2003 (3) TMI 159 - AT - Central Excise

Summary

Issues involved:
Manufacture of explosives in a mobile van at mine site, applicability of duty and penalty, interpretation of Rule 2(a) of the Rules for Interpretation of the Schedule to the Tariff Act, 1985, exemption under Notifications No. 63/95-C.E. and No. 182/87-C.E., suppression of facts, limitation period for demand.

Detailed analysis:
The case involved the manufacturing of explosives in a mobile van at a mine site, which was challenged in a show cause notice alleging duty evasion and lack of necessary licenses. The Commissioner upheld the duty and penalty, citing Rule 2(a) of the Rules for Interpretation of the Schedule to the Tariff Act, 1985. However, the Tribunal found that the mere mixing of ingredients in the van did not constitute manufacture, as per the precedent set in Collector of Central Excise v. Kalinga Paints & Chemicals Industries. The Tribunal rejected the Commissioner's interpretation of the rule, emphasizing that the ingredients retained their separate identities until mixed in specific proportions.

Regarding the exemption under Notifications No. 63/95-C.E. and No. 182/87-C.E., the Commissioner denied the benefit based on the misapplied rule of interpretation. However, the Tribunal disagreed, highlighting correspondence with the Ministry indicating that the explosives manufactured in the mines were indeed exempt under these notifications. The Tribunal clarified that when the explosives were finally prepared in the van, the benefit of the notification applied, relieving the assessees of duty liability.

On the issue of suppression of facts, the Commissioner alleged that the assessees intended to evade duty, leading to the demand. However, the Tribunal found that the demand was barred by limitation on multiple grounds. Firstly, there was no specific averment of suppression or misrepresentation in the show cause notice, as required by Section 11A. Secondly, the Tribunal cited precedents to support that where facts were known to both parties, suppression could not be alleged. Lastly, the Tribunal noted that a previous show cause notice for a later period had been issued, rendering the demand for the extended period hit by limitation.

In conclusion, the Tribunal ruled in favor of the appellants, stating that the storage of ingredients in the van did not constitute manufacture, the benefit of the exemption notifications applied, and the demand was barred by limitation both on merits and suppression grounds. The appeal was allowed based on these findings.