1. The appellants manufactured Emulsion Matrix falling under sub-heading 3602.00 which was cleared on payment of duty and was stored in premises adjacent to their factory. They also purchased duty paid Fuel Oil and Ammonium Nitrate Prilled which was also stored in the same shed. They owned a mobile van, which had four compartments. In three compartments they stored separately Emulsion, Matrix, Fuel Oil and Ammonium Nitrate. They took contracts for supply of prepared explosives for blasting in the mines. Such prepared explosives fall under sub-heading 3602.00. The van was taken to the mines, inside the mines the forth compartment of the mobile van was used for mixing the three ingredients in the required proportions which were then taken for blasting. Show cause notice was issued on 20-2-2001 alleging that the activity of mixing the ingredients together in the van at the mine site amounted to manufacture. It was alleged that the appellants had not taken out a licence, had not maintained accounts, and had cleared the excisable goods without payment of duty. The short levy during the period January, 1996 to March, 1999 was quantified at Rs. 29,79,676/-.
The Commissioner after hearing the assessees passed order confirming the duty and imposing penalty of equal amount on the assessees. Hence the appeal.
2. We have heard Shri Balbir Singh, Advocate for the appellants and Shri A. Shukla for the Revenue.
4. The show cause notice merely makes the assertion that the prepared explosives are produced in the van for instant use for blasting. It does not substantiate the allegation in any manner. Before the Commissioner considerable case law was cited to the effect that merely putting together of various items did not amount to manufacture. The Commissioner overcame this lacuna in a novel manner. He cited the Sub-rule (a) of Rule 2 of the Rules for Interpretation of the Schedule to the Tariff Act, 1985 which reads as follows :- "2(a) Any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished, provided that, the incomplete or unfinished goods have the essential character of the complete or finished goods. It shall also be taken to include a reference to those goods complete or finished (or falling to be classified as complete or finished by virtue of this rule), removed unassembled or disassembled." He, therefore, concluded that since all the ingredients essential to the making of the explosives were carried together, they were explosives in incomplete condition but having the essential character of the finished goods. In doing so the Commissioner misdirected himself completely.Collector of Central Excise v. Kalinga Paints & Chemicals Industries - 1989 (44) E.L.T. 548] aluminium medium and aluminium paste were put together in a common packet. The Tribunal held that in such condition the commodity which was manufactured only on admixure thereof could not be called to come into existence while the two ingredients were packed separately. In the present case as long as the three ingredients were carried separately they retained their separate identities of duty paid goods. Only when they would be mixed together in certain proportions, would they merge and emerge as a newly manufactured commodity. As long as this substances were stored and carried independently they retained their identities and could not fall under the ambit of the aforesaid Rule. The belief of the Commissioner that these three ingredients carried separately in the same van were prepared explosives incomplete or unprepared form has no substance and must be rejected.
5. As the second argument before him the assessees claimed that the goods on final mixing at the time at which they assumed the identity of prepared explosive would be entitled to the benefit of Notifications No. 63/95-C.E., which exempted goods manufactured in mines or in workshops situated in the precincts of mines and intended for use in such mines. The Commissioner held that in terms of the misapplied rule of interpretation, the goods having come into existence before entering the mines, the benefit was not available. On this ground he denied the benefit of notification. He also referred to Supreme Court judgment in the case of Jaypee Rewa Cement v. Commissioner of Central Excise, M.P.[2001 (133) E.L.T. 3 (S.C.)] which had no bearing on the issues before him.
6. As we have observed above the assessees did manufacture to prepare explosive which activity was undertaken in a van situated inside the mines. Notification No. 182/87-C.E., exempted goods manufactured in workshops situated in the precinctings of the mines and indeed for use in such mines. The present appellants were in correspondence with the Ministry regarding this exemption. In a letter F. No. 108/3/93-CX. 3, dt. 7-7-1994 the Deputy Secretary, C.B.E. & C. informed the appellants that the explosive manufactured by them in the mines would enjoy exemption under the said notifications. In a letter written to the Jurisdictional Commissioner vide the same file number and the same date the Board veiy clearly stated that "Mobile Van which carried the ingredients to the mines area is covered by exemption Notification No.182/87". This was clearly in pursuance of an earlier Circular No.22/90-CX. 3, dated 26-4-1990 which gave a wider interpretation to the terms "Workshop" for the interpretation of Notificaiton No. 182/87.
7. During the material time serial No. 4 Notification No. 63/95-C.E.exempted all goods from excise duty and also from the Additional Duty of Excise in identical circumstances. Therefore, when the prepared explosive ultimately came into existence in the fourth compartment of the van, the benefit of the Notification stood attracted and there was no burden of duty on the assessees.
8. The Commissioner has held that the assessees had suppressed facts for intend to evade payment of duty and confirmed the demand.
9. Apart from merits the demand is barred by limitation on three counts.
Firstly, where the demand is made for a period of six months from the date of issue of the show cause notice a specific allegation and averment has to be made that there was suppression or misrepresentation of facts with intention to evade payment of duty. In the absence of any specific averment to this effect, the proviso to Section 11A does not come into operation. No such allegation is made in the show cause notice at all. The act of not taking a licence is described as wilful but there is nothing to sustain the invocation of the extended period.
Shri A. Shukla attempted to state that the tenor of the show cause notice would bring out this allegation. The Supreme Court in the case of U.P. Lamination [1997 (89) E.L.T. 440] observed :- "2. One such argument pertained to the validity of the notice issued to it on 20th October, 1982, calling upon it to show cause why excise duty should not be levied on the goods in issue. It is not in dispute that the notice was issued after the permissible period of six months. It is clear from the notice that there is no averment therein that the respondent has contravened the relevant provisions with intent to evade the payment of excise duty, nor is this a necessary inference upon the facts alleged. The extended period is, therefore, unavailable. The notice being out of time, the order under appeal must be upheld." 10. This observation applies totally in this case. Even if there had been any such allegation in the show cause notice it could not have been sustained, in the absence of proof of suppression. In the judgment in the case of Pushpam Pharma [1995 (78) E.L.T. 401] the Supreme Court held that where the facts were known to both sides, suppression could not be alleged. We have referred to the assessee's correspondence with the C.B.E. & C. The same shows that the C.B.E. & C. was aware of the facts of the case and that they had in very clear and unequivocal terms opened that in the storage place no manufacturing activity had taken place and that the mobile van was a workshop enabling the assessees to claim the benefit of the earlier notification. In this situation the allegation of suppression even if raised would not stand.
11. There is also the third ground on which the plea of limitation succeeds. On the same issues and grounds are taken in the present proceedings a show cause notice was issued to the appellants on 21-1-2000, seeking recovery of duty short-levied for the period July, 99 to September, 99. The present proceedings cover the earlier period i.e. April, 1996 to March, 1999. The law laid down by the Tribunal is that where a demand is made vide a show cause notice for the "normal" period, and where a subsequent notice is issued alleging suppression, etc., for an earlier period, the demand made for the extended period is hit by limitation. The following judgments witness this ruling - (1) The storage in three compartments of the ingredients necessary to manufacture prepared explosives in the same van did not amount to manufacture and that the provisions of Rule 2(a) of the Rules for Interpretation of Central Excise Tariff did not apply.
(2) When the prepared explosive falling under Heading 3206 came into existence, it was manufactured inside the mines for use in the mines and, therefore, the benefit of Notification No. 63/95 was available.
(4) That both on merits and on limitation the appeal succeeds and is allowed.