Perforation of flat rolled steel sheets may amount to manufacture, but extended limitation fails where departmental clarification exists.

Perforation of flat rolled steel sheets was treated as manufacture for excise purposes because the process created a commercially distinct product that was not interchangeable with a plain sheet, and excise duty was therefore payable. However, the demand could not rely on the extended limitation period where a departmental clarification covered identical products and removed the basis for alleging extended suppression; the demand was confined to the normal period of limitation, with consequential recalculation of duty, interest, and penalty.

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Issues: (i) Whether perforation of flat rolled steel sheets amounts to manufacture under excise law. (ii) Whether the demand could be sustained by invoking the extended period of limitation.

Issue (i): Whether perforation of flat rolled steel sheets amounts to manufacture under excise law.

Analysis: The activity of perforating flat rolled steel sheets was examined with reference to Chapter Note 1(k) to Chapter 72, which treats flat rolled products as including perforated products. However, reliance was placed on the view that perforation brings into existence a different commercial commodity, since a perforated sheet is commercially distinct from a plain sheet and its use is not interchangeable with the original product. On that basis, the activity was treated as manufacture for excise purposes.

Conclusion: The activity amounts to manufacture, and excise duty is payable.

Issue (ii): Whether the demand could be sustained by invoking the extended period of limitation.

Analysis: The record showed a departmental clarification covering identical products, which negatived justification for the extended period. In light of that clarification, the demand was held enforceable only to the extent of the normal limitation period, with the remaining portion not sustainable under the extended period.

Conclusion: The extended period was not justified, and the demand was confined to the normal period of limitation.

Final Conclusion: The appeal succeeded only in part: the levy on manufacture was upheld, but the demand was restricted to the normal limitation period with consequential recalculation of duty, interest, and penalty.

Ratio Decidendi: Perforation of flat rolled steel sheets results in manufacture when it creates a distinct commercial commodity, but an extended limitation period cannot be invoked where the department's own clarification negates such justification.

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