No manufacture in paper coating process; exemption remains available because the product does not become a distinct commodity.

Coating uncoated paper does not amount to manufacture because the process does not create a new commodity with a distinct name, character or use; the coated paper remains paper for printing and writing. The uncoated paper is only an intermediate stage in the production process, and treating it as a separate taxable manufacture would defeat the purpose of exemption notifications designed to promote non-conventional raw material in paper and paperboard manufacture. On that construction, the assessee remained entitled to the exemption, and the demand and penalty could not be sustained.

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Issues: Whether coating of uncoated paper amounts to manufacture and whether the captive use of uncoated paper in the production of coated paper disentitles the assessee from exemption under the relevant notifications.

Analysis: The process of coating uncoated paper does not bring into existence a new commodity having a distinct name, character, or use. The coated paper remains paper for printing and writing, and the uncoated paper is only an intermediate stage in the manufacture of the final product. The exemption notifications were intended to encourage the use of non-conventional raw material in the manufacture of paper and paperboard, and a construction that treats the intermediate stage as a separate taxable manufacture would defeat that object.

Conclusion: Coating of uncoated paper does not amount to manufacture, and the assessee remained entitled to the exemption. The demand and penalty could not be sustained.

Final Conclusion: The revenue appeals failed because the Tribunal's view that no duty was payable on the disputed process was upheld.

Ratio Decidendi: A process is not manufacture unless it results in a new and distinct commodity with separate name, character, and use, and exemption notifications must be construed consistently with their statutory purpose.

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