2008 (8) TMI 585 - SC - Central Excise

Manufacture - Plates and sheets which are starting materials get transformed into various products which are having a distinct name identity character and use - That the sheets plates or angle irons cannot be used as cutting HS plates Shuttering or other items for which purpose they are specifically transformed into new product - Agree with the finding recorded by the Tribunal that the activities carried out by the appellant amount to manufacture of the goods - Accordingly finding recorded by the Tribunal on this point is confirmed. Limitation - The department was not justified in invoking the extended period of limitation under Section 11A of the Central Excises and Salt Act 1944 (for short the Act ) and accordingly finding of the Tribunal on this point is reversed - The department shall initiate some action against the erring officer/official for issuing show cause notice to the assessee after a gap of approximately two years and four months from the date of inspection at the factory of the assessee - The Appeal is partly allowed.

Summary

Issues:
1. Whether the fabrication of various products from steel materials amounts to manufacture for excise duty.
2. Whether the show cause notice issued after a significant delay is valid.

Analysis:
1. The central issue in this appeal was whether the fabrication of various products like cutting edge plates, shuttering plates, props, and derricks from steel materials constitutes "manufacture" for the purpose of excise duty. The Tribunal had concluded that the transformation of starting materials into distinct products with specific uses qualifies as manufacture. The Supreme Court concurred with this finding, emphasizing that the activities carried out by the appellant indeed amounted to the manufacture of goods. Therefore, the Tribunal's decision on this aspect was upheld.

2. Another crucial point contested in the appeal was the validity of the show cause notice issued with a significant delay. The revenue authorities had detected the appellant's activities in August 1987 but issued the notice only in December 1989. During the proceedings, it was revealed that the file pertaining to the delay was misplaced and untraceable. The Supreme Court, after considering the circumstances, held that the revenue department was unjustified in invoking the extended period of limitation under Section 11A of the Central Excises and Salt Act, 1944. Consequently, the Tribunal's decision on this issue was overturned. The Court expressed dissatisfaction with the delayed notice issuance and suggested that action be taken against the responsible officer. As a result, the appeal was partly allowed, with each party bearing its own costs.