Manufacture test for excise duty fails where duty-paid components are only packed together outside the factory as a market product.

Separate packing of duty-paid aluminium paste with aluminium medium in a common carton outside the factory did not amount to manufacture of aluminium paint under Section 2(f) of the Central Excises and Salt Act, 1944. The only product manufactured in the factory was aluminium medium, and duty had already been paid on it. As no material showed that the outside packing process created a new excisable product, duty could not be levied on the combined market product. Duty was payable only on the aluminium medium manufactured within the factory.

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Issues: Whether packing separately cleared and duty-paid aluminium paste with aluminium medium in a common carton outside the factory amounted to manufacture of aluminium paint so as to attract excise duty on the combined product, and whether duty was payable only on the aluminium medium manufactured in the factory.

Analysis: The only product manufactured in the factory was aluminium medium, on which duty had already been paid and cleared. The aluminium paste was duty paid and procured from outside, and the two items were merely packed together outside the factory for marketing. No material was shown to establish that such separate packing into a common carton constituted manufacture. In the absence of manufacture within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944, duty could not be levied on the combined market product as aluminium paint.

Conclusion: The duty was payable only on the aluminium medium manufactured by the respondents, and the demand on the combined product was not sustainable.

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