2000 (5) TMI 141 - AT - Central Excise

Summary

Issues Involved:

1. Denial of exemption under Notification No. 230/86.
2. Use of power in the manufacturing process.
3. Interpretation of the term "made without the aid of power."
4. Limitation period for issuing the show cause notice.

Issue-wise Detailed Analysis:

1. Denial of Exemption under Notification No. 230/86:

The Commissioner of Central Excise, Calcutta, denied the benefit of exemption Notification No. 230/86 to the appellants, resulting in a confirmed demand of duty amounting to Rs. 1,20,99,122/- and a penalty of Rs. 12 lakhs. The denial was based on the grounds that power-driven pumps were used for storing raw materials in underground and overhead tanks, which allegedly constituted the use of power in the manufacture of thinners.

2. Use of Power in the Manufacturing Process:

The appellants contended that thinners were manufactured without the aid of power. They stated that solvents, which are the raw materials, were brought in barrels and manually transported to the manufacturing sections. They emphasized that no power was used in the Cellulose section where 75% of their thinner production occurred. They argued that the use of power was limited to storing solvents in overhead tanks and not in the actual manufacturing process. The Tribunal's decision in Premier Credits Ltd. v. CCE was cited, where the use of power in pumping raw materials was considered use of power in manufacturing. However, the appellants distinguished their case, asserting that power was not used for pumping solvents into mixing vessels but only for storage purposes.

3. Interpretation of the Term "Made without the Aid of Power":

The appellants argued that the phrase "made without the aid of power" should be interpreted narrowly, focusing on the actual manufacturing process rather than storage. They compared this phrase with other notifications that used broader language such as "in or in relation to the manufacture of which power is used." They cited the Tribunal's decision in Fram & Co. v. CCE, where the use of power for lifting water to overhead tanks was not considered use of power in manufacturing aerated waters. The Tribunal agreed with the appellants, concluding that the use of power for storing raw materials did not equate to use of power in the manufacturing process of thinners.

4. Limitation Period for Issuing the Show Cause Notice:

The appellants challenged the demand on the grounds of limitation, as the show cause notice was issued on 13-3-1992 for the period April 1987 to November 1991, beyond the statutory six-month period. They highlighted that their classification lists claiming exemption were regularly filed and approved by the Central Excise authorities. They argued that there was no suppression of facts, as the Central Excise officers were aware of their manufacturing processes. The Tribunal found merit in this argument, referencing the Supreme Court's decision in CCE, Baroda v. Cotspun Ltd., which held that demands based on approved classification lists were time-barred. Consequently, the Tribunal concluded that the demand was barred by limitation.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal with consequential relief to the appellants. The Tribunal held that the use of power for storing raw materials did not constitute use of power in the manufacture of thinners and that the demand was time-barred.