Manufacture under central excise was not attracted by pesticide dilution, and the later chapter-note change applied only prospectively.

Dilution of technical pesticide material with inert carriers, solvents and stabilising agents to obtain a usable formulation was treated as processing that did not create a new product with a distinct character and use, so it was not manufacture under Section 2(f) of the Central Excise Act for the relevant period. The later Budget 1996 chapter-note amendment was characterised as a substantive legislative change rather than a mere clarification, so it operated only prospectively and could not validate duty demand for the earlier disputed period. Prior Tribunal reasoning and the Board circular were relied on to support the pre-amendment position.

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Issues: Whether the conversion of technical pesticide material into formulations by dilution amounted to manufacture under Section 2(f) of the Central Excise Act, and whether the Budget 1996 change to the chapter note operated retrospectively so as to validate the demand for the earlier period.

Analysis: The process was found to be only dilution of the concentrated material with inert carriers, solvents and stabilising agents, resulting in a formulation fit for use without bringing into existence a new product with a distinct character and use. The prior Tribunal view and the Board circular supported the conclusion that such activity did not amount to manufacture for the relevant period. The subsequent chapter note inserted by the Budget 1996 was treated as a legislative change, and not a mere clarification, so it could operate only prospectively from its effective date and not for the earlier period in dispute.

Conclusion: The process did not amount to manufacture for the period in question, and the amendment could not be applied retrospectively; the Revenue's challenge failed.

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