Manufacture by chemical treatment: vulcanisable polyethylene became a distinct excisable product on removal

Mixing dicumyl peroxide with polyethylene granules to produce vulcanisable polyethylene was treated as manufacture for excise purposes because the processing caused chemical cross-linking and produced a commercially distinct article with a new character and end-use as cable insulation. The absence of a separate chemical reaction in the narrow sense was held to be immaterial where the treatment brought into existence a new product with distinctive use. Accordingly, excise duty was chargeable when the vulcanisable polyethylene emerged as the final marketable product and was removed for clearance.

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Issues: Whether mixing dicumyl peroxide with polyethylene granules to produce vulcanisable polyethylene amounts to manufacture so as to attract excise duty at the stage of clearance of the treated product.

Analysis: The treated product was found to be more than a mere physical mixture. Its properties and uses changed materially after treatment with dicumyl peroxide, resulting in chemical cross-linking and a commercially distinct product suitable for use as cable insulation. The fact that no separate chemical reaction in the narrow sense occurred was held to be immaterial, because manufacture may still be established where processing brings into existence a new article having a distinctive character and use. The earlier authorities relied upon by the assessee were distinguished on the ground that, unlike those cases, the present product underwent a material transformation in character and end-use. The duty liability was therefore held to arise at the stage when the vulcanisable polyethylene emerged as the final marketable product.

Conclusion: The process amounts to manufacture and excise duty is chargeable on vulcanisable polyethylene at the stage of its removal.

Ratio Decidendi: A product is manufactured for excise purposes when processing, even by physical treatment or blending, brings about a commercially distinct article having a new character or use, and duty is leviable at the stage of clearance of that final product.

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