Manufacture requires a new commodity with distinct identity; removing microscopic tin from scrap did not create one and stayed exempt.

Removal of a microscopic tin coating from tinned steel scrap did not amount to manufacture because no new commodity emerged with a distinct name, use or identity; mere stripping of a negligible component was insufficient. The activity therefore did not create a separate excisable product. The conceded manufacture of tin also remained within the exemption limit under Notification No. 175/86, so no duty was payable and the duty demand and penalty could not survive. Consequential relief followed.

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Issues: (i) Whether removal of a microscopic tin coating from tinned steel scrap resulted in manufacture of scrap; (ii) whether the activity remained within the exemption limit under Notification No. 175/86.

Issue (i): Whether removal of a microscopic tin coating from tinned steel scrap resulted in manufacture of scrap.

Analysis: The process only removed a very small quantity of tin from scrap that was already received as scrap. No new commodity emerged with a different nomenclature, use, or identity merely because the tin coating was stripped off. The existence of a process by itself did not establish manufacture.

Conclusion: No manufacture of scrap took place.

Issue (ii): Whether the activity remained within the exemption limit under Notification No. 175/86.

Analysis: The manufacture of tin, which was conceded, fell within the exemption limit of Rs. 30 lakhs under the notification. On that basis, no duty was payable and the duty demand and penalty could not survive.

Conclusion: The activity was within the exemption limit and no duty was payable.

Final Conclusion: The duty demand and penalties were set aside and consequential relief followed.

Ratio Decidendi: Manufacture requires emergence of a new commodity with a distinct nomenclature, use, and identity; mere removal of a negligible component from an existing product does not amount to manufacture.

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