Manufacturer in excise is the person who transforms raw material; valuation rules must be applied in their prescribed sequence.

In central excise valuation, the person who carries out the transformation of raw material into a distinct commodity is treated as the manufacturer, even where the material is supplied by another party and the finished goods are returned without sale. The absence of a sale does not by itself create a principal-agent relationship. Where Section 4(1)(b) applies, valuation must follow the prescribed rules in sequence: Rule 6(b)(1) is unavailable on comparable-goods facts, and Rule 7 cannot be used unless Rule 6 is first excluded. On the facts noted, Rule 6(b)(2) was the proper basis and the value declared by the appellant was accepted.

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Issues: Whether the appellant, which processed raw material supplied by another company and returned the finished soap to it, was the manufacturer for central excise purposes, and whether valuation had to be determined under Rule 6(b)(2) rather than by resort to Rule 7.

Analysis: The mere absence of a sale between the parties did not establish a principal-agent relationship. The decisive test was who undertook the transformation of raw material into a commodity with a distinct name and character. Since the appellant carried out that manufacturing process, it was the manufacturer. For valuation, once Section 4(1)(b) of the Act was attracted, the value had to be worked out under the applicable valuation rules. Rule 6(b)(1), dealing with comparable goods, was not available on the facts, and Rule 7 could not be invoked unless Rule 6 was first excluded. The proper basis was therefore Rule 6(b)(2), which led to acceptance of the value declared by the appellant.

Conclusion: The appellant was held to be the manufacturer, and valuation was required to be determined under Rule 6(b)(2); the contrary approach based on Rule 7 was rejected.

Final Conclusion: The demand as sustained in the impugned order could not stand, and the appeal succeeded.

Ratio Decidendi: In excise valuation, the manufacturer is the person who effects the transformation of raw material into a distinct commodity, and the valuation rules must be applied in their prescribed sequence, with a later rule becoming applicable only when the preceding rule is inapplicable.

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