1991 (2) TMI 224 - AT - Central Excise

Summary

Issues Involved:
1. Whether the crushing of limestone into lime fine amounts to a process of manufacture and if lime fine is an excisable product.
2. Whether the demand is time-barred due to the appellants' declarations and the department's awareness.

Summary:

Issue 1: Process of Manufacture and Excisability
The appellants contended that crushing limestone into lime fine does not amount to manufacture and lime fine is not an excisable product. The impugned order assumed that Chapter Note 2 of Chapter 25 equates certain processes with 'manufacture'. However, Section 2(f) of the Central Excises and Salt Act, 1944, as it stood prior to 28-2-1986, defined 'manufacture' inclusively, requiring the creation of a new commercial commodity. Post-28-2-1986, the definition was expanded to include processes specified in the Chapter Notes of the Central Excise Tariff Act, 1985.

Chapter Note 2 of Chapter 25 does not equate the process of crushing with manufacture but merely lists forms of products under Headings 25.01 to 25.05. This is contrasted with other chapters where specific processes are explicitly stated to amount to manufacture. The Tribunal found that the department failed to show that crushing limestone into lime fine resulted in a new product known in the market as a distinct commodity. Therefore, the crushing process did not constitute manufacture, and lime fine was not excisable.

Issue 2: Time Bar
The appellants argued that the demand was time-barred as they had declared lime fine in their classification lists and had not suppressed any facts. The department was aware of the use of lime fine in the sinter plant. The Tribunal noted that no classification list, price list, or monthly returns were submitted, and RG 1 account was not maintained, invoking the extended period u/s 11A. However, since the appellants succeeded on merits, showing no manufacture process was involved, the question of time bar became irrelevant.

Conclusion:
The appeal was accepted, concluding that crushing limestone into lime fine does not amount to manufacture, and lime fine is not an excisable product. The demand was also deemed time-barred due to the appellants' declarations and the department's awareness.