Manufacture under excise law requires a new commercially distinct product; rubber lining of tanks did not meet that test.

Rubber lining or anti-corrosive treatment of tanks was held not to amount to manufacture because the process did not produce a new and distinct commercially known product; the tanks remained tanks after treatment. As manufacture was not established, the excise duty demand failed. The extended limitation period was also found unsustainable because the assessee's view that the activity was not excisable was treated as bona fide. On the same reasoning, confiscation of plant, machinery, building and land, and the penalty, could not survive. The absence of a clear classification finding further weakened the case against the assessee, and the appeal succeeded.

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Issues: Whether rubber lining or anti-corrosive treatment of tanks amounts to manufacture under central excise law and, if not, whether duty demand, extended limitation, confiscation, and penalty could be sustained.

Analysis: The process undertaken did not bring into existence a new and distinct commodity known to the market. The tanks remained tanks after rubber lining, and the activity was neither shown to be incidental or ancillary to the completion of a manufactured product nor to satisfy the statutory ingredients of manufacture. The decision relied on the settled principle that relining or re-rubberising, without emergence of a new commercial product, is not manufacture. Since manufacture was not established, the basis for duty demand also failed. The record further did not justify invocation of the extended period, as the assessee's belief that the process was not excisable was treated as bona fide. On the same reasoning, confiscation of plant, machinery, building and land, and the penalty, could not survive. The findings below were also weakened by the absence of a clear classification finding.

Conclusion: The process was not manufacture; the demand, extended limitation, confiscation, and penalty were unsustainable and the appeal succeeded.

Ratio Decidendi: A process amounts to manufacture only if it results in a new and distinct commercially known product or is otherwise brought within the statutory deeming provision; mere relining or anti-corrosive treatment that leaves the original goods commercially unchanged is not manufacture.

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