Conversion of waste PET bottles into PET flakes is not ‘manufacture’

The CESTAT Chennai has held that conversion of waste Polyethylene Terephthalate (‘PET’) bottles into PET flakes does not amount to ‘manufacture’ as per Section 2(f) of the Central Excise Act, 1944. 

The assessee was undertaking the process wherein, first, from the used PET bottles/waste PET bottles, non-PET materials such as PVC, aluminium, paper, iron & stone were sorted out and then the bottles were crushed into smaller pieces called flakes. The crushed flakes were then washed to remove sand and dirt and then dried, packed and cleared from the factory. 

Considering various case law on ‘manufacture’, the Tribunal agreed with the submission of the assessee that the final product, i.e. PET Flakes, was still in PET form only since the input goods were reduced to flake form and there was neither emergence of a new product nor the raw material in PET form ceased to exist. 

Setting aside the impugned order, the Tribunal in Shree Renga Polymers v. Commissioner [2026 VIL 636 CESTAT CHE CE] also observed that the Commissioner committed an error in holding that merely because the final product is known as ‘paring of PET Bottles’, which is the same as PET flakes, ‘manufacture’ had taken place. 

Further, Commissioner’s reliance on Wikipedia to hold that chemical changes/characteristics had changed, was also found to be wrong by the Tribunal while it noted that the Supreme Court had earlier held that Wikipedia cannot be utilized for legal dispute resolution. 

The assessee was represented by Lakshmikumaran & Sridharan Attorneys here.