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

Civil Appeal · 2026 INSC 582Decided 27 May 2026
C.A. No.-008030-008030 - 2010
Justice J.B. Pardiwala · Justice R. Mahadevan

Background

The appellant, a construction contractor, imported pre-coated Aluminium Composite Panels (ACPs) and, before fixing them onto building facades, cut and grooved the imported sheets to the required size at its own premises. Until April 2002 it paid excise duty on this cutting/grooving activity, but then stopped, believing the process did not amount to "manufacture" under the Central Excise Act, 1944. The Revenue disagreed and pursued proceedings; while the CESTAT and the Commissioner (Appeals) initially ruled in stages, the Karnataka High Court ultimately set aside the Tribunal's order and ruled in favour of the Revenue, holding the process was excisable "manufacture." The company appealed to the Supreme Court.

Decision Breakdown

The Supreme Court undertook a detailed analysis of Sections 35G and 35L of the Central Excise Act (governing which appeals go to the High Court versus the Supreme Court) and held that questions of "excisability" of goods are inherently connected to the "rate of duty" and therefore fall within the Supreme Court's exclusive appellate jurisdiction, not the High Court's. On the substantive question, the Court held that cutting and grooving pre-coated ACPs to size (without changing their fundamental character, composition, or use) does not create a new, distinct, and marketable product, and therefore does not amount to "manufacture." The Court also clarified that the burden of proving marketability of an allegedly manufactured good lies on the Revenue, to be discharged on a "preponderance of probabilities" standard proportionate to the nature of the goods. Since the ACPs underwent no such transformation, the Court held the Karnataka High Court's judgment was wrong and set it aside, allowing the appeal.

Lesson Learnt

Merely cutting, shaping, or otherwise superficially altering a product to fit an end use does not automatically attract excise duty as "manufacture": a new, distinct, and marketable commercial product must actually come into existence, and it is the tax authority's burden to prove that transformation occurred.

Official source (sci.gov.in)View Judgment (PDF)

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