Manufacture test: printing on customer supplied materials is not manufacture under central excise law, so excise demand unsustainable.

The article examines whether printing on customer supplied materials constitutes "manufacture" for central excise by applying the transformation test requiring a new article with a distinctive name, character or use; it applies Chapter notes and Section 2(f) principles and precedents that mere printing or surface treatment does not alter the basic character. It emphasises that change of tariff heading alone cannot convert a process into manufacture and that marketability of the printed item and job work/cenvat considerations are relevant. Conclusion reached: printing on customer supplied materials is not manufacture and excise demands, interest and penalties are unsustainable.

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Issues: (i) Whether the activity of printing carried out on materials supplied by customers amounts to "manufacture" for the purposes of central excise and whether the impugned demand of excise duty, interest and penalties is sustainable.

Analysis: The issue was examined by applying the legal test of manufacture requiring a transformation that yields a new and different article having a distinctive name, character or use. The analysis considered chapter notes and tariff headings of the Central Excise Tariff Act, 1985 (notably Chapter 48 and Chapter 49), the definition of "manufacture" under Section 2(f) of the Central Excise Act, 1944, and precedent holding that mere printing or surface treatment does not alter the basic character of the underlying material. It was further examined whether change in classification alone or change of tariff heading establishes manufacture, and whether printed items produced for a particular customer are marketable in themselves. Relevant principles applied include the manufacture test (distinctive name, character or use), marketability of the end product, applicability of job-work and modvat/cenvat credit where relevant, and the inability of classification alone to convert a non-manufacturing process into manufacture.

Conclusion: (i) In favour of the assessee. The activity of printing on materials supplied by customers does not amount to "manufacture" under Section 2(f) and related chapter notes; the demand of excise duty, interest and penalties is not sustainable and is set aside.

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