Manufacture versus job work exemption: conversion of acetic acid into acetic anhydride was held to create a new excisable product.

Conversion of acetic acid into acetic anhydride was treated as manufacture because the supplied material lost its identity and a new product with a different name, character and use emerged. The job-work exemption under Notification No. 119/75 applied only where an article is supplied for processing and returned after that process; it did not cover a process resulting in a distinct excisable product. On that basis, the exemption was denied. The proposed reference to a larger Bench was not accepted by the majority.

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Issues: Whether conversion of acetic acid into acetic anhydride amounted to manufacture so as to deny the benefit of Notification No. 119/75, and whether the goods were entitled to exemption as job work under that notification.

Analysis: The notification exempted goods manufactured in a factory as job work, but its explanation required that an article intended to undergo a manufacturing process be supplied to the job worker and returned after that process. The controlling distinction drawn in the reasoning was between a mere manufacturing process incidental or ancillary to completion of an already existing product and a true manufacture bringing into existence a new article. On the facts, acetic acid was chemically converted into acetic anhydride, which was held to be a different and distinct product with a different name, character and use. Since the supplied article lost its identity and a new product emerged, the process was treated as manufacture under the excise law and not as job work eligible for the notification. The view that the appeal should be referred to a larger Bench was not accepted by the majority.

Conclusion: Conversion of acetic acid into acetic anhydride was manufacture, and the assessee was not entitled to exemption under Notification No. 119/75.

Ratio Decidendi: Where the article supplied for job work loses its identity and a new and distinct excisable product emerges, the process is manufacture and the job-work exemption under the notification does not apply.

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