1987 (7) TMI 247 - AT - Customs

Issues Involved:
1. Excisability of granite slabs.
2. Eligibility for exemption under Notification No. 234/82.
3. Allegation of suppression of facts by the appellants.
4. Applicability of the extended period of limitation under Section 11-A of the Central Excises and Salt Act.
5. Validity of the demand for duty for the period November 1983 to March 1986.
6. Excisability of granite scrap.

Detailed Analysis:

1. Excisability of Granite Slabs:
The appellants, M/s. Indian Granite Limited, contended that their granite slabs were not excisable as no manufacture was involved under Section 2(f) of the Central Excises and Salt Act. This claim was rejected by the Assistant Collector on 3-11-1982, and no appeal was filed against this order. The Tribunal noted that the process involved cutting and polishing granite slabs using sophisticated machinery, which transformed the raw granite into a marketable product. Hence, the granite slabs were held to be excisable under Item 68 CET.

2. Eligibility for Exemption under Notification No. 234/82:
The appellants claimed that their granite slabs were handicrafts and thus exempt under Notification No. 234/82. The Collector (Appeals) initially allowed this exemption, citing the Ministry of Commerce's recognition of cut and polished granite stones as handicrafts. However, the Tribunal found that the use of sophisticated power-driven machinery in the manufacturing process meant that the slabs could not be classified as handicrafts. The Tribunal relied on dictionary definitions and the nature of the manufacturing process to conclude that the slabs did not qualify for exemption under Notification No. 234/82.

3. Allegation of Suppression of Facts:
The Collector of Central Excise alleged that the appellants had suppressed facts regarding their manufacturing process to evade duty, justifying the extended period of limitation. The Tribunal found no evidence that the appellants had failed to disclose their manufacturing process or had hidden any facts during inspections. The Tribunal held that the charge of suppression of facts was not established.

4. Applicability of the Extended Period of Limitation:
Given the finding that there was no suppression of facts, the Tribunal held that the extended period of limitation under Section 11-A of the Central Excises and Salt Act was not applicable. Consequently, the demand for duty could only be enforced for the normal period of six months preceding the date of each notice.

5. Validity of the Demand for Duty (November 1983 to March 1986):
The Tribunal noted that the Collector's notice dated 19-6-1986 and earlier notices covered different periods. The demand for the period November 1983 to February 1984 was set aside due to the absence of any appeal against the earlier orders of the Collector (Appeals). For the subsequent periods, the Tribunal held that the demands could be enforced only for six months preceding each notice, not for any longer period.

6. Excisability of Granite Scrap:
The Tribunal found that the granite scrap generated during the manufacturing process was not an excisable product. The scrap was a byproduct of the manufacturing process and did not result from a separate manufacturing activity.

Conclusion:
1. Granite scrap is not excisable.
2. Cut and polished granite slabs are excisable under Item 68 CET.
3. The slabs are not eligible for exemption under Notification No. 234/82 as handicrafts.
4. The demand for the period November 1983 to February 1984 is set aside.
5. Demands can be enforced for the period of six months preceding the date of each notice, with the period covered by the notice dated 19-6-1986 being limited to September 1985 to March 1986.
6. The appeal is allowed to the extent of modifying the order of the Collector, and the quantification of duty is to be done by the Collector. The appeal is otherwise dismissed.

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