Mere dilution of resin is not manufacture for excise purposes; no duty arises absent a new commercial product.

Mixing synthetic resin with alcohol to produce a resin solution was not manufacture for excise purposes because the process only diluted the resin and did not create a new, commercially distinct commodity with a different name, character or use; excise duty was therefore not chargeable on that basis. A demand for differential duty was, however, treated as valid under rule 10 because the short levy arose from departmental mistake in assessing duty only on the resin content instead of the total weight of the solution. The stated final position was that, despite the valid invocation of rule 10, the demand could not be sustained since the process itself was not manufacture.

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Issues: (i) Whether mixing synthetic resin with alcohol to produce a resin solution amounted to manufacture so as to attract excise duty under the charging provision and Tariff Item 15-A; (ii) whether the demand for differential duty was validly raised under rule 10 on the ground of short levy caused by mistake.

Issue (i): Whether mixing synthetic resin with alcohol to produce a resin solution amounted to manufacture so as to attract excise duty under the charging provision and Tariff Item 15-A.

Analysis: Excise duty is attracted only when manufacture results in a new and distinct commodity having a different name, character or use. The process in question merely converted resin from solid form into liquid form by dilution with alcohol, without any chemical reaction or transformation into a commercially different product. The end product continued to retain the essential characteristics of resin, and even the departmental analysis treated it as a synthetic resin solution. Since the process did not produce a new commercial commodity, it could not amount to manufacture.

Conclusion: The process was not manufacture and the resultant product was not excisable on that basis; this issue was decided in favour of the assessee.

Issue (ii): Whether the demand for differential duty was validly raised under rule 10 on the ground of short levy caused by mistake.

Analysis: Rule 10 applies where duty has been short levied through inadvertence, error, collusion, or misconception by an officer. The record showed that duty had originally been assessed only on the resin content instead of the total weight of the solution, and the short levy was attributable to departmental mistake. The statutory conditions for invoking rule 10 were therefore satisfied.

Conclusion: The demand was validly made under rule 10; this issue was decided against the assessee.

Final Conclusion: As the process did not amount to manufacture, no excise duty was chargeable on the product, and the demand raised by the department could not be sustained.

Ratio Decidendi: Mere dilution or mixing that does not bring into existence a new and commercially distinct product is not manufacture for excise purposes, even if the product changes form.

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