M/S Alupro Building Systems Pvt. Ltd. v. Commissioner of Central Excise Bangalore-II

Background & Facts

The appellant assessee imported pre-coated Aluminum Composite Panels (ACPs) manufactured by a foreign manufacturer, paying applicable customs duties. The appellant undertook activities of cutting the ACPs into rectangular or square panels of required size according to design requirements, and making grooves on the back side (routing/grooving) to enable affixation to buildings. The appellant then erected frames at building sites and fixed the cut and grooved ACPs using angles, clamps and fasteners. The appellant discontinued paying excise duty from April 2002 under bona fide belief that the process did not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. A show cause notice dated 14.09.2004 alleged that the process amounted to manufacture and demanded duty of Rs. 21,46,437/- with interest and penalties. The Additional Commissioner confirmed the demand, the Commissioner (Appeals) partly allowed the appeal setting aside penalty and interest but upheld the finding of manufacture, and the CESTAT allowed the assessee's appeal holding that no new product emerged and Revenue failed to prove marketability. The Revenue appealed to the Karnataka High Court under Section 35G, which answered the substantial question of law in favour of the Revenue. The assessee appealed to the Supreme Court.

Statutes Involved

• Section 2(f), Central Excise Act, 1944 — Defines manufacture to include any process incidental or ancillary to completion of manufactured product, processes specified in Fourth Schedule as amounting to manufacture, and processes involving packing, repacking, labelling or re-labelling of goods in Third Schedule to render product marketable to consumer.
• Section 35G(1), Central Excise Act, 1944 — Provides that an appeal shall lie to the High Court from every order passed by the Appellate Tribunal on or after 01.07.2003 (not being an order relating to determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law.
• Section 35L(1)(b), Central Excise Act, 1944 — Provides that an appeal shall lie to the Supreme Court from any order passed by the Appellate Tribunal relating to determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment.
• Section 35L(2), Central Excise Act, 1944 — For purposes of this Chapter, determination of any question having a relation to the rate of duty shall include the determination of taxability or excisability of goods for the purpose of assessment.

Full Analysis

Cases Cited

• Navin Chemicals Manufacturing & Trading Co. Ltd. v. Collector of Customs (1993) 4 SCC 320 — Cited for the proposition that classification of goods under the tariff for determining rate of duty is a question having relation to rate of duty.
• CST v. Ernst and Young (P) Ltd. (2014) 27 GSTR 22 (Delhi) — Cited for holding that determination of any question relating to rate of tax directly and proximately involves the question whether service tax is leviable.
• CCE v. Reliance Media Works Ltd. 2019 SCC OnLine Bom 5162 (FB) — Cited for holding that the question of excisability is appealable only to Supreme Court and that sub-section (2) of Section 35L is clarificatory and retrospective.
• Commr. of Customs v. Motorola (India) Ltd. (2019) 9 SCC 563 — Cited for the proposition that Sections 130 and 130E of the Customs Act (pari materia to Sections 35G and 35L) provide special treatment for questions relating to rate of duty or value of goods.
• Union of India v. Delhi Cloth & General Mills Co. Ltd. 1962 SCC OnLine SC 148 — Cited for the principle that manufacturing means bringing into existence a new substance and not merely producing some change in a substance.
• Union of India v. J.G. Glass Industries Ltd. (1998) 2 SCC 32 — Cited for establishing the two-fold test for manufacture: fundamental change test and but-for-the-process test.
• Servo-Med Industries (P) Ltd. v. CCE (2015) 14 SCC 47 — Cited for classifying case law into four categories and affirming that transformation and marketability must be read cumulatively.
• Quippo Energy Ltd. v. CCE 2025 SCC OnLine SC 2021 — Cited for clarifying that the two-fold test cannot be read as a strict conjunctive test and that the but-for test is not a sufficient assessment to establish manufacture.
• Bharat Forge and Press Industries (P) Ltd. v. CCE (1990) 1 SCC 532 — Cited for holding that pipe fittings cut from steel pipes remain pipes and tubes; essential character and use remain the same.
• CCE v. S.R. Tissues (P) Ltd. (2005) 6 SCC 310 — Cited for holding that cutting jumbo rolls into tissue paper of various shapes and sizes does not amount to manufacture.
• Aman Marble Industries (P) Ltd. v. CCE (2005) 1 SCC 279 — Cited for holding that cutting marble blocks into slabs does not amount to manufacture.
• Moti Laminates (P) Ltd. v. CCE (1995) 3 SCC 23 — Cited for holding that marketability is sine qua non for levying duty even for goods mentioned in the tariff.
• Union Carbide India Ltd. v. Union of India (1986) 2 SCC 547 — Cited for holding that past payment of excise duty under mistaken belief cannot serve as evidence of marketability.
• Union of India v. Sonic Electrochem (P) Ltd. (2002) 7 SCC 435 — Cited for holding that marketability requires the goods to be commercially known and capable of being bought and sold.
• M. Rajendran v. KPK Oils & Protiens India (P) Ltd. (2026) 3 SCC 505 — Cited for holding that procedural amendments and declaratory amendments are presumed retrospective.
• University of Kerala v. Merlin J.N. (2022) 9 SCC 389 — Cited for holding that clarificatory amendments are meant to operate from an antecedent date to cover antecedent events.
• CIT v. Podar Cement (P) Ltd. (1997) 5 SCC 482 — Cited for holding that circumstances of introduction and effect of amendment determine whether it is clarificatory or substantive.

Courtroom Arguments