Paragraph numbers below are the court’s original numbering, recovered from the source text.
39. In Maruti Suzuki India Ltd v. Commissioner of Central Excise, reported in (2015) 13 SCC 186, the appellant’s primary contention was that the process of Electro Deposition Coating of various spare parts such as bumpers, grills, etc, did not amount to “manufacture” as the same was in the nature of anti-rust and was merely done to increase the shelf life of the said spare parts. Agreeing with the appellant, the Court held as follows: “17. On the facts of the present case, we have first, therefore, to arrive at whether there is “manufacture” at all and only subsequently does the question arise as to if this is so, what is the valuation of the processed goods and whether duty is payable upon them. We have found on facts that for the purposes of the proviso to Rule 57F(ii), the inputs that were not ultimately used in the final [2025] 9 S.C.R. M/s Quippo Energy Ltd. v. Commissioner of Central Excise Ahmedabad – II product but were removed from the factory for home consumption remain the same despite ED coating and consequent value addition. We follow the law laid down in S.R Tissues Pvt. Ltd.’s case and state that on account of mere value addition without more it would be hazardous to say that manufacture has taken place, when in fact, it has not. It is clear, therefore, that the inputs procured by the Appellants in the present case, continue to be the same inputs even after ED coating and that Rule 57F(ii) proviso would therefore apply when such inputs are removed from the factory for home consumption, the duty of excise payable being the amount of credit that has been availed in respect of such inputs under Rule 57A.” (Emphasis supplied)
40. At first glance, it may seem that the observations in various decisions discussed above fortify the appellant’s stance that no transformation could have occurred from placing imported Genset into a steel container and fitting the steel container with multiple additional components. The appellant may legitimately argue, in the facts of the present case, like in the aforementioned cases: (i) no change in end use of the subject article is occurring [Servo-Med (supra)]; (ii) merely form is being changed for the sake of convenience [S.R Tissues (supra)] and utility [Maruti Suzuki (supra)]; and (iii) the additional elements do not change the character of the good [Satnam Overseas (supra)]. Consequently, undertaking the necessary process would not amount to “manufacture” under Section 2(f) of the Act, 1944.
41. However, such contention should fail. In all the aforementioned cases, the character or use of the subject article did not change, and hence, there was no transformation. In S.R Tissues (supra), the change in form of the tissue roll did not lead to a change in the characteristics of the tissue. Similarly, in Satnam Overseas (supra), the additional elements did not change the essential characteristics of the subject article. However, in the facts of the present case, the change in the form/structure and the addition of new components to the imported Genset has transformed it and brought into existence a different product, i.e. the Power Pack, which has its own distinct character and identity. 1142
42. Determining the ‘character’ and ‘identity’ of goods is an inherently fact-specific inquiry, necessitating assessment on a case-to-case basis. Given the vast diversity of products and manufacturing processes, it is impossible to lay down one universal definition for these terms.
43. In the facts of the present case, we are convinced that the steel container and the other additional components do transform the imported Genset and bring into existence a distinct product which has its own character and identity. On a preliminary analysis itself, it is amply evident that the constituent components of the imported Genset are very different from the constituent components of the Power Pack. The appellant argued that mere addition of extra components would not transform the imported Genset as all the additional components are in the nature of mere accessories being attached for the sake of convenience and utility. Consequently, the addition of these components would not transform the imported Genset into a different and distinct product.
44. At this juncture, it is necessary to determine whether these components attached to the steel container would constitute as ‘parts’ or ‘accessories’ of the Power Pack. This is crucial because if these additional components are ‘parts’ of the Power Pack, it would establish beyond doubt that the imported Genset has undergone transformation as its constituent elements are very different from that of the Power Pack.
