Manufacture by transformation: converting nichrome coils into heating elements attracts duty, with limitation tested from the statutory relevant date.

Limitation for a customs/excise demand must be tested against the statutory relevant date, not the date on which statements were recorded; on the facts stated, the limitation objection failed because the clearances had occurred earlier and the normal period had expired before inspection. Processing purchased nichrome coils by cutting and winding them into heating elements was treated as manufacture because the process produced a distinct commodity with a different name, character and utility. The text applies the character-and-use test and the principle that conversion into a new and marketable product constitutes manufacture. As a result, the duty demand and penalty were sustained on the merits.

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Issues: (i) Whether the show-cause notice and demand were barred by limitation. (ii) Whether cutting and winding purchased nichrome coils into heating elements amounted to manufacture and justified the duty demand and penalty.

Issue (i): Whether the show-cause notice and demand were barred by limitation.

Analysis: The demand related to clearances made upto March 1998, while the officers visited the factory only in May 2000. The normal period had already expired by then, and the date of recording of statements was not the relevant date for limitation. The plea based on the notice being issued beyond six months from the last statement was therefore unsustainable.

Conclusion: The limitation plea was rejected.

Issue (ii): Whether cutting and winding purchased nichrome coils into heating elements amounted to manufacture and justified the duty demand and penalty.

Analysis: The evidence showed processing of the purchased wire into a distinct product supplied as heating elements for electric furnaces. Applying the character and use test, the transformation resulted in a new commodity with a different name, character and utility. The finding that the activity amounted to manufacture was supported by the statutory tariff entry covering heating elements and by the principle that a process producing a new and marketable product constitutes manufacture. The penalty followed from the confirmed duty liability.

Conclusion: The activity was held to be manufacture, and the duty demand and penalty were sustained.

Final Conclusion: The appeal failed on both limitation and merits, and the orders of the authorities below were left undisturbed.

Ratio Decidendi: A process that converts purchased material into a product with a distinct character and use amounts to manufacture, and limitation must be tested with reference to the statutory relevant date rather than the date of statement recording.

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