M/s Alupro Building Systems Pvt Ltdv.Commissioner of Central Excise, Bangalore-II

Legal Analysis: M/s Alupro Building Systems Pvt. Ltd. vs. Commissioner of Central Excise, Bangalore-II

Citation: 2026 INSC 582 (Reportable)
Court: Supreme Court of India
Bench: Division Bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan
Judgment Author: Justice J.B. Pardiwala
Date of Decision: May 27, 2026
Nature of Judgment: Civil Appeal under Section 35L of the Central Excise Act, 1944 against the judgment of the Karnataka High Court, which had allowed the Revenue’s appeal and held that cutting and grooving of Aluminum Composite Panels (ACPs) amounted to “manufacture” under Section 2(f) of the Act.

Synopsis of the Judgment
The appellant was a construction contractor who imported pre‑coated Aluminum Composite Panels (ACPs) and undertook cutting, grooving (routing), and fixing them on building façades. The Revenue issued a show cause notice demanding excise duty on the ground that the process of cutting and grooving amounted to “manufacture”. The Additional Commissioner confirmed the demand, the Commissioner (Appeals) partly allowed but upheld the finding of manufacture, and the CESTAT allowed the assessee’s appeal holding that no new product emerged and the Revenue had not proved marketability. The High Court, in an appeal under Section 35G of the Act, reversed the CESTAT and held that the process amounted to manufacture. The Supreme Court allowed the assessee’s appeal, holding that (i) the High Court had no jurisdiction to entertain the appeal because the question of excisability of goods falls within the exclusive appellate jurisdiction of the Supreme Court under Section 35L(1)(b) read with Section 35L(2) (even prior to the clarificatory amendment), and (ii) on merits, the process of cutting and grooving does not bring into existence a distinct commercial product with a new name, character or use; it merely adapts the panels for a specific purpose, and therefore does not amount to “manufacture” under Section 2(f). The judgment also clarified the two‑fold test of manufacture (transformation into a distinct product and marketability) and the burden of proof on the Revenue.

1. Basic Information of the Judgment

• Case Title: M/s Alupro Building Systems Pvt. Ltd. vs. Commissioner of Central Excise, Bangalore-II

• Civil Appeal No.: 8030 of 2010

• Bench: Justice J.B. Pardiwala and Justice R. Mahadevan (Division Bench)

• Judgment Author: Justice J.B. Pardiwala

• Date of Decision: May 27, 2026

• Citation: 2026 INSC 582 (Reportable)

• Appeal From: Judgment and order dated 01.04.2010 passed by the High Court of Karnataka in Central Excise Appeal No. 17 of 2007, which had allowed the Revenue’s appeal and set aside the order of the CESTAT.

2. Legal Framework

Laws and Provisions Involved:

• Central Excise Act, 1944: Section 2(f) (definition of “manufacture” – includes any process incidental or ancillary to completion, or specified in Chapter Notes, or packing/labelling as amounting to manufacture), Section 35G (appeal to High Court – excluding orders relating to determination of any question having relation to rate of duty or value of goods for assessment), Section 35L (appeal to Supreme Court – including orders relating to determination of any question having relation to rate of duty or value of goods; sub‑section (2) inserted in 2014 clarifies that such determination includes taxability or excisability of goods).

• Central Excise Tariff Act, 1985: Chapter 76 (aluminium and articles thereof), Heading 7606 (aluminium plates, sheets and strip).

• Finance (No. 2) Act, 2014: Clause 99 which inserted sub‑section (2) in Section 35L of the Central Excise Act, 1944, with a clarificatory note.

• Constitution of India, 1950: Article 136 (special leave to appeal).

Key Precedents Cited and Applied:

• Navin Chemicals Manufacturing & Trading Co. Ltd. v. Collector of Customs (1993) 4 SCC 320 – The expression “relation to” in Section 130 of the Customs Act (pari materia to Section 35G) indicates a direct and proximate relationship to rate of duty or value of goods; classification and excisability are such questions.

• Commissioner of Customs v. Motorola (India) Ltd. (2019) 9 SCC 563 – Under the Customs Act (Sections 130 and 130E), which are pari materia to Sections 35G and 35L of the Central Excise Act, an appeal relating to determination of any question having relation to rate of duty lies directly to the Supreme Court, not to the High Court.

