Extended limitation fails on known facts, but filling bulk gas into smaller cylinders may prima facie amount to manufacture.

Where the department already knew the essential facts from correspondence, invocation of the extended period of limitation was not prima facie sustainable for want of suppression. By contrast, filling compressed hydrogen gas received in bulk into smaller returnable cylinders for marketing was treated as prima facie manufacture under Chapter Note 9 of Chapter 28, applying the repacking principle. On that interim assessment, the assessee had a prima facie case on limitation but not on merits, so the stay was granted only on condition of a partial pre-deposit, with the balance demand, interest and penalty stayed subject to compliance.

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Issues: (i) whether invocation of the extended period of limitation was prima facie sustainable; (ii) whether filling compressed hydrogen gas into returnable cylinders amounted prima facie to manufacture under Chapter Note 9 of Chapter 28 of the Central Excise Tariff Act, 1985.

Issue (i): Whether invocation of the extended period of limitation was prima facie sustainable.

Analysis: The correspondence between the assessee and the department showed that the material facts regarding the assessee's activity were within the department's knowledge. On the material placed at the stay stage, there was no apparent suppression of facts justifying the longer limitation period under the proviso to Section 11A of the Central Excise Act, 1944.

Conclusion: The extended period of limitation was not prima facie justified and the assessee made out a prima facie case on limitation.

Issue (ii): Whether filling compressed hydrogen gas into returnable cylinders amounted prima facie to manufacture under Chapter Note 9 of Chapter 28 of the Central Excise Tariff Act, 1985.

Analysis: The gas was received in bulk through pipeline and was filled into smaller cylinders for marketing to consumers. Applying the principle of repacking from bulk packs to retail packs, the activity fell within the deeming fiction of manufacture under Chapter Note 9. The authorities relied upon by the assessee were distinguished on the facts.

Conclusion: Prima facie, the activity amounted to manufacture and the assessee did not make out a strong case on merits.

Final Conclusion: The stay application was allowed only to a limited extent by directing a pre-deposit of Rs. 95 lakhs, with the balance demand, interest and penalty remaining stayed during the pendency of the appeal upon compliance.

Ratio Decidendi: For the purpose of interim relief, when bulk goods are received and filled into smaller cylinders for marketing, the activity may prima facie amount to manufacture under the relevant chapter note, while the extended period of limitation is not prima facie available where the department was already aware of the essential facts.

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