Statutory fortification is part of manufacture, and extended limitation fails without suppression, fraud, or misrepresentation.

Statutory fortification required to meet marketability standards formed part of the manufacturing process, so vitamins A and D added to hydrogenated vegetable oil were treated as component parts and credit/set-off under the exemption notification was admissible. The demand also failed for the period beyond six months because the show cause notice did not allege suppression, fraud or misrepresentation, so the extended limitation period could not be invoked and the claim was time-barred to that extent.

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Issues: (i) Whether vitamins A and D added to hydrogenated vegetable oil after manufacture could be treated as component parts so as to qualify for credit under the exemption notification. (ii) Whether the demand was time-barred for the period beyond six months in the absence of allegations of suppression, fraud or misrepresentation.

Issue (i): Whether vitamins A and D added to hydrogenated vegetable oil after manufacture could be treated as component parts so as to qualify for credit under the exemption notification.

Analysis: The product had to conform to the prescribed quality standards before it could lawfully be marketed. Vitamin A was a statutory requirement under the food-control regime, and the product could not be sold without that fortification. Vitamin D was also added in the manufacturing chain to improve the product. On that footing, the additives were integral to the finished product and the process of manufacture was not complete before their addition and the stage at which the product became marketable.

Conclusion: The vitamins were eligible to be treated as component parts for the purpose of the notification, and the credit/set-off was admissible.

Issue (ii): Whether the demand was time-barred for the period beyond six months in the absence of allegations of suppression, fraud or misrepresentation.

Analysis: The show cause notice did not allege wilful suppression, misrepresentation or fraud. In the absence of such allegations, the extended period could not be invoked, and the demand could operate only within the ordinary limitation period.

Conclusion: The demand for the period beyond six months from the show cause notice was time-barred.

Final Conclusion: The Revenue's challenge failed, the order in favour of the respondent was sustained, and the demand could not survive beyond the legally permissible limitation period.

Ratio Decidendi: Where a statutory quality requirement is an essential condition for making a product marketable, the fortification required to satisfy that condition forms part of the manufacturing process for the purpose of the exemption notification; and in the absence of allegations of suppression, fraud or misrepresentation, the extended period of limitation cannot be applied.

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