• CST v. Ernst and Young (P) Ltd. (2014) 27 GSTR 22 (Delhi High Court) – Dispute regarding taxability of services falls under “rate of duty” within Section 35G exclusion.

• CCE v. Reliance Media Works Ltd. (2019 SCC OnLine Bom 5162) (Full Bench) – The question of excisability of goods is part of the “rate of duty” for the purpose of assessment, and therefore appeals lie to the Supreme Court under Section 35L(1)(b); the 2014 amendment inserting sub‑section (2) is clarificatory and retrospective.

• Union of India v. Delhi Cloth & General Mills Co. Ltd. (1962 SCC OnLine SC 148) – Manufacture means bringing into existence a new substance having a distinct name, character or use; not merely producing some change in a substance.

• Union of India v. J.G. Glass Industries Ltd. (1998) 2 SCC 32 – Established the two‑fold test for manufacture: (i) fundamental change test (new commercial item emerges), and (ii) marketability test.

• Servo‑Med Industries (P) Ltd. v. CCE (2015) 14 SCC 47 – Both transformation and marketability must be cumulatively satisfied for manufacture. Categorised case law into four categories based on transformation and marketability.

• Quippo Energy Ltd. v. CCE (2025 SCC OnLine SC 2021) – Clarified that the ‘but for’ test is not sufficient; transformation is a necessary component, and the two‑fold test cannot be read as a strict conjunctive test in all cases.

• Bharat Forge and Press Industries (P) Ltd. v. CCE (1990) 1 SCC 532 – Cutting and shaping steel pipes into pipe fittings (bends, elbows, etc.) does not amount to manufacture because the essential character and use remain the same.

• CCE v. S.R. Tissues (P) Ltd. (2005) 6 SCC 310 – Cutting jumbo rolls of tissue paper into table napkins and toilet rolls does not amount to manufacture; the characteristics and end‑use remain the same.

• Aman Marble Industries (P) Ltd. v. CCE (2005) 1 SCC 279 – Cutting marble blocks into slabs and tiles does not amount to manufacture; marble remains marble.

• Moti Laminates (P) Ltd. v. CCE (1995) 3 SCC 23 – Marketability is the sine qua non for levy of excise duty, even for goods specified in the tariff. The burden of proving marketability lies on the Revenue.

• Union of India v. Sonic Electrochem (P) Ltd. (2002) 7 SCC 435 – Marketability requires that the goods are known as commercial products capable of being bought and sold, not merely that they have a physical form.

• Union Carbide India Ltd. v. Union of India (1986) 2 SCC 547 – Past payment of duty under mistaken belief does not constitute evidence of marketability.

• Cipla Ltd. v. CCE (2010) 5 SCC 534 – Reliance on a chemical directory without evidence of actual buying and selling is insufficient to prove marketability.

What the Judgment is About: The judgment resolves two principal issues. First, it clarifies the appellate forum for disputes concerning excisability of goods under the Central Excise Act: the High Court has no jurisdiction to hear such appeals because the question of excisability is “a question having a relation to the rate of duty” falling within the exclusive appellate jurisdiction of the Supreme Court under Section 35L(1)(b) (the 2014 amendment inserting sub‑section (2) is clarificatory and retrospective). Second, on merits, it holds that the process of cutting and grooving Aluminum Composite Panels (ACPs) does not amount to “manufacture” under Section 2(f) because no distinct commercial product with a new name, character or use emerges; the panels merely undergo dimensional changes for functional adaptation, and the Revenue failed to prove marketability. The judgment also elaborates on the two‑fold test for manufacture and the burden of proof.

3. Relevant Facts

• The appellant (M/s Alupro Building Systems Pvt. Ltd.) is a construction contractor. Among its activities, it affixes Aluminum Composite Panels (ACPs) on the exterior façades of buildings.

• ACPs are composite products made of a rigid polyethylene core sandwiched between two aluminum sheets, often pre‑coated with a heat‑resistant fluorocarbon coating.

