Cutting and polishing rough diamonds is not manufacture where no new commodity emerges, and Item 68 does not apply.

Cutting and polishing rough diamonds was treated as not amounting to manufacture because the process did not change the character or constitution of the diamonds and no new commodity emerged. On that same basis, the resulting cut and polished diamonds were held not to fall within Item 68 of the Central Excise Tariff. The assessee was therefore entitled to relief.

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Issues: Whether the process of cutting and polishing rough diamonds amounts to "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944 and whether the resulting cut and polished diamonds fall under Item 68 of the Central Excise Tariff.

Analysis: The process of cutting and polishing rough diamonds was found not to bring about any change in the character or constitution of the diamonds. As no new commodity emerged from the process, it did not satisfy the definition of manufacture. On the same reasoning, the cut and polished diamonds could not be brought within Item 68 of the Central Excise Tariff.

Conclusion: The process does not amount to manufacture and the goods do not fall under Item 68; the appeal succeeds and the assessee is entitled to relief.

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