinct commercial identity.

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