• The appellant imported pre‑coated ACPs in standard sizes, paying customs duty. It then undertook the following activities:
  Cutting the imported ACPs into rectangular or square panels of required size according to design requirements.
  Making grooves on the back side (routing/grooving) to enable fixing to buildings.
  Erecting a frame at the building site, fixing the cut and grooved ACPs onto the frame using angles, clamps, and fasteners, and sealing gaps with sealant.

• Before April 2002, the appellant paid excise duty on cutting and grooving of ACPs, but thereafter discontinued payment under a bona fide belief that the process did not amount to manufacture.

• On 14.09.2004, a Show Cause Notice was issued demanding duty of Rs.21,46,437/- for the period April 2002 to December 2003, along with interest and penalty, on the ground that the process amounted to manufacture.

• The appellant responded that no new product with a distinct name, character or use emerged, and the process was merely to provide functional utility. The appellant had already paid the duty amount and interest.

• The Additional Commissioner confirmed the demand (Order‑in‑Original No.3/2005 dated 21.06.2005) and appropriated the amount already paid.

• The Commissioner (Appeals) partly allowed the appeal, setting aside interest and penalty but upholding the finding of manufacture (Order‑in‑Appeal No.196/2005 CE dated 28.10.2005).

• The appellant appealed to the CESTAT. The CESTAT allowed the appeal (Final Order No.1112/2006 dated 27.06.2006), holding that the Revenue failed to discharge its burden of proving marketability of the item as separate goods, and that the process did not bring into existence a new product.

• The Revenue filed an appeal before the Karnataka High Court under Section 35G of the Central Excise Act. The High Court framed a substantial question of law: “Whether the Appellate Tribunal is right in holding that mere cutting of aluminium angles, plates to size, drilling holes, etc., would not bring into existence new product and the Revenue has not discharged its burden that those goods are marketable items…”. The High Court answered the question in favour of the Revenue, set aside the CESTAT order, and restored the Commissioner (Appeals) order.

• The appellant appealed to the Supreme Court under Section 35L of the Act.

4. Issues

1. Whether the High Court had jurisdiction under Section 35G of the Central Excise Act, 1944 to entertain the Revenue’s appeal, given that the dispute concerned the excisability of goods, which is a question “having a relation to the rate of duty of excise or to the value of goods for purposes of assessment” – an order relating to which lies directly to the Supreme Court under Section 35L(1)(b), not to the High Court.

2. Whether the insertion of sub‑section (2) in Section 35L by the Finance (No.2) Act, 2014 (which states that “determination of any question having a relation to the rate of duty shall include the determination of taxability or excisability of goods”) is clarificatory and retrospective, or whether it creates a new category of appeals prospectively.

3. Whether the process of cutting, grooving (routing), and fixing Aluminum Composite Panels (ACPs) amounts to “manufacture” under Section 2(f) of the Central Excise Act, 1944, i.e., whether it brings into existence a distinct commercial product with a new name, character or use, and whether the resultant goods are marketable.

4. Whether the burden of proving marketability lies on the Revenue, and whether the Revenue had discharged that burden in the present case.

5. Ratio Decidendi

A. The High Court lacked jurisdiction to entertain the appeal; the matter should have been brought directly to the Supreme Court under Section 35L(1)(b) (Paras 18-53).

The Court held that Section 35G(1) of the Central Excise Act, 1944 provides that an appeal lies to the High Court from every order of the Appellate Tribunal except “an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment.” The expression “any question” is wide, and the phrase “among other things” indicates that the exclusions are illustrative, not exhaustive. The question of excisability of goods (whether a particular process amounts to manufacture) is fundamentally a question having a direct and proximate relation to the rate of duty. A decision on excisability is a precursor to determining the rate of duty. The High Court’s jurisdiction under Section 35G is excluded when the order relates to such a question. The corresponding provision – Section 35L(1)(b) – provides that an appeal from such orders lies directly to the Supreme Court.

