Manufacture test under excise law failed where processed duty-paid paper was not shown to become a distinct excisable product.

Printing, colouring, polishing or varnishing duty-paid paper did not justify excise duty where the department failed to establish that the processing amounted to manufacture of a distinct excisable product under Section 2(f) of the Central Excises and Salt Act. In the absence of a finding that the processed paper had emerged as a different excisable commodity, the levy under Item No. 17(4) could not be sustained. The impugned orders were quashed and relief was granted against the excise demand on the processed paper.

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Issues: Whether the process of printing, colouring, polishing or varnishing duty-paid paper amounted to manufacture so as to attract excise duty under Item No. 17(4) of the Central Excise Tariff.

Analysis: The authorities below did not record any finding that the processes applied by the petitioners amounted to manufacture within the meaning of Section 2(f) of the Central Excises and Salt Act. The levy of excise duty required the department to establish that the processed paper had been manufactured into a different excisable product. In the absence of such a finding, and in view of the conflicting trade notices and earlier departmental view, the classification adopted by the authorities was unsustainable.

Conclusion: The levy of excise duty could not be sustained and the petition succeeded.

Final Conclusion: The impugned orders were quashed and the petitioners obtained relief against the excise levy on the processed paper.

Ratio Decidendi: Excise duty cannot be upheld unless the department first establishes that the processing amounts to manufacture of a distinct excisable product under the charging provision.

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