The Supreme Court has ruled that cutting, grooving and shaping aluminium composite panels (ACPs) for installation on building facades does not amount to “manufacture” under the Central Excise Act, 1944.
A Bench of Justice J.B. Pardiwala and Justice R. Mahadevan held that the process carried out by M/s Alupro Building Systems Pvt. Ltd. merely modified the size and shape of the panels for installation purposes and did not create a new commercially distinct product.
The Court also held that the Karnataka High Court lacked jurisdiction to hear the Revenue’s appeal because disputes relating to excisability of goods must directly go to the Supreme Court under Section 35L of the Central Excise Act.
Background Of The Case
M/s Alupro Building Systems Pvt. Ltd., a construction contractor, imported pre-coated aluminium composite panels in standard sizes for use in building cladding and facades.
According to the record, the company used to cut the panels into smaller sizes, groove them from the back side and fit them onto structures through frames, clamps and sealants depending on customer requirements.
Initially, the company paid excise duty on the activity. However, after April 2002, it stopped payment believing that cutting and grooving of ACPs did not amount to “manufacture” under Section 2(f) of the Act.
In 2004, the Department issued a show cause notice demanding over ₹21 lakh in excise duty along with interest and penalties for the period between April 2002 and December 2003.
While the adjudicating authority confirmed the demand, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) later ruled in favour of the company. The Tribunal held that no new product emerged from the process and the Revenue had failed to prove marketability of the altered panels as separate goods.
The Karnataka High Court reversed the Tribunal’s decision and held that the activity amounted to manufacture because the resulting product became commercially identifiable and suitable for a specific purpose.
Court’s Observation On Jurisdiction
Before examining whether the process amounted to manufacture, the Supreme Court first dealt with the issue of jurisdiction.
The Bench noted that Section 35G bars High Courts from hearing appeals involving questions related to excisability or rate of duty. Such appeals, the Court said, fall exclusively within the Supreme Court’s jurisdiction under Section 35L.
“The issue in the present appeal is in regard to excisability of the goods,” the Bench observed while holding that the Revenue should have approached the Supreme Court directly.
The Court further clarified that the 2014 amendment to Section 35L, which specifically included “taxability or excisability” disputes within the Supreme Court’s appellate jurisdiction, was only clarificatory in nature and applied retrospectively.
Supreme Court On Meaning Of ‘Manufacture’
The Bench then examined whether cutting and grooving ACPs resulted in the emergence of a new product.
Referring to earlier judgments on excise law, the Court reiterated that two conditions must be satisfied before an activity can be treated as manufacture:
A new product with a distinct name, character or use must emerge; and
The resulting product must be marketable as separate goods.
Applying this test, the Court found that the ACPs remained ACPs even after cutting and grooving. Only their dimensions and shape changed for installation purposes.
“The essential character of the goods remain entirely unchanged,” the Bench said.
The Court further observed that activities like grooving, bending and fitting the panels onto frames were merely installation-related operations and did not bring into existence a new commercially distinct commodity.
Rejecting the Revenue’s stand, the Bench held that adapting the panels to suit a particular building requirement could not by itself amount to manufacture.
Decision
Allowing the appeal filed by M/s Alupro Building Systems Pvt. Ltd., the Supreme Court set aside the Karnataka High Court judgment and restored the order passed by the CESTAT in favour of the assessee.
The Court held that the process of cutting and grooving aluminium composite panels does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944.
Case Details
Case Title: M/s Alupro Building Systems Pvt. Ltd. v. Commissioner of Central Excise, Bangalore-II
Case Number: Civil Appeal No. 8030 of 2010
Judge: Justice J.B. Pardiwala and Justice R. Mahadevan
Decision Date: May 27, 2026