The Court further held that sub‑section (2) of Section 35L (inserted by the Finance (No.2) Act, 2014) is clarificatory and retrospective. The Notes on Clauses to the Bill stated that the amendment was to “clarify that determination of disputes relating to taxability or excisability is covered under the expression ‘determination of any question having a relation to rate of duty’.” The Memorandum of the Central Board of Direct Taxes also clarified the position. The Court held that the amendment did not create a new right of appeal but made explicit what was always implicit in the scheme of Sections 35G and 35L. Therefore, even though the order of the CESTAT in this case was passed before the 2014 amendment, the question of excisability always fell within the exclusive appellate jurisdiction of the Supreme Court. The Revenue ought to have filed an appeal directly before the Supreme Court under Section 35L, not before the High Court. Consequently, the High Court’s judgment was without jurisdiction.

B. The process of cutting, grooving, and routing ACPs does not amount to “manufacture” under Section 2(f) (Paras 54-96).

The Court applied the two‑fold test for manufacture established in J.G. Glass and Servo‑Med: (i) whether a distinct commercial product with a new identity, character or use emerges (transformation test); and (ii) whether the resultant goods are marketable.

First limb – transformation test (Paras 65-76): The Court held that the process undertaken by the appellant does not result in the emergence of a distinct product. What enters the process is an ACP (aluminum sheets bonded to a polyethylene core), and what emerges is still an ACP – cut to a particular size, grooved at the edges, and bent into a frame. The essential character, material properties, and identity of the goods remain unchanged. Cutting merely adapts dimensions to specific requirements; routing and grooving prepare the panel for mechanical fixing and bending. These are processing activities, not manufacturing. The Court relied on Bharat Forge (pipe fittings remain pipes), S.R. Tissues (cutting tissue rolls into napkins is not manufacture), Aman Marble (cutting marble blocks into slabs is not manufacture), and Bheraghat Mineral Industries (crushing dolomite lumps into chips/powder is not manufacture). The location of the activity (whether at the appellant’s premises or at the site) does not convert processing into manufacture; fixing the panels onto a frame is an installation activity, not manufacturing.

Second limb – marketability test (Paras 77-96): The Court held that even if transformation were assumed, the Revenue had failed to discharge its burden of proving that the cut and grooved ACPs were marketable as distinct goods. Marketability means that the goods are capable of being bought or sold in the market as a commercial product, known as such in trade parlance. The Revenue produced no evidence of any independent market for cut‑to‑size, grooved ACPs as a separate product. The mere fact that the appellant had previously paid duty under a mistaken belief did not constitute evidence of marketability (citing Union Carbide India Ltd.). The CESTAT had correctly found that the Revenue had not discharged its burden. The High Court had erred in reversing this finding without pointing to any material on record.

C. The standard of proof for marketability is preponderance of probabilities, but the burden lies on the Revenue (Paras 85-96).

The Court reiterated that the burden of establishing marketability lies on the Revenue. Marketability must be proved by objective evidence – such as trade enquiries, evidence of actual sales, or expert testimony showing that the goods are known in the market. Mere assertion, or reliance on dictionary definitions or tariff entries, is insufficient. The degree of probability required depends on the nature, rarity, and character of the goods. The Revenue failed to adduce any such evidence.

D. The appeal was allowed, and the impugned High Court judgment was set aside (Paras 97-99).

The Court held that the High Court’s judgment was unsustainable both on jurisdiction and on merits. The CESTAT’s order was restored, and the appellant was held not liable to excise duty on the process of cutting and grooving ACPs.

6. New Legal Principles Established / Reiterated

• Jurisdictional principle under Section 35G vs. Section 35L: The question of excisability of goods (whether a process amounts to “manufacture”) is a question “having a relation to the rate of duty of excise or to the value of goods for purposes of assessment” within the meaning of Section 35G(1). Therefore, an appeal from an order of the CESTAT on such a question lies directly to the Supreme Court under Section 35L(1)(b), and the High Court has no jurisdiction to entertain an appeal under Section 35G. The 2014 amendment inserting sub‑section (2) in Section 35L is clarificatory and retrospective.

• Meaning of “manufacture” under Section 2(f): The two‑fold test (transformation into a distinct product and marketability) must be cumulatively satisfied. Cutting, grooving, and routing of Aluminum Composite Panels (ACPs) to required sizes and shapes for fixing on building façades does not bring into existence a new product with a distinct name, character or use. The essential identity of the goods remains unchanged; the process is one of adaptation and preparation, not manufacturing.

