2026 Supreme(SC) 629

SUPREME COURT OF INDIA
J.B. PARDIWALA, R. MAHADEVAN, JJ.
M/s Alupro Building Systems Pvt. Ltd. – Appellant
Versus
Commissioner of Central Excise Bangalore-II – Respondent
Civil Appeal No. 8030 of 2010
Decided On : 27-05-2026

The concept of 'manufacture' requires a two-fold test: a fundamental transformation creating a new, distinct commercial product, and inherent marketability. Additionally, questions regarding the excisability of goods are intrinsically related to the 'rate of duty,' placing them exclusively under the appellate jurisdiction of the Supreme Court.

Headnote:(A) Central Excise Act, 1944 - Sections 2(f), 35G, 35L - Manufacture - Definition and criteria - Appeal against Appellate Tribunal's orders concerning excisability or taxability - Jurisdiction of High Court vs Supreme Court.

(B) Appellate Jurisdiction - Questions on excisability or taxability of goods are intrinsically connected to the rate of duty and must be directed to the Supreme Court under Section 35L rather than the High Court under Section 35G - Amendment inserting Section 35L(2) is clarificatory and curative, thus operating retrospectively. (Paras 18-38, 39-53)

(C) Manufacture - Two-fold Test - Transformation and Marketability - An activity constitutes manufacture only if it results in a transformation creating a new, distinct commercial product with a different name, character, or use - Mere adoption, sizing, or preparation for functional utility without fundamental character change does not satisfy the transformation test. (Paras 58-76)

(D) Burden of Proof - Marketability is a sine qua non for excisability - Burden lies on Revenue to prove that the goods resulting from a process are commercially known, marketable, or capable of being traded as distinct commodities - Standard of proof requires objective evidence of market presence, not merely hypothetical probability. (Paras 82-95)

Facts of the case:
The assessee undertook the activity of cutting, grooving, and routing imported panels to adapt them for installation as cladding on structures. Revenue issued a notice alleging this process constituted "manufacture" and attracted excise duty. The Appellate Tribunal ruled in favour of the assessee, but the High Court reversed this on the ground that a new product emerged, leading to the current appeal.

Findings of Court:
The processes of cutting and grooving facilitate installation but do not alter the fundamental character of the panels, which remain identical to the original imported goods. Therefore, no "manufacture" occurs. Additionally, disputes regarding the excisability of goods fall squarely within the Supreme Court's jurisdiction as they pertain to the determination of the rate of duty.

Issues: Whether the High Court possessed jurisdiction to decide the excisability of the goods and whether simple cutting/grooving operations constitute "manufacture" under the Act.

Ratio Decidendi: The Court held that "manufacture" requires both proof of fundamental transformation into a new distinct article and proof of marketability. Furthermore, since excisability is a threshold question for tax liability, it is inherently tied to the rate of duty, requiring appellate adjudication by the Supreme Court.

Result: Appeal allowed.