Mineral water classification and limitation in excise turn on added mineral salts, lack of evasion, and no penalty.

Addition of mineral salts during processing can bring bottled water within the mineral water category and support excisability, because the final product is distinguishable from merely purified potable water by its increased mineral content. The demand, however, could not be taken beyond the normal limitation period since the materials did not show deliberate suppression or intent to evade duty, so the proviso to Section 11A was not attracted. Penalty under Rule 173Q was also unsustainable for the same reason. Duty remained payable only for the normal period, with quantification remitted accordingly.

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Issues: (i) Whether the treated bottled water, to which mineral salts were added during processing, was classifiable as mineral water and amounted to excisable manufacture under the tariff entry; (ii) whether the demand could be sustained for the extended period of limitation under the proviso to Section 11A of the Central Excise Act, 1944; and (iii) whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable.

Issue (i): Whether the treated bottled water, to which mineral salts were added during processing, was classifiable as mineral water and amounted to excisable manufacture under the tariff entry.

Analysis: The product was held to be distinguishable from merely purified potable water because the record, including sample comparisons and Board clarification, showed an increase in mineral salt concentration in the final bottled water. The process was found to involve manipulation of mineral content by physical addition of mineral salts, bringing the product within the mineral water category contemplated by the tariff and the Board's instructions.

Conclusion: The product was held to be excisable mineral water, and the assessee's plea of no manufacture was rejected.

Issue (ii): Whether the demand could be sustained for the extended period of limitation under the proviso to Section 11A of the Central Excise Act, 1944.

Analysis: The classification of Bisleri-branded treated water was found to have been in a state of flux, and the materials did not establish a deliberate intention to evade duty. The communication relied upon by the Department was treated as advice to describe the product correctly rather than concealment of liability. On that basis, the ingredients for invoking the longer limitation period were not made out.

Conclusion: The extended period under the proviso to Section 11A was not invocable, and the demand was confined to the normal period.

Issue (iii): Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable.

Analysis: Since the product's classification had been under dispute and the Department was aware of the nature of the process, the necessary basis for penalty was absent. The facts did not justify penal action under the rule.

Conclusion: The penalty was set aside.

Final Conclusion: The assessee succeeded on limitation and penalty, but the product was held dutiable and the matter was remitted for quantification of duty for the normal period.

Ratio Decidendi: Where processing results in the addition of mineral salts and an increase in mineral content in bottled water, the product may be treated as excisable mineral water; however, the extended limitation period requires proof of deliberate evasion, and penalty cannot be sustained absent the requisite culpable conduct.

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