• Processing vs. manufacturing: When goods are merely cut to size, drilled, grooved, or bent to facilitate a specific use or to make them workable, and they retain their original character and end‑use, the activity is “processing” and not “manufacturing”. The location of the activity (factory vs. site) is not determinative.

• Burden of proof of marketability: The Revenue bears the burden of proving that the resultant goods are marketable as distinct commercial products. Past payment of duty under a mistaken belief does not discharge this burden. The Revenue must adduce objective evidence such as trade enquiries, evidence of actual sales, or expert testimony showing that the goods are known and traded in the market under a specific name.

7. Court’s Examination and Analysis of Concepts

• Analysis of Section 35G exclusion (Paras 18-53): The Court conducted a detailed textual analysis of Section 35G and Section 35L. It noted that the bracketed portion in Section 35G is a negative condition: if the order relates to the determination of any question having a relation to rate of duty or value of goods for assessment, the High Court has no jurisdiction. The word “any” gives a wide sweep, and “among other things” indicates that the exclusion is not limited to the enumerated examples. The Court examined the decision in Navin Chemicals (under the Customs Act) and Motorola to hold that classification and excisability are directly and proximately related to the rate of duty. It then examined the 2014 amendment and the Notes on Clauses, concluding that the amendment was clarificatory. The Court also rejected the argument that the amendment was prospective, relying on Podar Cement, Merlin J.N., and M. Rajendran for the proposition that procedural and declaratory amendments operate retrospectively.

• Application of transformation test (Paras 65-76): The Court analysed the physical process: the appellant received pre‑coated ACPs in standard sizes. Cutting them to required dimensions and making grooves on the back does not change the chemical composition, physical properties, or essential character of the panels. The end‑use remains the same – as cladding or façade material for buildings. The Court distinguished cases where a completely new product emerges (e.g., raw material to finished product). It relied on Bharat Forge, S.R. Tissues, Aman Marble, and a High Court decision on dolomite crushing to illustrate the principle that merely adapting the shape or size of an existing product does not amount to manufacture.

• Analysis of marketability (Paras 77-96): The Court examined the evidence on record. The Revenue had not produced any trade witness, no evidence of any person buying cut‑to‑size, grooved ACPs as a separate product, no price lists, and no market enquiry. The Tribunal had correctly noted the absence of evidence. The High Court had reversed the Tribunal without pointing to any material. The Court reaffirmed the principle from Moti Laminates and Sonic Electrochem that marketability is a factual question to be determined on objective evidence. The Court also discussed the standard of proof (preponderance of probabilities) and noted that the degree of probability depends on the nature of the goods. The Revenue’s failure to adduce any evidence was fatal.

8. Critical Analysis

Strengths: The judgment provides a clear and authoritative resolution of two important issues in excise law. On jurisdiction, it settles the conflict between High Courts regarding the scope of Section 35G and Section 35L, holding that the question of excisability falls within the Supreme Court’s exclusive appellate jurisdiction. By holding that the 2014 amendment is clarificatory and retrospective, it prevents the Revenue from litigating such questions before High Courts for orders passed prior to 2014. On merits, the judgment correctly applies the well‑settled principles of “manufacture” and “marketability” to the facts. The analysis of the transformation test is thorough and consistent with the line of authorities from Delhi Cloth & General Mills to Servo‑Med and Quippo. The distinction between processing (adapting size/shape) and manufacturing (bringing into existence a new product) is drawn with clarity. The judgment also reinforces the burden of proof on the Revenue, which is especially important in excise matters.

Potential concerns: The judgment’s holding on jurisdiction – that the High Court had no jurisdiction to hear the appeal – is based on a reading of the pre‑2014 provisions. While the amendment is held to be clarificatory, the Court does not discuss whether the Revenue could have reasonably believed that the High Court had jurisdiction prior to the 2014 clarification, given that several High Courts had entertained such appeals. However, the Court’s reasoning that the language of Section 35G itself excluded such questions is strong. On merits, the judgment does not explicitly address the Revenue’s argument that the process brought about an “irreversible change” and that the end‑use became “specific” (from a generic panel to a custom‑sized panel). The Court held that the essential character and end‑use remain the same, but one could argue that a panel cut to a precise size for a particular building is no longer interchangeable with a standard panel. However, the judgment’s reliance on the Bharat Forge and S.R. Tissues line of authorities is persuasive, and the Court’s conclusion that such dimensional changes are not manufacturing is consistent with established excise jurisprudence.

