Assembly of fasteners without new product is not manufacture and does not enlarge the exemption base

Mere assembly of bolts, nuts and washers without emergence of a new product with a distinct name, character and function does not amount to manufacture under central excise law. As the items retained their separate identity and continued to operate as fasteners, only goods actually manufactured by the assessee could be counted for exemption purposes. The value of the assembled items was therefore not aggregated for computing the Notification No. 71/78 exemption limit, and the classification under Tariff Item 52 remained unchanged. The departmental challenge failed, and the order in favour of the assessee was upheld.

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Issues: Whether the clearance of bolts, nuts and washers as an integral assembly attracted manufacture or required inclusion of the value of all three items for computing the exemption limit under Notification No. 71/78, and whether the goods remained classifiable under Tariff Item 52 of the erstwhile Central Excise Tariff.

Analysis: The goods cleared together continued to be bolts, nuts and washers, each retaining its separate identity and use as a fastener. Mere attachment of nuts and washers to bolts for clearance did not bring into existence a new product having a distinct name, character and function. Excise duty being a duty on manufacture, only goods manufactured by the assessee could be taken into account for the exemption limit. Since the process amounted, at most, to an assembly and not manufacture, the value of the assembled goods was not required to be treated as manufacture-based clearance for the purpose of the notification. The classification under Tariff Item 52 also remained unaffected because the articles continued to be fasteners.

Conclusion: The assembly did not amount to manufacture, the value of the three items was not to be aggregated for the exemption computation, and the goods remained classifiable under Tariff Item 52.

Final Conclusion: The departmental challenge failed and the order in favour of the assessee was upheld.

Ratio Decidendi: Mere assembly of component goods without emergence of a new product with a distinct name, character and function does not amount to manufacture for central excise purposes.

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