Separate storage of explosive ingredients is not manufacture; mining workshop exemption applies, and extended limitation needs specific suppression.

Separate storage and carriage of explosives ingredients in a mobile van did not amount to manufacture under Rule 2(a), because the components remained identifiable duty-paid goods until mixed in prescribed proportions and a new commodity emerged. Prepared explosives produced inside the mines through the mobile van were treated as goods manufactured within the mining workshop and were therefore within Notification No. 63/95-C.E. The extended limitation period could not be invoked without a specific allegation and proof of suppression of facts with intent to evade duty, especially where the department was already aware of the relevant facts. The duty demand and penalty were therefore unsustainable on merits and on limitation.

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Issues: (i) Whether storing the ingredients for prepared explosives in separate compartments of a mobile van amounted to manufacture by treating the goods as incomplete explosives under Rule 2(a) of the Rules for Interpretation of the Schedule to the Central Excise Tariff Act, 1985. (ii) Whether the prepared explosives manufactured inside the mines in the mobile van were entitled to exemption under Notification No. 63/95-C.E. (iii) Whether the demand was barred by limitation.

Issue (i): Whether storing the ingredients for prepared explosives in separate compartments of a mobile van amounted to manufacture by treating the goods as incomplete explosives under Rule 2(a) of the Rules for Interpretation of the Schedule to the Central Excise Tariff Act, 1985.

Analysis: The ingredients remained separately identifiable duty-paid goods while stored and carried independently. Manufacture arose only when they were mixed in the prescribed proportions and a new commodity emerged. Rule 2(a) did not apply because the goods were neither incomplete nor unfinished goods having the essential character of the finished product merely by being transported together in the same van.

Conclusion: The storage of the ingredients in the van did not amount to manufacture, and Rule 2(a) was inapplicable, in favour of the assessee.

Issue (ii): Whether the prepared explosives manufactured inside the mines in the mobile van were entitled to exemption under Notification No. 63/95-C.E.

Analysis: The prepared explosives came into existence only inside the mines when mixing took place in the mobile van, which functioned as a workshop within the precincts of the mines. The exemption was intended for goods manufactured in such circumstances and for use in the mines. The correspondence with the departmental authorities also supported this understanding of the exemption scheme.

Conclusion: The benefit of Notification No. 63/95-C.E. was available, in favour of the assessee.

Issue (iii): Whether the demand was barred by limitation.

Analysis: The show cause notice lacked a specific averment of suppression of facts with intent to evade duty, which is necessary for invoking the extended period under Section 11A of the Central Excise Act, 1944. The department was also aware of the material facts from the assessee's correspondence, and the later notice could not validly extend limitation for the earlier period on the basis claimed.

Conclusion: The demand was time-barred, in favour of the assessee.

Final Conclusion: The duty demand and penalty could not be sustained either on merits or on limitation, and the appeal succeeded.

Ratio Decidendi: Separate storage and carriage of ingredients do not constitute manufacture; the exemption applies when the finished product emerges within the exempted mining workshop, and the extended limitation period cannot be invoked without a specific allegation and proof of suppression with intent to evade duty.

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