2002 (11) TMI 92 - SC - Central Excise

Whether the activity of crushing boulders into bajari amounts to manufacture and whether the bajari is a new product having a distinct name, character or use? Whether the Respondent could have invoked the extended period of limitation under Section 11A for the demand under the Show Cause Notice dated 3rd May, 1993? Held that - In this case, there was a divergent view of the various High Courts whether crushing of bigger stones or boulders into smaller pieces amounts to manufacture. In view of the divergent views, of the various High Courts, there was a bona fide doubt as to whether or not such an activity amounted to manufacture. This being the position, it cannot be said that merely because the Appellants did not take out a licence and did not pay the duty the provisions of Section 11A got attracted. There is no evidence or proof that the licence was not taken out and/or duty not paid on account of any fraud, collusion, wilful mis-statement or suppression of fact. We, therefore, set aside the demand under the show cause notice dated 3rd May, 1993. As regards the demand under the show cause notice dated 26th February, 1992, Mr. Sridharan states that the Appellant has already paid the amount. He states that he is not pressing this Appeal in respect of the demand under that show cause notice. Thus we see no reason to decide the other question, viz, whether crushing of stones amounts to manufacture and whether a new product has come into existence. We leave this question open.

Summary

Issues:
1. Whether crushing boulders into "bajari" amounts to manufacturing activity?
2. Whether the extended period of limitation under Section 11A applies for demanding excise duty?

Issue 1:
The case involved the Appellants engaged in construction activities, crushing boulders into "bajari" for construction work without considering it as manufacturing, hence not applying for a license or paying excise duty. The Tribunal dismissed their Appeal against the duty demand, leading to two questions before the Supreme Court. The first question addressed whether crushing boulders into "bajari" qualifies as manufacturing and if "bajari" is a distinct product. The second question dealt with invoking the extended period of limitation under Section 11A for the duty demand.

The Supreme Court referred to the precedent set by the case of Padmini Products v. Collector of Central Excise, emphasizing that the extended period of limitation does not apply merely due to the failure to pay duty or obtain a license. The Court highlighted that specific conditions like fraud, collusion, wilful misstatement, or suppression of facts must be present to trigger the extended period of limitation. The Appellant's counsel cited several authorities supporting this view, leading the Court to conclude that the law was well-settled, and the Tribunal's decisions need not be revisited.

The Court noted the conflicting views of various High Courts on whether crushing boulders amounts to manufacturing, creating a genuine doubt. Due to this uncertainty, the Court ruled that the absence of a license or duty payment by the Appellants did not automatically attract Section 11A. Without evidence of fraud or wilful misconduct, the demand under the show cause notice dated 3rd May, 1993, was set aside.

Issue 2:
Regarding the demand under the show cause notice dated 26th February 1992, the Appellant had already paid the amount, leading their counsel to not pursue that appeal. Consequently, the Court did not delve into whether crushing stones constituted manufacturing or if a new product emerged. The Court disposed of the Appeals without costs, given the circumstances.

In conclusion, the Supreme Court clarified the application of the extended period of limitation under Section 11A and the definition of manufacturing in the context of crushing boulders into "bajari." The judgment provided clarity on the legal principles involved and resolved the issues raised by the Appellants effectively.