No manufacture arises when FRP bodies are fitted onto vehicles without creating a new commodity; excise demand and penalty fail.

Mounting FRP bodies on chassis/vehicles received under Rule 57F(2) was not treated as manufacture because the process did not create a new commodity with a different name, character or use. The Tribunal also applied the principle that, where the principal manufacturer clears the finished vehicles on payment of duty including the FRP top and job charges, the excise burden should not effectively be imposed twice in a way that defeats the credit scheme. On that basis, the central excise demand and penalty were held unsustainable.

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Issues: Whether mounting FRP bodies on chassis/vehicles received under Rule 57F(2) amounted to manufacture so as to sustain the central excise demand and penalty.

Analysis: The goods were received under Rule 57F(2) without departmental objection, and the vehicles after fitting of FRP bodies were returned to the principal manufacturer, who cleared them on duty-paid value including the FRP top and job charges. The Tribunal noted that the process did not give rise to a new product with a different name, character or use. It also relied on the principle that, where the customer clears the final goods on payment of duty, the duty burden should not be fastened twice in a manner that defeats the statutory credit scheme.

Conclusion: The process was not treated as manufacture and the demand and penalty were not sustainable. The finding was in favour of the assessee.

Final Conclusion: The impugned order was set aside to the extent challenged, and the appeal succeeded.

Ratio Decidendi: A process that does not bring into existence a new commodity with a different name, character or use does not constitute manufacture for excise purposes.

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