Dilution of P.V.A. solution was not manufacture under Chapter 39 because the product's essential character remained unchanged.

Dilution of duty-paid P.V.A. solution did not amount to manufacture under Chapter 39 because the product remained P.V.A. solution before and after dilution, with no conversion from one primary form into another or change in essential character. Note 6 of Chapter 39 therefore did not apply to treat the process as manufacture, and the excise duty demand was not sustainable.

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Issues: Whether dilution of duty-paid P.V.A. solution amounts to manufacture so as to attract excise duty under Chapter 39.

Analysis: The product before and after dilution remained P.V.A. solution. On the findings accepted below, there was no conversion from one primary form into another primary form. In the absence of any change in the essential character of the product, Note 6 of Chapter 39 did not justify treating the process as manufacture.

Conclusion: The dilution process did not amount to manufacture and the duty demand was not sustainable.

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