1996 (9) TMI 156 - AT - Central Excise

Stone Crushing Deemed 'Manufacture' for Excise Duty, Steel Ribs Exempt

The Tribunal held that crushing stones into smaller sizes constitutes 'manufacture' attracting Central Excise duty. However, the longer limitation period ... Steel ribs Issues Involved:1. Classification and excise duty liability on crushed stones.2. Classification and excise duty liability on steel ribs.3. Applicability of limitation period for duty demands.4. Imposition of penalties.Summary:1. Classification and Excise Duty Liability on Crushed Stones:The appellants argued that crushing boulders into stones does not constitute 'manufacture' and thus should not attract Central Excise duty. They contended that the stones used in their construction project do not fall under Tariff Heading 2505.00 as they do not contain minerals. The Tribunal, however, held that the process of crushing stones into smaller sizes does constitute manufacture as per the Chapter Note 2 of Chapter 25, which includes products that have been washed, crushed, ground, etc. The Tribunal referenced several decisions, including the Madhya Pradesh High Court's judgment, which supported the view that converting stones into smaller sizes amounts to manufacture. However, the Tribunal allowed the appeal on the ground of limitation, stating that the longer period of limitation would not apply due to the issue not being free from doubt.2. Classification and Excise Duty Liability on Steel Ribs:The appellants contended that steel ribs fabricated at the construction site using materials provided by their customers are not 'manufactured goods' and thus should not attract excise duty. They argued that the steel ribs are tailor-made for tunnel purposes and become part of immovable property once installed. The Tribunal accepted the appellants' affidavit, which stated that the steel ribs come into existence inside the tunnel and are embedded to the earth, thus not constituting a different product. The Tribunal found the present case distinguishable from others where goods were manufactured in factories and then taken to the site. The appeal was allowed on this issue.3. Applicability of Limitation Period for Duty Demands:The appellants argued that the demands were barred by limitation as the show cause notices were issued more than six months after the relevant dates. The Tribunal agreed with the appellants, stating that the longer period of limitation would not apply due to the issue being debatable and not free from doubt. Therefore, the demand for duty on crushed stones was set aside on the ground of limitation.4. Imposition of Penalties:Given the Tribunal's findings on the merits of the case and the applicability of the limitation period, the penalties imposed by the adjudicating authorities were deemed unjustified and were set aside.Separate Judgment by Member (J):Member (J) disagreed with the majority on dropping the demands for steel ribs and the confirmation of larger periods for crushed stones. He argued that the affidavit submitted by the appellants was not properly admitted as additional evidence and that the case should be remanded for de novo consideration by the adjudicating authorities. He also suggested remanding the issue of longer limitation periods for crushed stones for further evidence and consideration.Final Order:In view of the majority opinion, the impugned orders were set aside, and the appeals were allowed.