1998 (7) TMI 207 - AT - Central Excise

Summary

Issues:
1. Duty demand on liquid electrolytes produced by mixing duty paid Potassium Hydroxide with water.
2. Jurisdiction of the adjudicating authority in case of mixing products at various customers' premises.
3. Whether mixing solid KOH and LiOH with water amounts to manufacture of a new excisable commodity.
4. Marketability of the liquid electrolyte.
5. Limitation period for the duty demand.
6. Admissibility of the duty demand and penalty based on the admission of the appellants.

Analysis:

Issue 1:
The duty demand of Rs. 2,43,702.21 was confirmed on liquid electrolytes produced by mixing duty paid Potassium Hydroxide with water, along with solid KOH and LiOH despatched with stationary batteries. The liquid electrolyte was considered excisable, attracting 15% ad valorem of Special Excise duty, not entitled to exemption under Notification No. 217/86-C.E. The adjudicating authority also imposed a penalty of Rs. 60,000.

Issue 2:
The jurisdictional aspect was raised concerning the adjudication of the demand for 61,379.90 litres of products mixed at various customers' premises falling under different Collectorates. The argument was made that the Collector of Central Excise, Chandigarh, lacked jurisdiction over demands from different customers under different Collectorates.

Issue 3:
The contention was whether mixing solid KOH and LiOH with water constituted the manufacture of a new excisable commodity. The appellants argued that even after mixing, the products remained electrolytes and did not result in a distinct excisable commodity.

Issue 4:
The marketability of the liquid electrolyte was disputed, with the appellants claiming that it was not marketable in liquid form. The burden of establishing marketability was placed on the department, which was deemed not fulfilled.

Issue 5:
Regarding the limitation period for the duty demand, the appellants argued that the demand was beyond the six-month period from the relevant date, and the extended period of limitation was inapplicable due to their bona fide belief based on a circular.

Issue 6:
The admission by the General Manager and Senior Works Manager of the appellants regarding the manufacturing process was highlighted by the Revenue. The non-disclosure of this fact was used to justify the applicability of the extended period of limitation and the duty demand.

The judgment concluded that the mixing of solid KOH with water and LiOH did not amount to the manufacture of a distinct excisable commodity. The Tribunal found that the liquid electrolytes were not excisable, setting aside the duty demand and penalty. The decision was based on the lack of a new commercial product emerging from the mixing process, supported by legal precedents and the absence of evidence establishing marketability.