Mere blending of duty-paid synthetic dyes was not manufacture absent a new commercially distinct product.

Blending duty-paid synthetic dyes into different shades by adding solvent did not amount to manufacture where the Department failed to show emergence of a new, commercially distinct product. The notice and orders below lacked a clear basis for treating the process as manufacture, and no market enquiry or other evidence established a change in identity of the goods. Although conversion of dyes into formulated or prepared forms may attract excise duty, mere blending without a new product does not. The duty demand was unsustainable and the finding against the assessee was set aside.

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Issues: Whether blending of duty-paid synthetic dyes into different shades by addition of solvent amounted to manufacture attracting central excise duty.

Analysis: The Department had to establish that the blending process resulted in a new product. The notice and the orders below did not disclose any clear basis for treating the process as manufacture, and no evidence or market enquiry was produced to show emergence of a different commercially distinct product. The nature of the tariff entries also supported the view that conversion of dyes into formulated or prepared forms may amount to manufacture, but mere blending of duty-paid dyes without emergence of a new product would not.

Conclusion: The process did not amount to manufacture, and the duty demand could not be sustained. The finding against the assessee was set aside.

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