Paddy to rice processing is not manufacture, and rice with blank tariff duty entry is not excisable goods.

Conversion of paddy into rice by de-husking or milling was treated as a simple process that did not create a new and distinct commodity, so it was not manufacture under the Central Excise Act. Because manufacture failed, rice and bran rice were also held not to be excisable goods; the tariff entry for rice was treated as having no prescribed duty, which supported the view that no excise levy could be sustained. Demand, interest and penalties therefore could not survive on merits, and consequential relief followed.

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Issues: (i) Whether conversion of paddy into rice amounts to manufacture under section 2(f) of the Central Excise Act, 1944; (ii) whether rice and bran rice are excisable goods under section 2(d) of the Central Excise Act, 1944.

Issue (i): Whether conversion of paddy into rice amounts to manufacture under section 2(f) of the Central Excise Act, 1944.

Analysis: Manufacture requires emergence of a new and distinct product having a different name, character or use. The conversion of paddy into rice by de-husking or milling was held to be only a simple operation by which the rice and husk remain in their natural form and no distinct commodity comes into existence. The definition of manufacture applied by the Court supported this conclusion.

Conclusion: The process does not amount to manufacture, and this issue is decided in favour of the assessee.

Issue (ii): Whether rice and bran rice are excisable goods under section 2(d) of the Central Excise Act, 1944.

Analysis: Excisable goods are those specified in the tariff as being subject to duty of excise. Mere mention in the tariff is not enough where the relevant entry carries no rate of duty or is left blank. The Court treated the blank duty entry for rice as significant and followed the view that goods with no prescribed duty in the tariff are not excisable goods for levy purposes. Since the goods were held not to be manufactured, the question of excisability also failed on merits.

Conclusion: Rice and bran rice are not excisable goods, and this issue is decided in favour of the assessee.

Final Conclusion: The demand, interest and penalties could not survive on merits, and the appeals succeeded with consequential relief.

Ratio Decidendi: Where a process does not bring into existence a new and distinct product, and the tariff entry for the goods carries no prescribed duty, central excise duty cannot be sustained on such clearances.

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