Intermediate products are not dutiable unless manufacture creates a new commercially identifiable and marketable commodity.

Blending wool tops with synthetic fibre supplied by customers was not treated as manufacture of a new excisable product because the blended tops were only an intermediate stage and required further processing before a marketable end-product, namely blended yarn, could emerge. The record did not show that the product coming out of the process was ordinarily traded or had a distinct commercial identity. In the absence of evidence that the blending produced a complete marketable commodity, excise duty was not attracted and the classification dispute did not survive. The stated principle is that an intermediate product is not dutiable unless manufacture results in a new commercially identifiable and marketable commodity.

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Issues: Whether blending wool tops with synthetic fibre supplied by customers resulted in manufacture of a new excisable product, and whether the resulting blended tops were classifiable and dutiable.

Analysis: The record showed that the blended tops were only an intermediate stage and required further processing before a marketable end-product, namely blended yarn, could emerge. The evidence accepted at the original stage indicated that the product was not ordinarily traded in the form in which it emerged from the appellants' process. The department did not adduce contrary evidence to show that the process produced a complete commercial commodity with a distinct market identity. In these circumstances, the process of blending was not treated as bringing into existence a new product liable to excise duty.

Conclusion: The process did not amount to manufacture of a new excisable product, and the demand could not be sustained; the classification dispute therefore did not survive.

Final Conclusion: The assessee's appeal succeeded and the Revenue's appeal failed, with the blended tops held not to be exigible as a separate manufactured commodity on the facts proved.

Ratio Decidendi: An intermediate product is not dutiable unless the process results in a new commercially identifiable and marketable commodity emerging from manufacture.

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