Mr. Venkataraman, the assessee buys ACPs that are already pre-coated and manufactured. After cutting and grooving, is it still an ACP or has it become something else?

My Lord, after the process, the ACPs become customised, prefabricated cladding panels specifically designed and sized for a particular building. They are no longer generic ACPs that can be used for any purpose. The High Court correctly observed that the product that emerges is a new product which is commercially identifiable and different from the product which the assessee had purchased. The essential use of the product changes from generic building material to customised prefabricated panels. That transformation is sufficient to constitute manufacture under Section 2(f).

In S.R. Tissues, this Court held that cutting jumbo rolls into tissue paper of various sizes was not manufacture because the characteristics remained the same. How is your case different?

My Lord, S.R. Tissues is distinguishable. In that case, the tissue paper retained the same texture, moisture absorption capacity, feel, and end use — household or sanitary purposes. Here, the ACPs undergo a far more significant transformation. They are not merely cut to size; they are grooved, routed, bent into frames, and then fixed to substructures. The process is not mere sizing for convenience; it is a fundamental adaptation that creates a prefabricated component with a specific design for a particular building. Moreover, the expanded definition of manufacture in Section 2(f)(i) includes any process incidental or ancillary to the completion of a manufactured product. The cutting and grooving is incidental and ancillary to the completion of the ACPs as prefabricated cladding panels.

The CESTAT found that the Revenue did not produce any evidence of trade parlance or market understanding that the cut and grooved ACPs are known as separate goods. How have you discharged the burden of proving marketability?

My Lord, marketability does not require the product to be widely traded. It requires that the goods are capable of being bought or sold or are known as a commercial product. The very fact that the assessee undertakes this process for its customers on a commercial basis demonstrates marketability. The assessee charges for the cut and grooved panels as part of its contract. The High Court found that the product is commercially identifiable. The assessee itself was paying excise duty on this process before April 2002, which is an admission by conduct. The burden of proof is on the assessee to show that the goods are not marketable, not on the Revenue to prove a negative. The CESTAT erred in placing the burden on the Revenue.

The assessee has a strong argument that the High Court lacked jurisdiction because the question of excisability relates to the rate of duty under Section 35L. How do you respond?

My Lord, the question of whether a process amounts to manufacture is a substantial question of law that falls within the High Court's jurisdiction under Section 35G. The expression 'rate of duty' refers to the percentage of duty, not the question of whether goods are excisable at all. Sub-section (2) of Section 35L was inserted in 2014 and is prospective. The Tribunal order in this case is from 2006, well before the amendment. The pre-amendment position applies, and this Court in Navin Chemicals held that classification questions — which are akin to excisability questions — were within the High Court's jurisdiction under the then-existing provisions. The High Court correctly entertained the appeal and decided the substantial question of law.

For RespondentTax Premium

Cutting and Grooving Aluminum Panels Constitutes Manufacture — (2026) INSC 582

The process of cutting aluminum composite panels into required sizes and grooving them brings into existence a new product with distinct identity and use, and the Revenue has discharged its burden of…

M/S Alupro Building Systems Pvt. Ltd. v. Commissioner of Central Excise Bangalore-II — (2026) INSC 582

Core Argument

Key Precedents

Union of India v. J.G. Glass Industries Ltd. (1998) 2 SCC 32 — Established 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 — Affirmed that transformation and marketability must be read cumulatively and classified case law into four categories.
Quippo Energy Ltd. v. CCE 2025 SCC OnLine SC 2021 — Clarified 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.

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