Modified starch remains dutiable as a distinct product, while power-linked liability starts only when the factory becomes operational.

Processed starch and dextrine with modifying agents was treated as a distinct commodity, still falling within the tariff description of starch, including dextrin and modified starch; duty on the finished product was therefore valid and not double taxation merely because the inputs had already suffered duty. Liability under the power-linked tariff entry arose only from the date the factory was actually power-operated, so the demand had to be redetermined from 1-8-1984. Extended limitation was sustained because the excisable manufacture came to light only on inspection and no declaration had been filed, while confiscation was upheld and the penalty was reduced on a mitigating view of record maintenance.

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Issues: (i) Whether the appellants' product, manufactured from starch and dextrine with further processing, was classifiable under Item 15C of the Central Excise Tariff and whether duty thereon amounted to double taxation; (ii) whether the liability to duty under Item 15C commenced only from 1-8-1984 when the factory became power-operated; (iii) whether the extended period and consequential penalty and confiscation were justified.

Issue (i): Whether the appellants' product, manufactured from starch and dextrine with further processing, was classifiable under Item 15C of the Central Excise Tariff and whether duty thereon amounted to double taxation.

Analysis: The product was not merely sold starch or dextrine. It underwent further physical and chemical processing with the addition of modifying agents, resulting in a distinct commodity suitable for paper glueing. The material retained its character as modified starch and fell within the tariff description covering starch, including dextrin and other forms of modified starch. The fact that the input had already suffered duty did not make the levy on the processed product double taxation, because the processed commodity had a separate commercial identity.

Conclusion: The product was correctly classifiable under Item 15C, and the duty levy on the processed product was valid.

Issue (ii): Whether the liability to duty under Item 15C commenced only from 1-8-1984 when the factory became power-operated.

Analysis: The evidence, including the electricity authority's letter and electricity-related receipts, supported the claim that sanctioned power connection was installed on 1-8-1984. The contrary inference drawn from the managing director's statement and speculation about possible use of another connection was not supported by enquiry or evidence. Since dutiability under Item 15C depended on manufacture with the aid of power, duty could arise only from the date when the unit became power-operated.

Conclusion: Duty liability under Item 15C commenced only from 1-8-1984, and the demand was required to be redetermined accordingly.

Issue (iii): Whether the extended period and consequential penalty and confiscation were justified.

Analysis: The manufacture of excisable goods came to light only on inspection, and no declaration had been filed. The extended demand was therefore sustained. At the same time, proper maintenance of records was treated as a mitigating factor for penalty. As the goods were manufactured without licence and without compliance with excise formalities, confiscation was held proper, though the penalty was reduced substantially.

Conclusion: The extended demand was upheld, confiscation was sustained, and the penalty was reduced to Rs. 1,000/-.

Final Conclusion: The appeal succeeded only to the limited extent of restricting duty liability from 1-8-1984 and reducing the penalty, while the classification, confiscation, and remainder of the demand were sustained.

Ratio Decidendi: A processed product having a distinct commercial identity and falling within the tariff description of modified starch remains dutiable notwithstanding duty on the inputs, and duty liability under a power-linked tariff entry arises only from the date the factory is actually power-operated.

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