CKD components and site assembly do not amount to manufacture where no new excisable product emerges in the factory.

Packing and despatch of water treatment plant components in CKD condition was not treated as manufacture because no new excisable product came into existence in the assessee's factory; the plant emerged only at the customer's site through assembly, erection, and civil work. The distinction between a package type plant and a large turnkey plant erected on site was material, with the latter being immovable and on a different footing for excise purposes. The extended limitation period was also unavailable because departmental records showed prior correspondence, disclosures, and earlier proceedings, leaving no proved wilful suppression or misstatement to evade duty.

---

---

Issues: (i) Whether the activity of packing and despatching parts and components of water treatment plants in CKD condition amounted to manufacture of excisable water treatment plants in the appellant's factory. (ii) Whether the demand was sustainable by invoking the extended period on the ground of suppression of facts.

Issue (i): Whether the activity of packing and despatching parts and components of water treatment plants in CKD condition amounted to manufacture of excisable water treatment plants in the appellant's factory.

Analysis: The dispute was confined to the standard or package type water treatment plant. The record showed that the appellant got certain parts manufactured by independent job workers, procured other components, and packed and despatched only a few parts in the condition received, with some parts sent directly from the suppliers. The water treatment plant came into existence only at the customer's site on assembly and erection with civil work. Mere packing of components, without a manufacturing process bringing a new product into existence in the appellant's premises, was not enough to attract excise duty. The distinction between the package type and the large turnkey plant was material, and the latter, being erected at site and immovable, stood on a different footing.

Conclusion: The appellant was not manufacturing water treatment plants in CKD condition in its factory; the duty demand on that basis was not sustainable.

Issue (ii): Whether the demand was sustainable by invoking the extended period on the ground of suppression of facts.

Analysis: The departmental records showed prior correspondence on the dutiability of water treatment plants, a clarification by the Assistant Collector, earlier refund and appeal proceedings, revised classification lists, and full disclosure of the appellant's activities. On those facts, the Department was aware of the material particulars and there was no proved wilful suppression or misstatement to evade duty. The extended limitation period could not therefore be invoked.

Conclusion: The demand was time-barred and the extended period was not available to the Revenue.

Final Conclusion: The appeal succeeded on both merits and limitation, and the impugned duty and penalty were set aside with consequential relief.

Ratio Decidendi: Packing and despatch of components in CKD condition do not amount to manufacture unless a new excisable product comes into existence in the assessee's premises, and the extended period cannot be invoked where the relevant facts were already within the Department's knowledge.

---