Practical impact: The judgment will be cited in all Central Excise matters where the dispute relates to whether a particular process amounts to “manufacture”. It clarifies that such appeals must be filed directly before the Supreme Court under Section 35L, not before the High Court, thereby avoiding forum confusion and reducing litigation time. For assessees, the judgment reinforces that cutting, slitting, grooving, or sizing of goods to customer specifications does not amount to manufacture unless a new product with distinct characteristics emerges. For the Revenue, the judgment serves as a reminder that the burden of proving marketability cannot be discharged by mere assertion; concrete trade evidence is required. The judgment also has implications for GST (where similar concepts of “manufacture” may be relevant for classification and valuation).

9. Final Outcome

• Civil Appeal No. 8030 of 2010: Allowed.

• The impugned judgment and order dated 01.04.2010 passed by the High Court of Karnataka in Central Excise Appeal No. 17 of 2007 was set aside.

• The order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Zonal Bench at Bangalore, in Final Order No. 1112/2006 dated 27.06.2006 was restored.

• It was held that the process of cutting, grooving (routing), and fixing Aluminum Composite Panels (ACPs) does not amount to “manufacture” under Section 2(f) of the Central Excise Act, 1944, and therefore, the appellant was not liable to pay excise duty on such activity.

• It was also held that the High Court had no jurisdiction to entertain the Revenue’s appeal under Section 35G of the Act, and the appeal should have been filed directly before the Supreme Court under Section 35L.

• Pending applications, if any, were disposed of.

• No order as to costs.

10. Practical Application

For an assessee (manufacturer/contractor) facing an excise demand for processing activities: If the Revenue claims that your activity (cutting, slitting, grooving, sizing, bending, etc.) amounts to “manufacture”, argue that the process does not bring into existence a new product with a distinct name, character or use. Cite Delhi Cloth & General Mills, Bharat Forge, S.R. Tissues, Aman Marble, and this judgment. Show that the essential character, material composition, and end‑use of the goods remain unchanged. If the Revenue relies on marketability, demand that it produce objective evidence (trade enquiries, evidence of actual sales, market surveys) to prove that the goods are known and traded in the market as a separate product. Past payment of duty under a mistaken belief is not evidence of marketability.

• For the Revenue (excise department): To prove that a processing activity amounts to manufacture, you must adduce evidence of transformation beyond mere dimensional change. Show that the resultant goods have a distinct name, character, or use in trade parlance. For marketability, produce trade witnesses, affidavits from industry associations, or evidence of actual sales of the processed goods as separate products. A mere assertion that the goods are “marketable” will not suffice. Also, note that after the 2014 amendment (clarificatory), any appeal against a CESTAT order on excisability must be filed directly before the Supreme Court under Section 35L, not before the High Court under Section 35G. The High Court has no jurisdiction.

• For a High Court hearing an appeal under Section 35G: Before entertaining the appeal, examine whether the order of the Tribunal relates to the determination of any question having a relation to the rate of duty or value of goods for assessment. If the core dispute is whether a process amounts to “manufacture” (excisability), the High Court has no jurisdiction. The appeal must be filed before the Supreme Court under Section 35L. This applies even to orders passed before the 2014 amendment, because the amendment is clarificatory and retrospective. Dismiss the appeal for lack of jurisdiction or transfer the matter to the Supreme Court (but the Supreme Court has original appellate jurisdiction, so transfer may not be possible; the proper course is to dismiss and leave the party to approach the Supreme Court, but subject to limitation).

• For a litigant considering an appeal from CESTAT: If the dispute involves classification, excisability, rate of duty, or valuation for assessment, file the appeal directly before the Supreme Court under Section 35L of the Central Excise Act, 1944 (or corresponding provisions under the Customs Act or Service Tax). Do not file before the High Court under Section 35G. If you have already filed before the High Court and it is pending, move for transfer or for a declaration that the High Court lacks jurisdiction. This judgment is binding authority.

