M/S. USHA RECTIFIER CORPN.(I) LTD. vs COMMNR. OF CENTRAL EXCISE, NEW DELHI

The Supreme Court ruled that under Section 3 of the Central Excises and Salt Act, 1944, excise duty is applicable only when there is a clear act of manufacture or production. The Court held that the appellant's activities did not constitute manufacture as they were primarily for research and development, and thus, the demand for excise duty of Rs. 4,92,566.28 was unjustified. The Court set aside the orders of the lower authorities, including the CEGAT, confirming the duty and penalty imposed on the appellant.