Mere dilution, repacking and relabelling do not amount to manufacture unless they create a new and distinct commodity.

Mere dilution, addition of preservatives, repacking and affixing a trader's own brand do not amount to manufacture under Section 2(f) of the Central Excise Act unless the process brings into existence a new and distinct commodity with a different name, character or use. Where testing showed the purchased goods and the cleared products had the same chemical characteristics, and no new product emerged, the activity was treated as only dilution and marketing-related repacking or relabelling. Accordingly, no fresh central excise duty liability arose.

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Issues: Whether the respondent's process of dilution, addition of preservatives, repacking and affixing its own brand on the purchased goods amounted to manufacture under Section 2(f) of the Central Excise Act, 1944, so as to attract central excise duty.

Analysis: The purchased raw materials and the cleared products were found on testing to have the same chemical characteristics, and the departmental reports did not establish emergence of a new and different article. The settled test of manufacture requires transformation resulting in a new product having a distinct name, character or use. On the facts found, the process was only dilution and marketing-related repacking or relabelling, without any material change in the identity of the goods.

Conclusion: The process did not amount to manufacture and no fresh excise duty liability arose on the respondent.

Ratio Decidendi: Mere dilution, repacking and relabelling do not constitute manufacture unless the process results in emergence of a new and distinct commodity with a different name, character or use.

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