11.  Court Lines

• “The expression ‘any’ in the aforesaid expression gives the exclusion as regards the jurisdiction a wide sweep, indicating that the question referred to therein is not limited to a specific question of rate of excise duty or value of goods. In other words, even peripheral questions touching a question pertaining to rate or valuation can attract such exclusion.” (Para 24)

• “The decision on excusability of goods is a precursor to the determination of any question having a relation to the rate of excise duty or to the value of goods for the purpose of assessment. Afterall, the levy of excise duty presupposes that the goods upon which such assessment is to be made, are downstream consequences of determination of excusability.” (Para 26)

• “The true test of whether an amendment is clarificatory is not dependent on the label that the legislature attaches to it, but whether the amendment, on a purposive and contextual reading, does no more than make explicit what was already implicit in the original provision.” (Para 40)

• “The process of cutting, grooving, and bending does not alter the fundamental nature of identity of the ACP, it merely adapts its dimensions and shape for a specific use. In other words, it amounts to no more than preparation, sizing, and installation of the ACPs for use as a cladding or façade material.” (Para 66)

• “To make pipes and tubes workable, it is necessary to turn them into required shape and size. When pipes and tubes undergo process of forging, welding, hammering, their essential character and use remain the same.” (Para 68, quoting Bharat Forge)

• “The test of whether a distinct product has come into existence is not a test of physical transformation alone, it is a collective test – of transformation into a new product. The question is also not as to whether the goods look different after the process, but whether they could be regarded as different goods commercially.” (Para 72)

• “Marketability, as contemplated in the second limb of the two‑fold test, is an absolute and standalone inquiry. The second limb asks whether the goods that have emerged possessing a distinct character, identity, or use, are marketable as such.” (Para 80)

• “The burden of establishing marketability lies on the Revenue. Marketability, being a question of fact, must be determined on the basis of the specific facts and circumstances of each case, and cannot be presumed or inferred in the absence of sufficient material.” (Para 86)

12. Legal Strategy Insight

• For an assessee challenging an excise demand on processing activities: First, raise the jurisdictional objection before the High Court if the Revenue appeals against a favourable CESTAT order. Argue that the question of excisability falls under Section 35L and the High Court has no jurisdiction. If the High Court erroneously entertains the appeal, raise the issue before the Supreme Court in further appeal. On merits, focus on the “transformation test”: demonstrate that the process does not change the identity, character or use of the goods. Bring expert evidence on the physical and chemical properties before and after the process. Also, attack the Revenue’s proof of marketability: demand to see trade enquiries, evidence of actual sales, and any independent market for the processed goods. If the Revenue has no such evidence, argue that the burden is not discharged.

• For the Revenue (excise department): To prove manufacture, document the process in detail, including any changes in physical properties, chemical composition, or functional characteristics. Obtain trade opinions from industry associations that the processed goods are known by a distinct name. For marketability, conduct market surveys, collect price lists, and produce evidence of actual sales of the processed goods as separate items. If the goods are intermediate products, show that there is a market for them as such. Also, ensure that you file appeals before the correct forum (Supreme Court under Section 35L for excisability/classification/rate issues, High Court under Section 35G for other substantial questions of law).

• For a legal practitioner advising on excise/GST classification: Understand the distinction between “processing” and “manufacturing”. If your client merely cuts, slits, sizes, or shapes goods without altering their essential character or composition, the activity is likely not “manufacture” and not liable to excise duty (or GST as “supply of goods” if no manufacturing). If the activity results in a new product with a distinct name and use (e.g., turning raw timber into furniture), it is manufacture. The test is factual and case‑specific. Maintain detailed records of the process and the characteristics of input and output goods.

• For a High Court judge dealing with an excise appeal: Before assuming jurisdiction under Section 35G, carefully examine whether the order of the Tribunal involves a determination of any question having a relation to the rate of duty or value of goods for assessment. If the core issue is whether a process amounts to “manufacture” (excisability), the High Court lacks jurisdiction. The appeal must be filed before the Supreme Court under Section 35L. Even if the parties have not raised the objection, the High Court can and should examine its own jurisdiction. The 2014 amendment is clarificatory and retrospective, so the lack of jurisdiction applies even to pre‑2014 orders.