2009 (3) TMI 176 - AT - Central Excise

Demand extended period of limitation held that - the earlier decision of the Tribunal as also the fact of other assessees similarly situate not paying any duty on such drill rods are sufficient reason for the assessee to entertain a bona fide belief that such emergence of drill rods was not an act of manufacture. - in spite of not applying for licence or filing any CL or PL, there could be a bona fide belief on the part of the assessee, is appropriate. As such we are of the view that the demand having been raised beyond the normal period of limitation is barred by limitation. The same alongwith penalty, is accordingly set aside on this ground alone, without going into the merits of the case

Summary

Issues:
Manufacture of drill rods - Whether it amounts to manufacture for taxation purposes.
Limitation - Whether the demand raised by the Commissioner is barred by limitation.

Manufacture of Drill Rods:
The case involved the manufacture of drill rods, which are essential components for mining machinery. The drill rods consist of connectors and steel pipes, both tailor-made as per specific designs and dimensions provided by buyers. The components are not independently usable or sold separately. The connectors are made by cutting solid round steel bars and sending them for machining, slotting, threading, and heat treatment. Similarly, steel pipes are cut to required sizes and threaded. The components are assembled by M/s. Vulcan Techno, welded, and ground to form the drill rod, which is used in mining machinery to hold the bit for boring the earth. The drill rods are re-usable until damaged, and the entire assembly cannot be dismantled once manufactured.

Commissioner's Decision and Appeal:
The Revenue argued that the drill rod is a complete product with a distinct use, and its components have no independent function. The Commissioner confirmed the demand against the appellant, imposing penalties and invoking a longer period of limitation. The appellant contested the order on merits and limitation. The appellant referred to a Tribunal decision where the conversion of steel bars into drill rods was not considered manufacture. The Commissioner did not provide evidence of additional activities by the appellant to distinguish the case. The appellant argued that they believed in good faith that their activity did not amount to manufacture, citing the classification filed by a similar unit. The Commissioner agreed with the appellant's contentions but invoked the longer period of limitation due to the absence of a classification filed by the appellant.

Decision on Limitation:
The Tribunal decided to dispose of the appeal on limitation grounds. Despite the Commissioner agreeing with the appellant's contentions, the longer period of limitation was invoked. The Tribunal considered the earlier decision, the classification filed by other assesses, and the bona fide belief of the appellant. Citing a Supreme Court decision, the Tribunal held that the demand raised beyond the normal limitation period was barred by limitation. Consequently, the demand and penalty were set aside solely on the limitation ground, without delving into the merits of the case. The appeal was allowed, granting consequential relief to the appellants.