1. M/s. Birla Jute & Industries Limited (Satna Cement Works Steel Foundary), Satna (Madhya Pradesh), have filed the present appeal against the order, dated 1-12-1992, passed by the Collector of Central Excise, Raipur (M.P.).
2. The appellants were engaged in the manufacture of articles of iron and steel. They were bringing into their factory, 'dolomite', and processed it into burnt dolomite (calcined dolomite), for captive consumption. The Collector of Central Excise, Raipur observed that the assessee had suppressed the facts. He confirmed a demand of Rs. 18,231/- for the period 20-3-1990 to December, 1990, and imposed a penalty of Rs. 10,000/- under Rule 173Q of the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules').
3. The matter was posted for hearing on 9-9-1994 when Shri Y.N. Chopra, Consultant appeared for the appellant Shri Sharad Bhansali, SDR, represented the respondent.
4. Shri Y.N. Chopra, the learned Consultant stated that the demand in this case was time-barred. In the show cause notice dated 6-12-1991, the duty had been demanded for the period March, 1986 to December, 1990. The adjudicating authority - the Collector of Central Excise, Raipur, had, however, confirmed the demand only for the period from 20-3-1990 to December, 1990, and even this demand was time-barred. The ground plan of the factory was with the department, and the Central Excise officers were regularly visiting the factory of the appellants.
They were well aware of the fact that dolomite was being processed by them in their unit. Relying upon the Supreme Court's decision in the case of Collector of Central Excise v. Chemphar Drugs and Liniments, 1989 (40) E.L.T. 276 (SC), the learned Consultant submitted that the extended period of limitation could not be invoked unless something positive, other than mere inaction or failure on the part of the manufacturer, is proved. Extended period of limitation was not applicable when material facts were not wilfully suppressed, as held by the Tribunal in the case of Kopran Chemicals Company Limited v. C.C.E., 1990 (48) E.L.T. 569 (Tribunal). On merits, it was stated that the calcined dolomite was manufactured in their workshop within the factory, and was captively used in lining their furnace. The goods were thus eligible for exemption under Notification No. 281/86-C.E., dated 24-4-1986, and in support of his argument, the learned Consultant referred to the Tribunal's decision in the case of Indian Iron and Steel Company Limited v. C.C.E., 1990 (46) E.L.T. 409 (Tribunal). As an alternative plea, it was claimed that the goods were covered by the exemption provided under Notification No. 217/86-C.E., dated 2-4-1986.
5. Shri Sharad Bhansali, the learned SDR stated that the relevant note 2 in chapter 25 of the Schedule to the Central Excise Tariff Act, 1985, (hereinafter referred to as the Tariff'), was substituted with effect from 20-3-1990, but added that this note was of a clarificatory nature.
On page 5 of his order, the adjudicating Collector of Central Excise, Raipur has discussed the contention of the assessee with regard to limitation. The learned SDR relied upon the Supreme Court's decision in the case of Jaishri Engg. Company (Private) Limited v. C.C.E., 1989 (40) E.L.T. 214 (SC), wherein it has been held that penalty under Rule 173Q of the rules was imposable if there was deliberate suppression or wrong statement. He further stated that for invoking the special time limit of 5 years, mentioning of the words 'fraud' or 'suppression' was not necessary, but merely allegations in the show cause notice pointing out to the same, were enough, as held by the Tribunal in the case of British India Corporation Limited, Dhariwal v. C.C.E., Chandigarh, 1986 (25) E.L.T. 727 (Tribunal). Further, the demand has been restricted to the period from 20-3-1990 to December, 1990, although in the show cause notice, the duty was demanded for the period March, 1986 to December, 1990. Thus, the benefit has already been given to the appellants. As regards the applicability of notification No. 281/86-C.E. and Notification No. 217/86-C.E., the learned SDR, mentioned that the Collector has rightly rejected the claim under both the notifications.
Dolomite was used in the lining of the furnace, and the goods were not the product of workshop. Relying upon the Tribunal's decision in the case of Eastern Minerals v. C.C.E., Indore, 1994 (70) E.L.T. 301 (Tribunal), he stated that the process to which the dolomite was subjected, was a process of manufacture.
6. In rejoinder, the learned Consultant stated that there was no suppression on the part of the assessee. The Chapter Note 2 in Chapter 25 of the Tariff came into force only on 20-3-1990; thus, no suppression could be alleged against the assessee. He referred to the Tribunal decision in the case of C.C.E. v. Mahavir Minerals Store Supply Company, 1988 (38) E.L.T. 171 (Tribunal) wherein it has been held that crushing of dolomite into powder and chips does not bring into existence a new commodity, as envisaged by Section 2(f) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Act').
7. We have carefully gone through the facts and circumstances of the case and have given our due thought and consideration to the submissions made by both the sides.
"Mineral substances, not elsewhere specified (including clay, earth, colours, natural abrasives, sulphurs, slate and stone), lime plasters with a basis of calcium sulphate, whether or not coloured, but not including plasters specially prepared for use in dentistry".
"Heading Nos. 25.01, 25.03 and 25.05 cover only products which have been washed (even with chemical substances, eliminating the impurities without changing the structure of the product), crushed, ground, powdered, lavigated, sifted, screened, or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallisation), but not products that have been roasted, calcined or obtained by mixing." Upto 19-3-1990, there was no specific entry with regard to 'dolomite'.
