Manufacture by marketability test applies when colour solution is processed into retail nail enamel and area-based exemption follows.

Testing, homogenisation, mixing with thixo lacquer, viscosity adjustment, bottling into retail packs and labelling with retail sale price were treated as processes amounting to manufacture of nail enamel. A conjoint reading of section 2(f)(iii) of the Central Excise Act, 1944 and Chapter Note 5 of Chapter 33 shows that any further treatment rendering a product marketable to consumers can constitute manufacture. On the stated facts, the colour solution in bulk drums did not become nail enamel until it was processed and put up in prescribed retail form, resulting in a new marketable product. The article concludes that the processes amounted to manufacture and that the appellant was entitled to the area based exemption.

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Issues: Whether the processes undertaken on the colour solution for manufacture of nail enamel amounted to manufacture under section 2(f) of the Central Excise Act, 1944 and whether the appellant was entitled to area based exemption under Notification No. 50/2003-CE dated 10.06.2003.

Analysis: The disputed goods were subjected to testing, homogenisation, mixing with thixo lacquer, adjustment of viscosity, filling in small retail bottles and labelling with retail sale price. These processes went beyond the peripheral activities mentioned in paragraph 4 of the exemption notification. A conjoint reading of section 2(f)(iii) of the Central Excise Act, 1944 and Chapter Note 5 of Chapter 33 of the Central Excise Tariff Act, 1985 shows that adoption of any other treatment to render the product marketable to the consumer amounts to manufacture. The material on record showed that the colour solution in bulk drums did not become nail enamel until it was so treated and put up in the prescribed retail form, with a new marketable product emerging thereafter.

Conclusion: The processes amounted to manufacture and the appellant was entitled to the area based exemption.

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