1988 (2) TMI 348 - AT - Central Excise

Tribunal rules in favor of appellants, rejecting duty concession for sandalwood oil.

MALAYAGIRI SANDALWOOD OIL DISTILLERY Versus COLLECTOR OF C. EX.

The Tribunal allowed the appeal in favor of the appellants, setting aside the lower authorities' decision. It ruled that sandalwood oil was not eligible ... Manufacture Issues:- Appeal against Order-in-Appeal rejecting appeal filed by appellants regarding extraction of sandalwood oil.- Classification of sandalwood oil as a new product and ineligibility for duty concession.- Appellants' contention on job work basis manufacturing and duty exemption under Notification No. 119/75.- Department invoking larger period of limitation for demanding duty.- Approval of classification lists by the department.- Allegations of suppression of material facts by the appellants.- Applicability of duty on job charges basis.- Barred notices by limitation period.Analysis:1. The appeal was made against the Order-in-Appeal rejecting the appellants' appeal concerning the extraction of sandalwood oil. The Collector (Appeals) held that the process amounted to manufacturing a new product, making the sandalwood oil ineligible for duty concession under Notification No. 119/75. The Collector also found suppression of material facts by the appellants, justifying a five-year limitation for duty demand.2. The appellants contended that they manufactured sandalwood oil on a job work basis, citing their correspondence with the department. They argued for duty exemption under Notification No. 119/75, stating that the understanding at the time was to pay duty only on job charges for goods manufactured on job charge basis. The department was aware of their operations through approved classification lists and assessment returns.3. The department invoked a larger five-year limitation period for demanding duty from the appellants. However, the appellants had disclosed their production details as early as 1977, including their manufacturing processes and value determination in accordance with relevant notifications. The show cause notices issued did not allege suppression of facts, and the appellants had been transparent in their dealings.4. The Tribunal referenced a previous decision regarding the manufacturing process, concluding that sandalwood oil was excisable under Item No. 68 CET and not eligible for duty concession. The Tribunal also found that the department was not justified in invoking the longer limitation period, as there was no evidence of suppression of facts by the appellants. The notices demanding duty were beyond the normal recovery period, rendering them time-barred.5. Consequently, the Tribunal set aside the lower authorities' orders and allowed the appeal in favor of the appellants, providing them with consequential relief. The decision was based on the lack of evidence supporting the department's invocation of the extended limitation period and the absence of suppression of material facts by the appellants.