Further, the products that have only been 'calcined' were specifically excluded from the coverage of Heading No. 25.05 of the Tariff.
9. In the Finance Bill, 1990, the Heading No. 25.05 of the Tariff was divided into 8 sub-headings, and sub-heading No. 2505.40 read as under :- "Dolomite - whether or not calcined; natural magnesium carbonate (magnesite); fused magnesia; dead burnt (sintered) magnesia, whether or not containing small quantities of other oxides added before sintering; other magnesium oxide, whether or not pure." Thus, with effect from 20-3-1990, dolomite, whether or not calcined, was specifically added in the Tariff. The Chapter Note 2 was also substituted under the Finance Bill, 1990 to read as under :- "Except where their context otherwise requires, Heading Nos.
25.01,25.03 and 25.05 cover only products which have been washed (even with chemical substances, eliminating the impurities without changing the structure of the product), crushed, ground, powdered, lavigated, sifted, screened or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallisation), but not products that have been roasted, calcined, obtained by mixing or subjected to processes beyond that mentioned in each heading or sub-headings." As dolomite, whether or not calcined, was specifically mentioned in sub-heading No. 2505.40 of the Tariff, the dolomite that has been calcined was not hit by exclusion and came to be covered by Heading No.25.05 of the Tariff.
10. Further, the goods as received by the appellant did not remain the same after processing by them after being subjected to the process of burning by coal in the dolomite kiln of the foundry, of calcination, crushing and powdering to which they were subjected by them in their unit. As received, they were not fit for use to which they were intended to be put in the lining of the furnace. The tariff entry is thus clear. This apart, the appellants have themselves admitted to have shown the process to which the dolomite is subjected, in the ground plan of their steel foundry unit. The quantities were said to have been entered in the furnace log sheets on a daily basis. Further, they themselves have claimed the benefit of exemption Notification No.281/86-C.E. and 217/86-CE. They have also claimed the benefit of set off/modvat. Thus, there appears to be no doubt that the goods involved in this case are excisable. In the case of C.C.E. v. Mahavir Minerals Store Supply Company, 1988 (38) E.L.T. 171 (Tribunal), the matter related to only the crushing and grinding of dolomite lumps into dolomite powder and chips. In the case before us the goods received are subjected to process of burning in the kiln of the foundry, of calcination, then crushing and powdering to be made usable in the process of lining of the furnace. Further, the Tribunal in that case has observed in para 5 as under :- In the case of Eastern Minerals v. C.C.E., Indore, 1994 (70) E.L.T. 301 (Tribunal), the Tribunal in paras 6, 7 and 8 have held as under :- * * * * * * 11. Thus, while on the question of process of manufacture and dutiability, the appellants have no case, we find that on the question of limitation the facts and circumstances do not justify invoking the larger period of limitation. The show cause notice was issued on 6-12-1991. It is seen that some information on the subject was called from the assessee on 6-2-1991. The duty was demanded for the period March 1986 to Dec., 1990. The goods involved are burnt dolomite (calcined dolomite). As discussed above, prior to 20-3-1990, there was no specific entry for dolomite, and further the products 'calcined' were specifically excluded from the coverage of Heading No. 25.05 of the tariff. The appellant had submitted before the Collector of Central Excise, Raipur during the personal hearing on 15-9-1992 as under :- "(3) Such imposition of penalty is also not justified if the facts were within the knowledge of the department (Indian Rubber Manufacturing Company Limited v. C.C.E., Calcutta, 1984 (16) E.L.T. 324 (Tribunal) as you would observe from the following facts :- (a) Since the inception of our steel foundry unit we have been calcining raw dolomite in the dolomite kiln installed therein. The said dolomite kiln is always shown in our ground plan as our steel foundry unit which is duly approved by the Central Excise authorities; (b) The usage of dolomite is also being shown in the daily/heatwise arc furnace log sheet maintained by us which is also being regularly verified by the Central Excise authorities. Such daily log sheet is also mentioned in the list of records that is being submitted to Central Excise department." They had pleaded before the adjudicating authority that the question involved was one of interpretation and that there was no suppression of facts.
12. The Adjudicating Collector of Central Excise, Raipur has held that "crushed/ground dolomite even if calcined as in the instant case is dutiable from 20-3-1990". Thus, prior to 20-3-1990 he has held the goods manufactured by the appellant as non-dutiable. He has dropped the demand for the period prior to 20-3-1990. In the circumstances his finding with regard to 'suppression' does not appear to be well reasoned. The show cause notice covered the period from March, 1986 to December, 1990. There was allegation that "the noticee have wilfully suppressed the facts from the Central Excise department with an intention to evade payment' of Central Excise duties on burnt dolomite (calcined dolomite) during the period from March, 1986 to December, 1990". The Adjudicating Collector has modified the allegation of 'suppression' from 20-3-1990 only. The show cause notice is dated 6-12-1991. Thus even this demand is beyond the normal period of limitation.
13. Taking all the relevant considerations into account, we find that the demand is hit by limitation and there are no grounds to allege suppression to justify demanding Central Excise duty for the extended period, beyond the normal period of limitation. In this view of the matter, we do not consider it necessary to discuss the plea of the appellants with regard to entitlement for exemption under Notification No. 281/86-C.E. and Notification No. 217/86-C.E. We, accordingly, set aside the impugned order and accept the appeal of M/s. Birla Jute Industries Limited (Satna Cement Works Steel Foundry), Satna (M.P.).