1995 (1) TMI 145 - AT - Central Excise

Issues Involved:
1. Whether crushing, grinding, and powdering of limestone constitutes manufacture.
2. Whether the appellant was liable to pay duty during the period 20-3-1990 to 16-9-1990.
3. Whether the extended period under the proviso to Section 11-A of the CESA, 1944, can be invoked.

Issue-wise Detailed Analysis:

1. Whether Crushing, Grinding, and Powdering of Limestone Constitutes Manufacture:

The Collector held that crushing of limestone constitutes manufacture and duty is payable on crushed limestone. The appellants argued that the process of crushing limestone into powder does not amount to manufacture under Section 2(f) of the CESA, 1944. They cited various case laws to support their contention, including the Supreme Court rulings in Bhor Industries Ltd. v. CCE and CCE v. Jayant Oil Mills, which emphasized that marketability is an essential ingredient to dutiability and that every process is not manufacture unless it transforms the old article into goods.

The Tribunal examined Note 2 of Chapter 25, which states that crushed, ground, powdered, etc., limestone shall be classifiable under Chapter Heading 25.05 and shall be excisable. The Tribunal also referred to the M.P. High Court's decision in M/s. Kher Stone Crusher v. G.M. Distt. Industries Centre, which held that the transformation of stone into ballast, metal, or 'gitti' through crushing constitutes manufacture. The Tribunal concluded that powdered, crushed, and ground limestone is classifiable under Chapter Heading 25.05 of the Central Excise Tariff Schedule and amounts to manufacture.

However, the Vice President dissented, referencing the Tribunal's decision in SAIL v. CCE, which held that such processes do not amount to manufacture unless they result in the production of a distinct commodity known to the market. The Vice President emphasized that Chapter Note 2 of Chapter 25 does not automatically imply that the processes listed therein amount to manufacture without evidence of market recognition as a distinct commodity.

2. Whether the Appellant Was Liable to Pay Duty During the Period 20-3-1990 to 16-9-1990:

The Collector demanded duty for the period 20-3-1990 to 16-9-1990, during which the exemption under Notification No. 217/86 was withdrawn. The appellants contended that they were under the bona fide belief that no duty was payable on powdered limestone, as earlier show cause notices on the same issue were withdrawn by the Assistant Collector.

The Tribunal found that the appellants' belief was justified based on the Assistant Collector's order and the absence of any new evidence in the show cause notice issued on 27-1-1992. The Tribunal held that the demand for duty beyond six months was time-barred, as the Revenue failed to prove that the appellants intentionally withheld information with the intent to evade duty.

3. Whether the Extended Period Under Proviso to Section 11-A of the CESA, 1944, Can Be Invoked:

The Collector invoked the extended period under the proviso to Section 11-A, alleging that the appellants contravened various rules with the intent to evade payment of duty. The appellants argued that no suppression of facts or misstatement was established to justify the extended period.

The Tribunal referred to the Supreme Court's rulings in Chempher Drugs and Liniment and Padmini Products, which require evidence of fraud, collusion, willful misstatement, or suppression of facts to invoke the extended period. The Tribunal found no evidence that the appellants intentionally withheld information and concluded that the extended period could not be invoked. Consequently, the demand beyond six months was time-barred.

Final Order:

In view of the majority opinion, the Tribunal held that the demand was time-barred and reduced the penalty from Rs. 5,00,000/- to Rs. 25,000/-. The impugned order was modified accordingly.

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