Recording sound on duty-paid cassette tapes is not manufacture absent a new commodity with distinct character or use.

Recording sound on duty-paid blank magnetic or cassette tapes does not, by itself, amount to manufacture under the Central Excise law unless a new and distinct commodity emerges with a different name, character or use. The inclusive definition of manufacture in Section 2(f) was not read to extend to mere recording activity, and Item 59 did not indicate a contrary legislative intent. As no manufacture of excisable goods was established, excise duty under Section 3 could not be sustained and the connected penalties also failed. The demand and penalties were therefore set aside.

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Issues: (i) Whether mere recording of sound on duty paid magnetic or cassette tapes amounts to manufacture under the Central Excises and Salt Act, 1944. (ii) Whether the appellant had manufactured excisable goods falling under Item 59 of the Central Excise Tariff so as to attract duty and penalties.

Issue (i): Whether mere recording of sound on duty paid magnetic or cassette tapes amounts to manufacture under the Central Excises and Salt Act, 1944.

Analysis: The expression "manufacture" in Section 2(f) is an inclusive definition and must still be understood in its ordinary sense unless the statute specifically enlarges it. The process relied upon by the Department was only recording sound on already duty paid blank cassette tapes. That process does not by itself bring into existence a new and distinct commodity having a different name, character or use. The tariff entry also did not create a separate legislative intent to treat recording alone as manufacture merely because sound recorded tapes were separately described.

Conclusion: Mere recording of sound on duty paid magnetic or cassette tapes is not manufacture.

Issue (ii): Whether the appellant had manufactured excisable goods falling under Item 59 of the Central Excise Tariff so as to attract duty and penalties.

Analysis: Excise duty under Section 3 is attracted only when excisable goods are manufactured. Item 59 covers articles of a kind used for sound or sound and image recording, including sound recorded cassette tapes, but the appellant was not manufacturing such goods as a product; he was only recording sound on tapes already in existence. The tariff wording "whether recorded or not" indicated dutiability of the article as manufactured, not that recording itself was a separate manufacturing process. Since no manufacture of excisable goods was established, the duty demand and consequential penalties could not survive.

Conclusion: The appellant had not manufactured excisable goods under Item 59 and was not liable to duty or penalties.

Final Conclusion: The impugned order was set aside and the appeal was allowed, with the demand and penalties holding not sustainable.

Ratio Decidendi: Recording sound on duty paid blank cassette tapes does not, by itself, constitute manufacture unless the statute expressly enlarges the meaning of manufacture or a new commodity with a distinct name, character or use emerges.

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