Mere chilling of water does not defeat aerated water exemption where the process is only preparatory and non-transformative.

Mere chilling of water before manufacture of aerated waters did not defeat exemption under Notification No. 293/77, because the process did not alter the character of the water or amount to a disqualifying process of manufacture; the benefit remained available despite limited power being used for preparatory chilling. The duty demand was also upheld as it was raised within six months, making recovery under Rule 10 competent and removing any need to rely only on review under Section 35 for short levy. The appeal therefore succeeded on the exemption issue, while the limitation objection to the demand failed.

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Issues: (i) Whether the appellants were entitled to the benefit of Notification No. 293/77, dated 15-9-1977, despite the use of power for chilling water; (ii) whether the demand for duty was justified.

Issue (i): Whether the appellants were entitled to the benefit of Notification No. 293/77, dated 15-9-1977, despite the use of power for chilling water.

Analysis: The notification exempted aerated waters manufactured subject to the condition that no power was used in any process of manufacture, except that power could be used up to the prescribed limits for carbonation of water and washing of bottles. The use of power for lifting water to overhead tanks was not treated as disqualifying. The decisive question was whether chilling of water was a process incidental or ancillary to the manufacture of aerated waters. Chilling did not change the character of the water, did not transform it into a different commodity, and was only a preparatory step to facilitate absorption of carbon dioxide. It was not shown that aerated waters could not be manufactured without first chilling the water.

Conclusion: The appellants were entitled to the exemption and the benefit of the notification could not be denied.

Issue (ii): Whether the demand for duty was justified.

Analysis: The demand was raised within six months and was therefore within the permissible period for recovery of short levy. In such circumstances, it was not necessary that recourse should be had only to review proceedings under Section 35; action under Rule 10 was competent for recovery of short levy.

Conclusion: The demand for duty was justified as it was within limitation and the appellants' challenge on this ground failed.

Final Conclusion: The appeal succeeded because the disputed chilling process did not disqualify the appellants from the exemption, even though the demand was held to be within time.

Ratio Decidendi: Mere chilling of water, which does not alter its character or constitute a process incidental or ancillary to manufacture, cannot by itself defeat an exemption that permits limited use of power in specified manufacturing processes.

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