Excise limitation and job-work exemption: fully manufactured clearances were taxable, but the demand failed as time-barred.

Clearances to a raw material supplier were treated as fully manufactured goods because the unit's director admitted the goods were made from the buyer's materials, were socketed and ready for use, and job charges were received; the exemption claim for job-work clearances therefore failed and the clearances were includible for excise purposes. The duty demand nevertheless was held time-barred because the department had already obtained the relevant facts during search and investigation, yet issued the show cause notice only after the normal limitation period. On those facts, the extended period was unavailable, and the demand and penalties did not survive.

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Issues: (i) Whether the clearances made to the raw material supplier were fully manufactured goods and therefore liable to be included in the aggregate turnover for excise purposes, and whether the exemption claimed for job-work clearances was available. (ii) Whether the duty demand was barred by limitation because the show cause notice was issued beyond six months from completion of investigation.

Issue (i): Whether the clearances made to the raw material supplier were fully manufactured goods and therefore liable to be included in the aggregate turnover for excise purposes, and whether the exemption claimed for job-work clearances was available.

Analysis: The admissions of the unit's director showed that the goods sent to the buyer were manufactured by the appellant from materials supplied by that buyer, that the pipes were socketed and ready for use, and that job charges were received for the work done. No evidence was produced to show that the activity remained at a semi-finished stage or that any manufacturing process was still pending with the buyer. On those facts, the clearances were treated as fully manufactured goods and the claim that they were only semi-finished goods was rejected. The exemption plea based on the job-work notification was therefore not accepted on the facts found.

Conclusion: The exemption claim failed, and the clearances to the buyer were held to be includible for excise purposes.

Issue (ii): Whether the duty demand was barred by limitation because the show cause notice was issued beyond six months from completion of investigation.

Analysis: The department had completed its investigation on the date of search and recorded the necessary statements and documents at that stage. The show cause notice was issued only later, beyond six months from that date. Applying the principle that, once the department is in possession of the relevant facts, the demand cannot be stretched beyond the normal limitation period without a sustainable basis, the extended period was held unavailable on the facts of the case.

Conclusion: The demand was time-barred.

Final Conclusion: The appeals succeeded on the limitation issue, and the duty demand and penalties did not survive.

Ratio Decidendi: Where the department has already obtained the material facts during investigation, a later show cause notice issued beyond the normal limitation period cannot be sustained on the basis of suppression for invoking the extended period.

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