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Issues Involved:
1. Whether mere recording of sound on duty-paid magnetic or cassette tapes constitutes "manufacture" under the Central Excises and Salt Act. 2. Whether the appellants have manufactured "excisable goods" as defined in the Act and are liable to pay the duty demanded or fines levied. Issue-wise Detailed Analysis: Issue 1: Whether mere recording of sound on duty-paid magnetic or cassette tapes constitutes "manufacture" under the Central Excises and Salt Act. The term "manufacture" under the Central Excises and Salt Act is defined in Section 2(f), which provides an inclusive definition rather than a precise one. The definition has been expanded over time to include various processes, but recording sound on blank magnetic or cassette tapes is not one of these processes. Therefore, recording sound on duty-paid cassette tapes does not constitute "manufacture" by the inclusive definition. The appellant argued that mere sound recording on cassette tapes does not result in a new commodity, as no new product comes into existence. This argument was supported by the decision in Union of India & Ors. vs. Delhi Cloth & Gen. Mills Co. Ltd., where it was held that "manufacture" implies a transformation resulting in a new and different article with a distinctive name, character, or use. The appellant also cited the case of Prabhat Associates vs. Collector of Central Excise, where it was held that recording sound on duty-paid magnetic or cassette tapes is not manufacture. The Department countered that there is no ambiguity in the language used in Tariff Item No. 59 or in the definition of "manufacture" under Section 2(f) of the Act. They argued that the process of recording sound is a manufacturing activity and that sound recorded cassette tapes are excisable and liable to duty. The Department cited the case of Hyderabad Asbestos Cement Products Ltd. & Another vs. Union of India & Ors., which held that once the legislature has included an item in the Schedule, its validity cannot be questioned on the grounds that it does not involve a manufacturing process. Upon review, the Tribunal found that the term "manufacture" should be interpreted based on its definition in the parent statute. The expression "whether recorded or not" in Item 59 of the Schedule indicates that the manufacture of the articles is complete without recording. Therefore, recording sound on duty-paid cassette tapes is not a process incidental or ancillary to the completion of manufacture. The Tribunal concluded that recording sound on duty-paid cassette tapes does not constitute "manufacture." Issue 2: Whether the appellants have manufactured "excisable goods" as defined in the Act and are liable to pay the duty demanded or fines levied. The term "excisable goods" is defined under Section 2(d) of the Central Excises and Salt Act as goods specified in the Schedule as being subject to a duty of excise. Item 59 of the Schedule includes articles used for sound or sound and image recording, whether recorded or not. The appellant argued that they were not manufacturing sound recorded magnetic tapes or sound recorded cassette tapes as such. Instead, they were recording sound on duty-paid cassette tapes either purchased from the market or supplied by customers. The Department argued that once an article is named or described in the Schedule, it is automatically chargeable to duty. The Tribunal found that the intention of the Legislature is to levy duty on goods specified as excisable in the Schedule, provided they are manufactured. The term "manufacture" implies that a new product with a distinct name, character, and use comes into existence. Mere recording of sound on cassette tapes does not transform the original product into a new product, and the same cassette tapes can be used multiple times for recording and re-recording. The Tribunal concluded that the appellant was not manufacturing excisable goods as defined in Item 59 of the Schedule. Conclusion: The Tribunal held that the appellant is not liable to pay any duty or fines for not having manufactured excisable goods under Item 59 of the Schedule. The recording of sound on duty-paid magnetic cassette tapes does not constitute "manufacture." The impugned order was set aside, and the appeal was allowed.
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