45. The judicial understanding of the terms ‘part’ and ‘accessory’ respectively is as presented below: a. A part is an integral/ constituent component which renders the article complete and functional i.e., the article would not be able to fulfill its primary function without this component. [See Saraswati Sugar Mills v. Commissioner of Central Excise, Delhi- III, reported in (2014) 15 SCC 625, and M/s Steel Authority of India Ltd. v. Commissioner of Central Excise, reported in 2022 SCC OnLine SC 1232]; b. An accessory on the other hand is a component which while not being essential to the primary functioning of the article, is used in conjunction with the article and adds supplemental/ secondary value by providing for additional beauty, elegance, [2025] 9 S.C.R. M/s Quippo Energy Ltd. v. Commissioner of Central Excise Ahmedabad – II comfort or convenience of use in relation to that article. [See Commissioner of Central Excise, Delhi v. Insulation Electrical Private Limited reported in (2008) 12 SCC 45]. To illustrate, an air conditioner installed in a car would not be considered a ‘part’ of that car. This is because the car can effectively perform its primary function of transportation even without an air conditioner. Conversely, the air conditioner would be classified as an ‘accessory’ because it enhances comfort and convenience when utilised with the car. It provides supplemental/secondary value by enabling the ability to control the temperature within the car. On the other hand, a steering wheel would be considered as a ‘part’ of the car because without a steering wheel the car would not be able to perform its primary function, i.e., transportation.
46. Applying the above enunciated judicial understanding of ‘parts’ and ‘accessories’ to the facts of this case, it becomes evident that the additional components should be considered as ‘parts’ of the Power Pack. The appellant itself has admitted to the fact that once the Genset is placed in the steel container, these additional components, such as the radiator, ventilator fan and air filter unit, are required for its effective functioning. However, according to the appellant, these components do not have a direct role in generating the electricity. Even if that be the case, it cannot be denied that these components play an equally vital role in facilitating such generation of electricity. It would be safe to assume that without these additional components, the Power Pack would not produce electricity within the steel container and thereby be able to fulfil its primary function. Thus, these additional components are not mere ‘accessories’ attached for the sake of convenience.
47. Further, the change in the form of the imported Genset after undergoing the process is drastic and substantial. Unlike in S.R Tissues (supra) wherein the tissue roll was itself cut/slit into different forms, what is happening in the present case is not mere restructuring of the imported Genset. Rather, the Genset is being reengineered so that it can function within a container. In order to facilitate the same a number of additional components are being added, and they are all recognisable as ‘parts’ of the Power Pack. In fact, the pictorial representations of the imported Genset and Power Pack itself indicates that structurally there is a profound distinction 1144 between both the products. In such circumstances, the fact that the process was undertaken merely for the sake of logistical purposes would not change the undeniable fact that the imported Genset has been transformed into a different product.
48. The appellant’s submission that the Genset was complete and functional at the time of import and the end-use of both the imported Genset and the Power Pack is the same i.e., generation of electricity, is also devoid of any merit. There is a serious dispute between the parties as to whether or not the Genset at the time of import was complete and functional. Even if we assume it was complete and functional, that still would not help in driving home the appellant’s contention. This is because the core end-use of a subject article might remain the same pre and post application of the process and yet it might have undergone a transformation into a different product.
49. The contention of the appellant that the end-use of both products is merely the ‘generation of electricity’ is an oversimplification that conflates the core function of a product with its functional utility. The Genset at the time of the import was in a form that was suitable/ intended for permanent installation. The process undertaken by the appellant imparts the core functional utility of portability to the Genset, a utility that was non-existent in the product at the time of its import. This is not a minor, value-added feature, it is the defining attribute from which the final product derives its entire identity and character.
50. We have no doubt in our mind that the test of transformation is satisfied in the facts of the present case. The imported Genset and the Power Pack are two different commodities with distinct constituent elements, structure and functional utility.
51. We now turn to the final test of marketability. No evidence has been adduced by the appellant to suggest that the Power Packs are not marketable. On the contrary, it is an admitted position, clear from the record, that it is these very Power Packs that are the subject of the lease agreements and are delivered to the ultimate customer. Thus, no serious question regarding the marketability of the final product remains, it is an established and undisputed fact. [2025] 9 S.C.R. M/s Quippo Energy Ltd. v. Commissioner of Central Excise Ahmedabad – II CONCLUSION
52. In the facts of the present case, both the transformation test and the marketability test stand fulfilled. The process of placing the Genset within the steel container and fitting that container with additional, integral components brings into existence a new, distinct, and marketable commodity. This process would thus amount to “manufacture” under Section 2(f)(i) of the Act, 1944. Consequently, the appellant is liable to pay excise duty on the goods manufactured.
53. For all the foregoing reasons, the appeals fail and are hereby dismissed. Result of the case: Appeals dismissed. †Headnotes prepared by: Ankit Gyan